A ‘MythBusters’ fan? You’ll love this…
Cryptocurrencies have been in the market for a decade now, and its introduction saw them join the ranks of fiat currencies as a viable mean of payment. However, even with all the benefits that crypto offer today against traditional currencies, not many are enthusiastic about them. Why? While there is not a single answer to this question, one of the reasons might be the wrong beliefs around cryptocurrencies and their underlying technology, blockchain.
A recent study shows that more than 60 of internet users are currently familiar with cryptocurrencies. Since familiarity breeds contempt, a lot of ‘familiarities’ and not enough information has bred some misconceptions about cryptocurrency.
For that reason, we’ve taken the time to debunked the most common myths and misconceptions about Bitcoin and other cryptocurrencies. Ready? Let’s get to it!
Crypto is a Replacement of FIAT Currencies
There was a time when TV was thought to kill radio; the US dollar was once anticipated to replace gold. And now cryptocurrencies are said to be a replacement for fiat money. Don’t get us the wrong way. We are all-in for this to happen, but the truth is that fiat currencies are not going anywhere anytime soon.
Nowadays, paying with cryptocurrencies is a truly seamless experience. You can either load them to a prepaid crypto card like the Crypterium Card or cash out directly to a regular bank card using an instant payouts service.
However, many people around the world continue to rely on traditional paper money. Brazil is a good example of strong cash dependency. Only last year, Brazil’s Central Bank published a report that reveals nearly half of the country’s workforce continues to get paid in cash. And that isn’t all. An additional research by the Brazilian Service to Support Micro and Small Enterprises outlined that 60% of local businesses doesn’t have POS terminals to enable card payments.
Bitcoin is Anonymous
Bitcoin is often described as ‘anonymous’ as it’s possible to move funds without providing any personal information. But that’s not entirely true. In fact, you should think of Bitcoin as ‘pseudonymous’ instead. Each transaction is registered on the blockchain under a wallet address. If that address is ever linked to your real identity, then you’re exposed!
Moreover, there are sophisticated instruments that are used by government and financial entities to track identities and that provide blockchain forensics for illegal activities.
Monero and Dash, for example, are regarded as the best privacy coins for offering higher ‘anonymity’ to their holders. In the case of Monero, transactions are divided into randomized amounts and mixed between stealth address, making it impossible to track the real origin.
Cryptocurrencies have no “Intrinsic Value”
“The idea that [Bitcoin] has some huge intrinsic value is just a joke in my view,” said Warren Buffett, one of the world’s most influential investors. And guess what? He is right.
Now, do you think FIAT currencies have “intrinsic value”? Almost nothing in the world of trading and money has it. The value of FIAT money, issued by nations, largely depends on the support fixed by governments. Bitcoin, unlike the dollar or the euro, has a limited supply, which is certainly a point on its side as it can’t be easily manipulated.
Let’s stop for a moment and see if Bitcoin and crypto actually fit the attributes of money:
- Acceptability: Money needs to be accepted by most people. Thanks to solutions like the Crypterium Card, you can spend cryptocurrencies all over the world.
- Scarcity: For a currency to have value, it should be limited. Only 21 million Bitcoins will ever be mined, which means that supply is indeed limited.
- Interchangeable: You can trade crypto against other cryptocurrencies, as well as the US dollar, the Euro, the British Pound, etc.
- Transferability: Blockchain technology makes cryptocurrencies the easiest, fastest and cheapest way to send and receive money internationally.
- Durability: Cryptocurrencies are stored on decentralized networks which guarantees longevity as long as these networks stay active.
- Divisibility: You can conveniently buy fractions of cryptocurrencies. For example, you can buy 0.001 Bitcoin.
Cryptocurrencies are Untaxable
Although some countries such as Liechtenstein, the Netherlands, and South Korea don’t impose taxes on cryptocurrencies, other nations like Spain have already alerted tax payers about required contributions to the government arcs linked to their crypto activities.
Taxation on cryptocurrencies varies depending on how countries perceive digital assets. For example, in the United Kingdom, United States, and Australia, it is taxed as a capital gain. In Germany, on the other hand, the taxation will depend on whether you are buying or selling it.
Cryptocurrencies are illegal
Back in the 1970’s, the Medellín Cartel — one of the largest organized drug cartels in history — was making $60 million in drug profits per day. Does it make the dollar an ‘illegal’ currency?
The fact that criminals use a certain currency doesn’t make it illegal. It is true that crypto is highly associated with illegal transactions. For instance, a study carried out in Australia showed that 46% of Bitcoin transactions were involved in unlawful activities. But this does not mean that it’s solely used for illegal dealings. Any other currency can also be used for illegal transactions.
The Government can shut down Cryptocurrencies
Since cryptocurrencies are hosted in decentralized networks, there is no specific person to ‘take down’ or arrest. The only way this can happen is if the entire internet infrastructure is shut down.
Bitcoin is Blockchain
Okey. Let’s not put everything on one bag. Bitcoin is a cryptocurrency and, just like any other crypto, runs on blockchain. Blockchain is not the same thing as Bitcoin. Blockchain is a distributed ledger technology that is used in many different industries, not just finance.
If we were to assume that Bitcoin is a train, then, in this case, blockchain will be the train tracks. As mentioned above, blockchain allows information to be stored in a decentralized database.
Cryptocurrency is a reward that the blockchain offers miners for developing the network. To date, there are more than 1500 available coins and there is a blockchain behind each of them. That said, we can conclude that blockchain can exist in other contexts than crypto; however, crypto cannot exist outside a blockchain.
The Crypto Market is a Bubble
We get it. When you see an asset fall in value by half in a few days, bubble is the first thing that comes to mind. But bubbles aren’t always a bad thing. In fact, when bubbles have the power to boost mass adoption. Just like it happened with the dotcom or internet bubble back in the 90s.
Once the bubble bursts, it helps the market get rid of certain players, especially the ones without strong value propositions. The crypto market has experienced a speculative bubble, but as predicted by Crypterium analysts back in December, the market is recovering consistently.
Crypterium is one of the most promising fintech companies, according to KPMG and H2Ventures. We are building a mobile app that meets the banking needs of the digital assets era.
Our goal is clear: with Crypterium, whatever you can do with traditional money you will able to do with digital assets. This idea is supported, among others, by the co-founder of TechCrunch Keith Teare and over 400,000 registered users, and the number is growing by day.
The team is led by former General Manager of Visa Central & Eastern Europe Steven Parker, and C-level executives from global financial institutions, like Renaissance Insurance, London Derivatives Exchange, American Express etc.
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Myths & Misconceptions About Bitcoin (Finally) Debunked was originally published in Hacker Noon on Medium, where people are continuing the conversation by highlighting and responding to this story.