Myths About Cryptocurrency
Bitcoin, the first cryptocurrency, was introduced in 2009. There are now thousands of cryptocurrencies, with a total value of around $2 trillion. The rise in their prices earlier in the year generated thousands of cryptocurrency millionaires, at least on paper. Many investors may find cryptocurrencies a huge speculative bubble. Many cryptocurrency fortunes have been destroyed by the recent plunge of prices. However, whatever their fate, the technological innovations that underpin them will change the nature of money.
Here are some popular myths people believe about cryptocurrency below:
1. Digital Currencies are Primarily used for Illicit Activity
One of the most common myths about digital currency is that are only used to do illicit activities. Although it is true that digital currency has been used by criminal organizations as well as individuals with nefarious ends, the same could be said for fiat currencies. This myth can be explained by the anonymity of most cryptocurrencies. Bitcoin was the first major digital currency and became very popular on black markets such as the Silk Road.
It’s true that bitcoin’s anonymity and some aspects may have attracted criminals to do illegal business in those markets. However, it is important to remember that the illegality of the transactions was not caused by the cryptocurrency. It is possible for criminals to use fiat currency in their crimes so as not blame such innovation. Analysis of the patterns of money flows on the Bitcoin network revealed that although there was a time when most Bitcoin activity was concentrated at black market and gambling venues , that amount has fallen to a very small percentage of total usage today.
2. Cryptocurrencies Are a Scam
Investors should be wary of potential scams. Numerous initial coin offerings have been exposed as fraudulent in many ways. Smart investors treat cryptocurrencies the same as any other investment, with a healthy amount of skepticism along with extensive research and caution.
Investors can be lured into investing in fraudulent opportunities in traditional financial markets too. This happens when investors don’t take the time to fully consider the details of the opportunity. As one would need to be able to discern good from bad investments in traditional finance, the same applies to cryptocurrency investment opportunities. Although it is impossible to eliminate the possibility of being scammed, it can be reduced significantly.
3. Cryptocurrencies and Blockchain technology are the same
FALSE. Thou they are often mistakenly thought to be synonymous. Blockchain is the technology that underpins cryptocurrencies. It is the technology it uses.that is if you think they are the same, because they are not. Cryptocurrency uses the other–blockchain tech to function.
4. Crypto transactions are anonymous.
Bitcoin was initially marketed as an anonymous medium for exchange that was untraceable and invisible to hackers when it first appeared. According to Bitcoin.org, Bitcoin transactions are permanently stored on a network and can be accessed by anyone. While Bitcoin addresses don’t have names attached, transactions can be linked with real-world identities. According to Business Insider cash is more anonymous than cryptocurrency.
5. Cryptocurrencies will soon be a passing fad.
Warren Buffet has likened cryptocurrencies to 17-century Dutch tulip craze. Bank of England Governor Andrew Bailey warned that cryptocurrencies “Buy them only if you’re prepared to lose all your money” while Nouriel Roubini called Bitcoin “the mother or father of all scams” as well as criticizing its underlying technology.
Although cryptocurrencies are not a viable investment vehicle due to the volatility of its values spiking and falling, they are making significant financial and economic changes. Stable coins will accelerate the rise of digital payments as the technology matures.
This will usher in the end of paper currency. Central banks around the globe have been encouraged to create digital versions of their currencies because of the threat of private currencies. The Bahamas already has a digital currency central bank, and countries such as Japan, China, and Sweden are experimenting with digital money. If you have any dollar bills, they could soon be relics.
Even transactions like buying a car or house could be handled by computer programs that run on cryptocurrency platforms.
Electronic transactions that involve money or other assets, such as transfers of assets and payments could be made easier by digital tokens. This is often done without the involvement of trusted third parties like real estate attorneys. While governments will continue to be required to enforce property rights and contractual obligations, software could one day replace bankers and accountants.
These are some few myths about digital currency: What were your thoughts? Did you believe any of these myths at one time? Many people have heard these stories and don’t want to invest or use cryptocurrencies. You don’t have to be one of them. Instead, explore the world of cryptocurrency and all it has to offer.