Debunking Common Cryptocurrency Myths

Debunking Common Cryptocurrency Myths

9 minutes to read | 08.12.2022
TL;DR Debunking common crypto myths: Myth 1: People claim that crypto isn't secure because they think it can be hacked. What they are thinking of is third party hackings like exchanges or wallets. The crypto itself is not hackable due to the way blockchain technology works. Myth 2: Others believe that cryptocurrency is a bubble. Crypto is very volatile because it is a new technology that hasn't fit into the world yet. As it gets more popular, crypto will stabilize. Myth 3: Many think that crypto is only used for illicit activities. Bitcoin was once used for this purpose, but now less than one percent of transactions are used for something illegal. Myth 4: There are those that believe crypto is bad for the environment. However, most cryptocurrencies hardly use any energy and have very little impact on the environment. Myth 5: A lot believe that crypto has no value because you can't spend it on anything. Many businesses accept crypto like Tesla, AMC Theaters, GameStop and more. More and more businesses are accepting crypto every day.
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Everyone in the crypto space wants cryptocurrency to become mainstream. However, crypto can leave a bad taste in people’s mouth for many different reasons. And that bad taste can last for a very long time because they want nothing to do with crypto after they’ve heard something that makes it sound sketchy. There are plenty of reasons for someone to legitimately not like cryptocurrency. Maybe they got scammed, or lost money in a market crash. A lot of the reasons that people don’t like crypto is because of a few negative things that they have heard in the news or online that are actually myths. You’ve probably heard of every myth on this page, but let’s take a deep dive into these and start debunking common crypto myths.

Myth: Cryptocurrency is Not Secure

There have been many hacks in the cryptocurrency world. You hear of exchanges getting hacked, wallets getting hacked, or malicious smart contracts that get passed around that wipe the crypto from your wallet. However, these hacks are usually done to a third party who makes use of cryptocurrency, not the cryptocurrencies themselves. For example, a centralized exchange allows users to buy and sell cryptocurrencies, and your crypto is really held by the exchange, not you. If this exchange gets hacked in any way, the hacker can take all of the exchange’s crypto, meaning they will have none for you, leaving you with nothing but fancy numbers on a screen. Crypto is powered by the blockchain, which is just groups of listed transactions (a block) connected to each other in order until the very first block (chain). Blockchain is extremely secure. No one can ever change any of the transactions on the blockchain because anyone on the network can see this. Everyone on the network agrees to transactions listed on the blockchain, and everyone has a copy of the blockchain that everyone has agreed to. If someone tried to change a transaction, everyone else could compare the changed version to theirs and know it’s been tampered with. Bitcoin’s consensus method, otherwise known as cryptocurrency mining through proof-of-work, means that someone has to spend a certain amount of energy in order to add a new block to the chain (mine the block). When someone mines a block, everyone on the network can see that the energy has been spent, and agrees that this block should be added, and updates their own copy of the blockchain. The only way to take over the blockchain would be to have more than 51% percent of the miners, and also be pretty lucky. The immense amount of power it would take means that it is basically impossible to hack Bitcoin. Your money has more of a chance to be lost in a hack of a bank than a hack in Bitcoin. Bitcoin has never been hacked.

Myth: Cryptocurrency is a Bubble

Many people are hesitant to get into cryptocurrency because they believe it is a bubble like tulips or, more closely related, the dot com bubble. A bubble is when an asset is worth more in price than in value. Usually, this means a very rapid increase in the price over a short period of time, and will eventually “pop” when it becomes too unsustainable and drives the price into the ground. During a bubble many people get rich, but a lot more people lose money. Because of its insane growth, Bitcoin and other cryptocurrencies may look like a bubble, especially when the market crashes shortly afterwards, exactly like a bubble. While it may seem like crypto is a bubble, it’s just a new technology with a very undecided future, which makes it very speculative, very risky to invest in, and very volatile. The volatility is what may be mistaken for a bubble. Since Bitcoin was introduced in 2008, it has gone through several market cycles where it hits a new all time high and then crashes down for a period of time, and then recovers to another all time high. This cycle has repeated itself many times before. As Bitcoin and cryptocurrencies become more and more popular there will be less and less swings in the market, and its price will be a lot more stable. Blockchain technology is being used by some governments to create central bank digital currencies (CBDCs). These will be a digital version of the country’s own currency that can be used to buy and sell goods just like regular money. Governments are helping progress the use of digital currencies. Cryptocurrency is new, and a bubble usually means things won’t stick around. It looks like its technology may be here to stay.

