There are many myths about cryptocurrencies and they are driven as much by marketing and myths as misinformation. Let’s debunk the most common misconceptions!
Myth 1: Bitcoin is not backed by anything, so it has no value
Truth: There are varying opinions on this point. Some believe bitcoin’s scarcity is the main attribute that gives it value, while others claim bitcoins are useful because they are required to use the world’s most prominent and secure decentralized ledger. In fact, like all currency in the history of money, bitcoins are backed by confidence. (Also known as consensus.). By the way, gold is also valuable only because people agree that it is.
Myth 2: Bitcoin’s price volatility makes it useless
Truth: There are various mechanisms for using the Bitcoin network for payments while avoiding the volatility associated with the token of value. Some Bitcoin companies, such as Circle and Coinbase, allow users to store funds in U.S. dollars or other fiat currencies before making Bitcoin transactions on the user’s behalf.
Myth 3: Bitcoin is used by terrorists
Truth: Although Bitcoin is sometimes used for illegal transactions on the Internet, the reality is that the privacy issues related to the public blockchain make it a poor choice for terrorists. In the world of untraceable payments, dollar is still the king.
Myth 4. It’s just fake internet money
Truth: This fear tactic may have worked five years ago, but now that people are realizing Bitcoin is here to stay, we can expel this myth. Bitcoin solves a lot of problems traditional banking faces. For instance, Bitcoin can be used to send millions of dollars anywhere in the world in minutes. Plus, it’s backed by a strong community, and strong code. The world is realizing that Bitcoin isn’t a gimmick. It is a disruptive technology that is changing how the world transacts money.
Myth 5. The CEO of Bitcoin Was Arrested
Truth: When the general public reads about Bitcoin, the connection is often made with Silk Road or Mt. Gox. Many people actually thought it was Bitcoin that was shut down by the F.B.I. in 2013, and not the anonymous online black market (Silk Road); or that it was Bitcoin that collapsed in early 2014, and not the failed Bitcoin exchange (Mt. Gox). The inability to make the distinction between Bitcoin and the companies or services built on top of it has been a huge problem for the digital currency in terms of education.Because of this inability to distinguish between Bitcoin and Bitcoin companies, many people thought the CEO of Bitcoin had been arrested in the cases of Silk Road founder Ross Ulbricht, Mt. Gox CEO Mark Karpeles and BitInstant CEO Charlie Shrem. Of course, the reality is that there is no CEO of Bitcoin
Myth 6. Bitcoin Mining Wastes Electricity
Truth: A recent report found that Bitcoin’s network hashrate could consume as much power as Denmark by 2020. Other reporters dispute this characterization, pointing out that Bitcoin uses the same electricity as the yearly consumption of 674.5 average American homes, two Amtrak locomotives or a California hydroelectric plant. Do these things waste electricity? It depends on your point of view. The reality is that the use of computing power serves a purpose in Bitcoin, which is securing all of the transactions on the network. If you don’t think Bitcoin is valuable, maybe that’s a waste. If you don’t think fiat currencies are valuable, maybe keeping the lights on at the Federal Reserve is a waste.Electricity-intensive Bitcoin mining is essentially a way to prove that someone has expended resources in hopes of getting a block reward and transaction fees in return for their efforts. Proof-of-work, as it’s called, acts as a prevention mechanism against Sybil attacks (forged identities) on the Bitcoin network. Waste? You decide.
Myth 7. Bitcoin Is a Ponzi Scheme
Truth: A Ponzi scheme requires an initial founder who persuades investors that they’ll make some sort of profit. There is no central point of power in Bitcoin, as it’s a decentralized system, so no promises of profits are made by the network.
A Ponzi scheme always requires new investors to pay off earlier investors. This is not the case with Bitcoin, as the system can work with practically any number of users. However, the network is stronger and more resilient when used by more people.
If Bitcoin is a Ponzi scheme, then all other forms of money were also initially developed as Ponzi schemes.
Myth 8. Bitcoin Is Only Used for Illegitimate Purposes
Truth: One of the fundamental values of Bitcoin is its resistance to censorship. As Elon Musk put it in 2014:“I think it’s primarily going to be a means of doing illegal transactions. But that’s not necessarily entirely bad. You know, some things maybe shouldn’t be illegal.”What is or isn’t a legitimate or legal transaction can change when moving between various jurisdictions, but Bitcoin is also used for completely legal purposes. Some people use Bitcoin to save 10-20 percent on purchases at Amazon, Starbucks and Target via Foldapp and Purse.io. Others see it as a valuable tool for cheaper international money transfers and remittances. Abra, Align Commerce and Freemit are three startups using Bitcoin to lower the costs of money transfers around the world.
Myth 9. Bitcoin Is Anonymous
Truth: Although Bitcoin is often referred to as the “anonymous currency of the dark web,” it is more correct to say that Bitcoin addresses are pseudonymous. This means that there is an identifiable address (or many addresses) for each user on the network, but no one necessarily knows who is behind each address.With Bitcoin, it’s important to remember that every transaction is recorded on a completely public ledger that anyone can view on a block explorer. A few blockchain analytics companies have popped up over the past few years, and they’re able to deanonymize large portions of the network.
Myth 10. Bitcoin Is Completely Transparent
Truth: It’s also a myth that Bitcoin is completely transparent. As mentioned in the above section, the true identities of the individuals or organizations behind specific Bitcoin addresses are not always known. There are also various privacy-enhancing services, such as JoinMarket, which allow users to enhance their privacy on the blockchain. There are also other enhancements, such as Confidential Transactions and Zerocash, that could come to Bitcoin in due time.