- No helpdesk – while being decentralised (i.e. not controlled by any bank or organisation) is a great strength of Bitcoin, it can also have its downsides. If you forget your password there’s no call centre to help you reset it, and if someone steals your wallet, you can’t just ask the bank to put a hold on your account.
- Slow – the Bitcoin network can only process around 4 transactions a second, compared to Visa which can theoretically process more than 50,000 transactions per second!
- Energy intensive – the power used by the Bitcoin network is estimated to be equivalent to 70% of the total power consumption of New Zealand, and this is growing. If Bitcoin were a country, it would be the 58th biggest energy consumer in the world.
- Expensive to transact with – because Bitcoin uses so much energy, it is expensive to send transactions on the network. At the moment, a transaction costs around NZD$40 – which is pretty pricey!
- Volatile – the price of Bitcoin can fluctuate massively, which makes it difficult to use for buying goods and services. If you bought a $4 coffee a year ago with Bitcoin, that payment would now be worth $100! And of course, the price can go down as well as up, making Bitcoin a risky investment option.
Not all cryptocurrencies have these same limitations though. While Bitcoin was truly ground-breaking as the first ever cryptocurrency, newer coins have since come along that seek to address some or all of these limitations.
Stay tuned for our upcoming series on other cryptocurrencies and what they offer.