Bitcoin is a digital payment system that operates by exchanging virtual coins among multiple users who intend to perform transactions with each other. Bitcoin, unlike mainstream currency such as cash or plastic money, is a decentralized system. This means that it is not controlled by a central authority and does not face regulatory restrictions. This makes it a preferred mode of payment as well as an investment among many netizens.

Although Bitcoin has gained popularity in the recent years, it is still far from being a substitute to the mainstream currency systems such as cash or plastic money. Because of certain inherent characteristics associated with cryptocurrencies, there are certain downsides as well.

For instance, because Bitcoin is a digital system, it does not have any physical presence. This inherent characteristic restricts the use of bitcoin to only those people who are familiar with computer systems, large data download and the internet. This makes bitcoin inaccessible to the remaining masses, let alone using bitcoin for payments or investments. An average person would require a significant learning curve to be familiar with the working and operation of bitcoin.

Another problem associated with bitcoin is that it is highly volatile. This is because there is a limited supply of bitcoins. A total of only 21 million bitcoins can be mined, from which 16 million bitcoins have already been mined. With the upper limit of the bitcoin supply capped, it is inevitable that at some point, supply will stop. Analysts predict that this time frame would be approximately 20 years from now. Therefore, with limited supply and rising demand, which leads to sharp volatility in the value of a bitcoin can be observed. This is evident from the fact that recently, the bitcoin value saw an approximately 20% decline in a single day and 30% in two days. Such high volatility may not allow bitcoin to be a replacement for an average currency such as a rupee or a dollar because such a highly volatile resource cannot be used for daily financial transactions.

Additionally, although bitcoin may seem like an interesting bet for investors, governments and regulatory bodies globally seem to be wary of bitcoin because they do not have any regulatory control on its operations. It is the very same reason because of which, there are safety concerns with transacting in bitcoin. For instance, if a bitcoin wallet gets hacked, there is no mechanism of raising disputes or complaints with any government authority.

The bitcoin wallets are not approved by any regulatory body and have no legal backing. That is to say, if a user faces a dispute regarding the wallet, there is no mechanism where the user can raise an issue and get it resolved. Even worse, if the wallet gets hacked and the bitcoins are stolen, the user cannot recover the money or initiate any litigation against the hacker in some countries. In contrast, most of the available currency options provide appropriate mechanisms for redressal of disputes such as theft, money laundering, and so on.

Whether bitcoin becomes a successful investment destination or not is yet to be seen in view of the rising fears and concern surrounding bitcoin. However, it seems certain that bitcoin cannot replace a conventional currency yet because of zero physical presence, heavy dependency on technology and absence of any regulatory mechanisms. In fact, there is a growing fear in global markets that bitcoin is a bubble that may eventually burst, thereby, leading to a crash in bitcoin value.