Lesson 3: Pros and Cons of Crypto – Napkin Finance

Lesson 3: Pros and Cons of Crypto


Pros of cryptocurrency

  • No middleman
    • With cryptocurrency, there’s no corporation that can sell your data or deny you service.
  • Data security
    • When you make a cryptocurrency transaction, your data is spread out over a secure network, like a credit card cut up into thousands of tiny pieces.
  • Greater access
    • Cryptocurrency may be more accessible for people with poor credit histories or who live in developing countries.
  • Potential for high reward
    • Many cryptocurrency investors have enjoyed huge returns in recent years, and some believe crypto prices will continue to soar.
  • No government intervention
    • Governments can’t manipulate the price of cryptocurrency or, say, cut off financial access for adversaries.

Cons of cryptocurrency

  • Volatile price
    • The values of traditional currencies do shift over time, but cryptocurrency values can swing wildly. If investors lose faith in cryptocurrencies one day, their values could even go to zero.
  • Risk of loss
    • If you lose your ATM PIN, you don’t lose access to your money. If you lose your cryptocurrency key, that money is gone forever.
  • Nefarious uses
    • With no government intervention, there’s no way to cut off financial access for, say, human traffickers or drug lords. And there’s evidence that Bitcoin has become a one-stop shop for money laundering.
  • Shifting regulations and tax treatment
    • Many governments are still deciding how to regulate cryptocurrency, and the rules could change in the future.
  • High environmental cost
    • Verifying blockchain transactions takes massive computing power, which requires massive energy usage.

“The banks brought you the great recession and global recession of 2008, and geeks gave you the Internet. Who are you going to let write the rules?“

—Andreas Antonopoulos

More than meets the wallet

The technology behind cryptocurrency isn’t just about sending money without banks. It has the potential to disrupt countless other types of transactions and industries, including:

  • Contracts—Whether transferring real estate or making a business contract, with blockchain technology, all previously agreed to terms could be public and verifiable but also secure. So-called
  • Smart Contracts made on the blockchain could also cut out the need for attorneys and other middlemen.
  • Healthcare—Medical providers could use the technology to share sensitive information in an efficient, secure way.
  • Voting—Blockchain could serve as a secure, anonymous but verifiable technology for tallying votes.


Different countries have adopted different regulatory approaches to cryptocurrency, and regulations are still shifting.

In the U.S., there is no unified regulatory approach in part because regulators can’t agree on whether cryptocurrencies are securities (like stocks), commodities (like oil), or currencies (like dollars). Right now, the ball is in Congress’s court to decide whether the Securities and Exchange Commission (SEC), Commodities Future Trading Commission (CFTC), or some other agency should take the lead.

For now, the SEC steps in when it sees an obvious violation. Some actions it has taken have included:

  • Halting fraudulent coin offerings
  • Filing charges in cases of misleading coin advertising or in which buyers weren’t given the advertised price
  • Taking action in cases where regulators feel the coins should be treated as securities

If the U.S. develops a uniform regulatory approach to cryptocurrencies in the future, it could hurt or help cryptocurrency prices.

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