Cryptocurrency is bad for the environment.
There is a common misconception that cryptocurrency, like Bitcoin, has an incredibly high energy footprint. This belief comes from the fact that Bitcoin transactions are powered by computers that solve complex mathematical problems in order to validate transactions on the network; this takes a lot of electricity and computing power. However, newer cryptocurrencies have been developed which use algorithms that require less electricity to mine coins, making them greener alternatives to Bitcoin. In addition, miners do not necessarily have to mine cryptocurrency as their primary source of income as it can be done as a hobby as well as anyone who wishes to make some extra cash through mining can invest in the necessary equipment instead of buying new hardware every time they wish to mine coins.
Bitcoin is an anonymous payment network
There are various misconceptions associated with the world of cryptocurrencies, especially with regard to Bitcoin being an anonymous payment network. The fact is that users can have as many Bitcoin addresses as they want but every transaction is recorded in a public ledger that cannot be viewed by just anyone but can be accessed through Blockchain explorers or APIs that can be integrated into websites.
There are various other myths about the world of digital currencies that have been circulating for some time now, so let’s see if they really hold any truth or have just been invented by misinformed people with too much spare time on their hands.
Cryptocurrency is not regulated
There has always been a fear that digital currencies will be used for illegal activities and to fuel terrorism. However, the truth is that since the introduction of anti-money laundering and other funding regulations, cryptocurrency has become heavily regulated and monitored by governments all over the world.
It’s just a Ponzi scheme
An Initial Coin Offering (ICO) is not just an unregulated means of crowdfunding, but the future of venture capitalism. It’s an opportunity for entrepreneurs all over the world to entice investors with promises of quick returns on their investments. On top of that, it’s no secret that Bitcoin is only one cryptocurrency among hundreds. Just because there are so many cryptocurrencies now, people cannot say it is just a Ponzi scheme.
It’s possible to manufacture cryptocurrency out of thin air
Miners are not just generating bitcoin out of thin air, they are verifying transactions and maintaining the integrity of the network in exchange for mining rewards. They contribute to securing the network by validating transactions that take place on it. Miners receive new bitcoins in the process of verifying transactions. In this way, they are compensated for their services and incentivized to ensure that honest protocol rules are followed. For instance, miners have been criticized for being able to block specific transactions from taking place on the Bitcoin network if they want, without having a proper system in place to contest these actions should they do so maliciously.
Bitcoin exchanges play a vital role in the processing of transactions and other revenue-generating activities on the network. By interfacing with payment instrument vendors, banks, and merchants, these intermediaries mediate between transactors and facilitate non-cash payments. They have their own security measures to prevent fraud, but since they are independent third parties, they are vulnerable to cyber-attacks. Mt. Gox, the Japan-based Bitcoin exchange that shut down in February 2014 after it lost $470 million of customer deposits due to a hacking incident, is one example of many that show how exchanges can compromise users’ money under certain circumstances.
In April 2013, The Financial Crimes Enforcement Network (FinCEN) released guidelines for individuals administering or exchanging virtual currencies, such as Bitcoin. The guidelines fall under the Bank Secrecy Act that requires “money services businesses” to register with FinCEN and implement anti-money laundering policies.
Bitcoin’s true value is $0.00
One of the biggest and most common false assumptions about Bitcoin and other cryptocurrencies is that they have no real value.
“Bitcoin has no underlying rate of return,” Vanguard Group Founder and early investor in the computer industry.
It’s too late to invest in Bitcoin
A similar myth is that there’s still time for anyone interested in buying Bitcoins to do so. “It’s like deciding whether to buy Microsoft back when it was $0.25 per share — you had very little chance of buying low and selling high,” is the analogy that perhaps best explains the situation.
There’s a fixed number of Bitcoins
Bitcoin can be thought of as an open-source software project, and just like any other project, it can be modified if the participants of the Bitcoin community agree to do so.
Bitcoin wastes resources
The blockchain is where the public record of all transactions resides. It’s described as “an open, distributed ledger that can record transactions between two parties efficiently and in a verifiable and permanent way.” As opposed to most types of ledgers, the blockchain is “backed by cryptographic principles.” There are a number of benefits to using a distributed ledger. It’s trustless and eliminates the need for a central authority which means that every participant in the network has access to identical information.
In addition, transactions can be programmed and they execute automatically on their own without any chance of censorship, fraud, or third-party interference. Transactions also cannot be altered which makes the record of them extremely secure and reliable.
A distributed ledger is the perfect way to create a decentralized digital currency because it can act as an unalterable data store that everyone trusts equally without any need for a central authority. There are many different types of cryptocurrencies, but the most popular ones are Bitcoin, Ethereum, and Monero.
Some people wonder
what would happen if somebody manages to come up with a new cryptocurrency that is even better than Bitcoin? There are some that think that it won’t be possible because cryptocurrencies are just too perfect for people to reproduce them. However, others believe that there are a lot of flaws in cryptocurrencies and that a new one can definitely be created.
The value of cryptocurrencies is directly tied to the number of people using them, which makes them a very volatile asset. One day might see a spike in its value while another might see a sudden decrease, which leaves many wondering if cryptocurrency has any worth at all or if it’s just all hype. Turn to the next page to see some of the most popular myths about cryptocurrencies that you can easily debunk.