Myth: Cryptocurrency is for Criminals

A long time ago, when Bitcoin first started getting popular, let’s say 2013, there was an online marketplace called Silk Road where users could buy and sell illegal items. This is probably the first time Bitcoin started to get into the mainstream and it definitely wasn’t for a good reason. Since then, people still believe that Bitcoin and other cryptocurrencies are only used by criminals to hide under anonymity while buying and selling illegal things. Some of the worst countries for cryptocurrency believe that crypto will be only used for money laundering or to fund terrorism. These things are possible, of course, but think of all the times that fiat money has been used in crimes. Money laundering, bribery, tax evasion, counterfeiting, paying for illegal substances, theft, the list just goes on. However, with cryptocurrency these are rare. Most blockchains are public ledgers, which means that anyone with an internet connection can see the transactions. Everyone can see any transactions that could be used for crimes. According to a study run by Chainalysis, only 0.34% of cryptocurrency transactions are used for illegal activities, and over half of these were from crypto scams. Most countries now have started cracking down on cryptocurrency that is used for crimes. The U.S. FBI had even arrested and sentenced the owner of the SIlk Road marketplace, seizing all of the Bitcoin. Other countries have anti-money laundering laws, and some have Know Your Customer systems set up so that you must provide an ID to buy or sell crypto in the country.

Myth: Cryptocurrency is Bad for the Environment

You may have already heard that Bitcoin is bad for the environment. Elon Musk and many others have expressed concern over the environmental impact of Bitcoin and other cryptocurrencies. The reason Bitcoin could be bad for the environment is because it uses a lot of energy in its mining process. Basically, a bunch of computers are all using a ton of energy in order to solve a complicated math problem that helps keep Bitcoin secure. However, only one computer will end up solving the problem, meaning the other computer's work was for nothing, and that energy wasted. Bitcoin uses something like 110,000 GWh of electricity per year, which is around the same amount as the Netherlands. This sounds like a lot, but refrigerators in the U.S. alone use 173,000 GWh per year. Bitcoin releases about 57 million tons of carbon dioxide into the atmosphere per year. Compared to gold, which releases 144 million tons and the traditional banking system, which releases 1,368 million tons, Bitcoin really isn’t really having the same type of impact on the environment. Just because Bitcoin uses a lot of energy doesn’t mean it's all bad for the environment. It depends on the source of that energy. Bitcoin can be mined with electricity from the sun, wind, water, or even with a volcano. About 56% of the energy used by Bitcoin comes from sustainable resources. Some cryptocurrencies have even been designed with the environment in mind. Crypto like Cardano, Algorand, and Nano are some of the best cryptocurrencies for the environment, due to the fact that they use a fraction of the energy Bitcoin uses.

Myth: Cryptocurrency Cannot Be Spent on Anything

A lot of the anti-crypto crew will go after Bitcoin and other cryptocurrencies saying that they are just gambling, or a ponzi scheme. You may know there are a ton of crypto scams already out there, and people do gamble on cryptocurrencies just like horse racing. So does that mean crypto has no real value or can’t be used as an actual currency? No, there are actually plenty of places that currently accept cryptocurrency as a method of payment. Over 15,000 businesses worldwide already accept crypto in 2022, and more are being added each day. There are also around 36,000 Bitcoin ATMs in the United States alone. Some major businesses that accept crypto are Microsoft, Telsa, Wikipedia, Overstock, Starbucks, Whole Foods, Gucci, Etsy, AMC Theatres, Newegg, Home Depot, PayPal, Twitch, AT&T, and GameStop. Not all cryptocurrencies are created equal and some are more trusted than others. The trusted crypto, the ones who provide an actual value, are the currencies that you will see being accepted more and more by businesses in the future. Right now, you mostly see Bitcoin, Litecoin, Dogecoin, Shiba Inu, and Polygon being accepted by certain stores and businesses. Businesses are also investing in cryptocurrency themselves. Massive hedge funds and publicly traded companies like MicroStrategy, Tesla, Block, and Coinbase have all invested in Bitcoin in recent years. Another thing is that cryptocurrency is used as a store of value. That basically just means it is something that will hold its value, or get more valuable, as time goes on. Bitcoin is the main cryptocurrency used as a store of value. Bitcoin was once worth $6, and years later it became worth $69,000. There will only ever be 21 million Bitcoin, so there It’s true that crypto is volatile right now, but as it gets more and more mainstream, and more people hold crypto, it will start to become more steady over time. Summary Some may claim that cryptocurrency is not secure because they hear of hacks on third parties like wallets and exchanges. This is not the cryptocurrencies themselves. Blockchain is extremely secure, and uses encryption techniques to make sure nothing can be changed or hacked. Cryptocurrencies are sometimes seen as the next bubble because of their exploding short-term value. However, cryptocurrency is just a new technology, which makes it wildly volatile, but as it gets more popular the price will stabilize. Bitcoin may have once been used in illegal activities, but those days are no more. Under 1% of all cryptocurrency transactions were used for something illegal, mostly scams. Cryptocurrency can use a lot of energy during its consensus process, but that does not mean that it is bad for the environment. Over half of the energy used to mine Bitcoin is from renewable resources. Cryptocurrency has been said to have no value. The value of cryptocurrency has increased over time with businesses like Tesla, Gucci, AMC Theaters, and GameStop accepting crypto as a form of payment. Now that we have debunked common crypto myths, let's learn about the best advice for beginners investing in crypto.
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