Overview
There are some myths about Bitcoin or cryptocurrencies in general that mainstream media continuously perpetuates by giving naysayers and nocoiners airtime. With any new innovative area of investment like cryptocurrency, potential investors ask questions and rightfully so. However, persistent untruths, myths, and rumors serve to add confusion and discourage informed decisionmaking. This article takes a look at the top myths that have been fully debunked.
Myth #1:
FALSE – Digital currencies are used primarily for criminal activity.
Just as with cash, digital currencies have been used by criminals and those with nefarious goals but the majority of users are not criminals or terrorists, for that matter. An October 2017 UK Treasury report found that “there is no specific evidence of terrorist using cryptocurrency to store or transfer funds and the sector is assessed to be exposed to relatively low risks for terrorist financing.” The anonymity associated with cryptocurrencies only feeds this particular myth, as does the fact that infamous black markets like Silk Road used bitcoin. The fact is, criminals use fiat currency for activities more so than cryptocurrency.
Myth #2:
FALSE – Digital currencies don’t have value or Bitcoin has zero intrinsic value.
Considering the overwhelming share of industrial gold consumption does not come from its intrinsic value. Its main use is largely rooted in ostentation and the historic perception that the shiny metal is valuable. While one may believe “intrinsic value” can only be attributed to something physical, the point is irrelevant. Bitcoin introduces something completely different – a new concept of digital scarcity. The fact is gold faces competition from ‘digital gold’ in a digital age with its transportation, storage and security costs – the reason why banks were created in the first place.
While it is true one can’t use a bitcoin for anything other than money. It can’t be worn as jewelry, you can’t eat it, or make machines with it. Its value is only realized as a unit that facilitates peer-to-peer exchange. And yet, bitcoin already is money used daily and exchanged in real time. It’s not a myth and clearly has value to many people around the world.
Myth #3:
FALSE CONCERN – Governments will ban bitcoin.
While a few nations have made cryptocurrency officially illegal, bitcoin and the blockchain industry it spawned is exploding in the United States. Japan, Hong Kong, Singapore, Switzerland, and other places. Many governments are buying bitcoin themselves, and many officials have admitted to spreading false rumors to capitalize on resulting price movements. The industry is expected to grow at a CAGR (Compound Annual Growth Rate) of 61.5% by 2021, so the chances that countries will ban it are slim. Regulate it? Yes. Ban it? Not likely.
Myth #4:
FALSE – Cryptocurrencies are not secure.
This myth literally stems from a lack of knowledge accentuated by high-profile scams, hacks, and thefts. Exchanges have been the targets of attacks and people lost their investments as a result. Individual wallets have been hacked by criminals capitalizing on vulnerabilities and poor security practices. The crypto space is one that demands investors be 100% accountable for their own actions as well as choices. Mistakes are costly and irreversible.
Technically, blockchains themselves are immune to hacking. It should be noted that not a single attack has occurred that was not the result of human error or an outside technical vulnerability. What makes the Bitcoin blockchain hack proof are the millions of users. Each block has a timestamp and a link to the previous block that forms a chronological chain reinforced through cryptography that ensures records cannot be altered by others. This makes it difficult for the network to be corrupted.
Blockchain technology is very simple, yet extremely secure. Financial institutions and governments are now showing an interest in blockchain tech because it is widely seen as a secure, highly effective tool with untapped potential.
Myth #5:
FALSE CONCERN – Bitcoin uses more electricity than some countries.
These deliberately sensational headlines about mining bitcoin are recycled over and over. A recent Forbes article debunked it by explaining why this is not a realistic concern. Compared to the U.S. last year using 4.3 million gigawatt hours, and 6 million by China, the 20,000 Gwh used to mine bitcoin each year pales in comparison. Expert analysists figured that if the price of bitcoin rose to $50K, mining efforts might consume upwards of 350,000 Gwh, less than 2% of world power capacity. The team also calculated the bitcoin price that would be needed to incentivize miners to gobble up all the world’s generation capacity: $1.1 million per coin. Of course, as technology evolves, mining crypto will become more energy efficient.