The 5 biggest myths about cryptocurrency

Fear of the unknown is greater than fear of the known! 

When any new technology or innovation is introduced to the world, the possibility of a negative atmosphere around it will arise as soon as it hits the masses. The reason is simple people don’t know about it much, and speculations are everywhere. 

Cryptocurrencies went through the same thing. Initially, it was not popular with the masses but became a path-breaking invention as it gained momentum. We are all wondering about its future. Is it good or bad? All these questions are a concern. 

Let us take a look at the top 5 myths surrounding cryptocurrencies:- 

  1. Cryptocurrency is not secure

This one is the most common myth related to crypto. As the popularity of digital currencies grows, there have been several high-profile scams and thefts. Many of these attacks have targeted digital currency exchanges. Criminals took advantage of flaws in wallets and other aspects of the cryptocurrency space in other cases. Hacks, thefts, and fraud all pose a risk to investors concerned about the security of their digital assets. However, the cryptography and mining network that makes up a blockchain network may be resistant to attack. However, single points of failure, such as a cryptocurrency exchange’s website or a particular user, may be vulnerable to malicious attacks.

Security concerns regarding Bitcoin arise primarily from attacks on third-party businesses and services that use Bitcoin rather than attacks on the Bitcoin network itself. Some users are questioning Bitcoin’s security due to high-profile hacks of early Bitcoin companies with flawed security procedures (like the one which hit the early Mt. Gox exchange in Japan) and data breaches (like the one affecting Ledger wallet users).

Since its inception in 2009, Bitcoin’s core protocol has operated securely with a 99.9% uptime. A massive amount of computing power protects the network. A network of miners spread across over 100 countries ensures that there are no single points of failure. So, you can ignore this myth and move on to the next one.

  1. Cryptocurrency is a bubble

Nouriel Roubini, a prominent economist, has called Bitcoin “the mother or father of all scams.” Roubini has also criticized the technology that supports Bitcoin. Bank of England Governor Andrew Bailey compared cryptocurrencies to the 17th-century Dutch tulip craze, warning that they are only worthwhile if you’re willing to lose all your money. If statements like this came from influential personalities, the myth would strengthen.

As speculative investment vehicles, cryptocurrencies may or may not succeed, but they are changing the way we manage money and finance. As technology matures, the rise of stablecoins will make digital payments a reality, ending the era of paper money. The threat of competition from private currencies has prompted central banks worldwide to develop digital versions of their currencies. The Bahamas has already implemented a central bank digital currency, and countries such as China, Japan, and Sweden are testing their official digital currencies. If you still have any dollar bills in your wallet, they may soon become relics.

Asset transfers may be in store for the future

Computer programs running on cryptocurrency platforms could soon manage transactions such as purchasing a home or a car. A digital token representing money and other assets could simplify the process of conducting transactions involving asset transfers and payments, which are highly prevalent in real estate settlements without the involvement of a trusted third party, such as a real estate lawyer. Governments will continue to be necessary to enforce contractual obligations and property rights. But, the software may one day replace other intermediaries such as bankers, accountants, and lawyers.

Bitcoin and other cryptocurrencies may be purchased as speculative investments with high returns; however, this does not imply that Bitcoin or cryptocurrency is a bubble. Economic cycles characterized by unsustainable increases in market value are known as bubbles. Investors eventually pop when they realize that prices are much higher than an asset’s fundamental value. Cryptocurrency is frequently compared to a well-known early speculative bubble: the Dutch “tulip mania” of the 17th century. In 1637, speculators drove up the price of some tulip varieties by 26 times. The bubble lasted six months before collapsing and never resurfacing.

  1. Cryptocurrency is destructive to the environment

Crypto mining consumes considerable energy, but it is difficult to determine its environmental impact. Many crypto mining operations use renewable energy sources. According to Cambridge researchers, Crypto environmental impact is currently marginal at best. One can argue that the economic incentives inherent in crypto mining assist in advancing sustainable energy innovation. 

Many cryptocurrencies, including bitcoin, have set hard limits on how many tokens can be mined. Don’t forget that the modern financial and banking system consumes a significant amount of electricity daily.

  1. The primary use of cryptocurrency is for illegal purposes

One of the most common (or perhaps most effective) myths about digital currencies is that they are most commonly (or perhaps most effectively) used for illegal activity. The anonymity that most cryptocurrencies require is one of the reasons for this myth. Bitcoin became popular on underground markets like the Silk Road as the first primary digital currency. It is important to remember that the transactions, not the cryptocurrency, were illegal.

  1. No real value

Cryptocurrencies are notoriously difficult to classify. The Internal Revenue Service (IRS) in the United States has spent years figuring out how to classify digital currencies for tax purposes. When it comes to taxes or even everyday transactions, investors have been unsure how to treat their digital assets. This may have contributed to the perception that cryptocurrencies are a passing fad or will simply vanish and don’t have any real value.

In reality, not only have cryptocurrencies risen in prominence and popularity, but they are also set up in such a way as to minimize the risk of such events occurring. Like other currencies, cryptocurrencies can be exchanged for goods and services, and their value is determined by the belief of the currency’s holders.

However, research has shown that bitcoins have intrinsic value based on the marginal cost of producing new bitcoins and other cryptocurrencies. Cryptocurrencies like Bitcoin use a consensus mechanism known as proof-of-work (PoW) that requires electricity and costs money to create. The market price of bitcoin tends to fluctuate around this figure, which rises as the mining network expands and the block reward decreases over time. 

This article has provided you with an understanding of the myths and realities of digital currencies. Knowing the top 5 myths about cryptocurrency puts you in a better position. For regular updates on cryptocurrencies, follow this space.