Cryptocurrencies have become quite popular since they first launched in 2008. But even though they’ve been around for over a decade, their nature remains obscure to many and is somehow difficult to understand. Thus, various myths and related lies that revolve around these virtual currencies have been allowed to exist for a long while.
This article will list and debunk some of the common myths that surround cryptocurrency. Have you heard any of these before? Check our list to find out.
Myth #1: Cryptocurrency Has No Value
People perceive things subjectively and value things differently. Someone might put something on a pedestal, while others may categorise it as trash. An example would be Bitcoin, which only had a thousandth of a cent as its value in 2009. However, Its value reached up to $69,000 per bitcoin in 2021.
Meanwhile, the blockchain ecosystem Ethereum that powers the cryptocurrency ether (ETH) is the foundation for decentralised finance applications, non-fungible tokens, and other technological innovations. Ether may not be worth quite as many dollars as Bitcoin; however, there is more value for ether when it comes to firms that develop financial products and services that utilise Ethereum smart contracts and blockchain.
Myth #2: Cryptocurrency Is Solely Used for Criminal Activity
One of the topmost myths about digital currencies is their use in criminal activities. It is true that bad people sometimes use these currencies to propagate their criminal intentions. However, money has also been used this way by many criminal organisations throughout the years. So it seems the issue is not in the currency itself, but in how we use it.
There was a decrease to 0.34% in the number of illegal activities related to cryptocurrency in 2020. Only $54 of this was connected to cryptocurrency scams, according to a report of MSN, which provides data to crypto crime investigators using blockchain data analysis.
The majority of cryptocurrency transactions are entirely legal. Law enforcement agencies, governments, and the international community track the use of cryptocurrencies by criminals. Anti-money laundering measures are adopted by different countries to fight the financing of terrorism. In the US, criminal crypto use is investigated and prosecuted by the National Cryptocurrency Enforcement Team (NCET).
Are you worried that you might accidentally commit a crime if you use crypto? That’s quite unlikely. Still, when regular people like yourself engage with cryptocurrency, you should always seek and find out whether there are any crypto laws in your country. For instance, this platform stresses the importance of trading regulations and eligibility so it requires from its users to verify such information before proceeding to trade with crypto, Forex or other assets.
Myth #3: Cryptocurrencies Are Not Environmentally Friendly
Environmentalists are making their concern about the impact cryptocurrencies have on the environment known. There are some digital currencies that utilise large amounts of energy to validate and verify transactions. Bitcoin’s popularity has made it more valuable, making it a target for the crypto mining industry.
Large amounts of energy are needed by mining farms to power their massive mining rigs. Some even have a total power consumption similar to that of some small countries. However, the impact on the environment is influenced by the energy source that these mining operations obtain their power from.
If the source of energy for these crypto mining operators comes from fossil fuels, then there would be excess carbon pollution. On the other hand, if they use sustainable energy resources, then there would be less environmental impact.
It is significant that Galaxy Digital Mining reports that even though the Bitcoin network consumes large amounts of energy, the gold industry and modern banking system consume twice as much.
Myth #4: Cryptocurrencies Are Not Safe
Blockchain is the heart of cryptocurrency. Blockchain is a technology with a secure, encrypted database that hackers would find difficult to break. The blockchain records old and new transactions in the system.
The network proceeds with recording on the previous block, and a number of verifiers should agree that the transactions encoded are legitimate. Thus, cryptocurrency is difficult to steal because of the blockchain’s linked blocks, encryption, and consensus mechanisms.
The storage of cryptocurrency through centralised exchanges and crypto wallets is the system’s vulnerability. There is no need to worry about sending crypto from one user to another; however, it is easy to hack or tamper with the software and platforms used to store crypto.
It is a common misconception that the process of creating a token is called cryptocurrency mining. However, crypto mining is the verification of transactions and the creation of new blockchain blocks. The reward for creating a new block just happens to be cryptocurrency, hence the confusion.
Myth #5: Cryptocurrency Will Replace Fiat Currency
Compared to fiat currencies, cryptocurrencies are just a baby. History tells that it was around 1000 CE that China issued the first fiat currency. Today, all nations use fiat currency.
People need to have mass adoption of crypto over money in order for it to replace fiat currency. However, it is possible that this could happen if purchasing power and value are established. If sellers use crypto to set prices for their goods, then crypto use might become widespread.
However, it would be difficult to change the current system of using fiat currency as governments do not like to let go of established control systems for tax collection and providing funds for programs and services sponsored by governments.
Government funds for social services will be depleted if there is no tax collection. In addition, there is uncertainty when it comes to trends in inflation if crypto replaces fiat currency, and it would take decades to figure out the solution.
Furthermore, the decentralised nature of cryptocurrency makes it difficult for governments to control inflation. It has taken 100 years for banks to counteract unemployment and inflation through the modern tools that they have used. There is little knowledge on how the economy can be affected with complete decentralisation. There is a need to create new financial policies and tools because crypto and blockchain technology do not have internal tools to influence economic growth, employment, and inflation.
Myth #6: Crypto Trading Is a Scam
Cryptocurrency has been a tool in purchasing and selling in various businesses. People accept them in conducting transactions, and governments are finding ways to regulate them. Most cryptocurrencies do not have the built-in algorithm to steal funds from users.
However, there are some ill-meaning parties that try to cheat crypto users out of their coins or money. For instance, a number of initial coin offerings eventually are revealed to be scams.
There are also instances that encourage users to accept unverified transactions or scammers that pretend to be the government and try to ask them to pay their debt in crypto.
It is difficult to completely remove the possibility of being scammed. However, sufficient knowledge and awareness can decrease the possibility of users becoming victims of scams.
