When Bitcoin first came along back in 2009, it was slow to gain any sort of popularity. It was the world’s first and very few people understood the concept or purpose. Even after more cryptocurrencies popped up, there was still a deep misunderstanding or rather, a lack of understanding entirely.
With so much confusion and wrong information being written and passed on, this created a fair amount of rumors and myths about cryptocurrencies and digital tokens.
We’re here to dispel some of the top myths that have been circulating for years and hopefully help those curious to understand better what’s true and what’s false.
Jump to sections:
- Cryptocurrencies Are Valueless
- Cryptocurrencies Are Not Real Money
- Cryptocurrencies Are For Illegal Activities
- Cryptocurrencies Negatively Affect the Environment
- Cryptocurrencies Will Replace Fiat Currency
- Cryptocurrencies Are Unsafe
- Cryptocurrencies Are a Scam
- Cryptocurrencies Are a Fad
1. Cryptocurrencies Are Valueless
The value of any asset or commodity is completely subjective. Something is worth what someone is willing to pay.
For example, you could own a car that has a “value” of $10,000 but if everyone interested in buying it from you is only willing to pay $3000, then your car is only worth $3000.
The opposite scenario is true also. You could have a dollar note that, therefore, has a “value” of one dollar. However, if for some reason, a person is willing to give you ten dollars in exchange for your one dollar note, then your one dollar is worth ten dollars.
People place value on everything in life and just because something is said to have a value of x, be that a small number or a big number, that doesn’t mean this is what it is worth.
The same applies to cryptocurrencies. Take BTC, for example, when it was launched in 2009, each Bitcoin was worth a few cents.
However, at its ATH in November 2021, each one was worth nearly $70,000. The rise (and fall) in Bitcoin’s value over the last 13 years shows that an asset's value is set by society’s perception as a whole.
Just because Bob down the road thinks that Bitcoin or other cryptocurrencies are worthless, that doesn’t make it true.
Added to this is that cryptocurrencies have a unique purpose which gives them extra worth. In the end, you can never say that all cryptos are valueless.
2. Cryptocurrencies Are Not Real Money
The International Monetary Fund defines money as a store of value, unit of account, or medium of exchange that is widely accepted and can be translated into prices.
The Financial Industry Regulatory Authority (FINRA) defines cryptocurrency as a digital representation of a stored value through cryptography.
The Internal Revenue Service views cryptocurrency as convertible currency—one that has an equal value to real currency. Transactions in cryptocurrency are taxed, and capital gains or losses from holding them must be reported on your tax filings.
According to US definitions, cryptocurrencies certainly fall under the term of real money.
While cryptocurrencies are not legal tender in every country, there are plenty of countries in the world where it isn’t illegal to sell, buy or trade crypto and where you can buy a multitude of goods and services using your coins.
Cryptocurrencies aren’t physical coins or pieces of paper that you can carry around in your bag.
However, cryptocurrencies are recognized by many official authorities as being real money.
3. Cryptocurrencies Are For Illegal Activities
One of the most common and longest-lasting myths is that cryptocurrencies are mostly used for criminal, illegal, and illicit activities. For the way that some people talk, you would think every mobster in the world now relies solely on crypto to run their business affairs.
However, this myth is far from true.
While there are some criminal activities carried out using cryptocurrencies, for example, money laundering, online scams, and buying the occasional goods that you can’t find in your local stores because they’re not allowed to be sold, it pales in comparison to the amount of crime carried out using fiat currency around the world.
In its last crypto crime report, Chainalysis said that 0.34% of 2020's crypto transactions were associated with illegal activity. That number has now been raised to 0.62%.
However, this 0.62% figure puts criminal activity in the billions, whereas illegal activity using fiat currency is in the trillions and rising.
Non-cryptocurrency crime will always far exceed the crypto crime, even when adjusted to be relative. All types of money since the dawn of time have been and will be used by some people for illegal activity at some point but in the crypto world, this accounts for only a fraction of the transfers and buys that happen.
On top of this, as crypto becomes more popular, governments around the world are taking more affirmative action against those who use digital currency for nefarious means.
Anti-money laundering departments have been set up with the sole focus on crypto and other agencies are monitoring illegal wallets and suspicious transactions to combat crypto crime.
4. Cryptocurrencies Negatively Affect the Environment
In total transparency, number four has an element of truth. Mining for crypto takes a lot of energy and computer power, otherwise, transactions can’t be validated and verified and mining couldn’t happen in the first place.
As time has gone on, more and more people have been mining and the more people that mine, the more computer power, and energy is needed to get ahead of everyone else. This then leads to bigger rigs and more powerful machines.
However, the full effect on the environment depends on the source of the energy being used. Just like with other products that use energy, if fossil fuels are the energy source, then the effect can be quite large. But if sustainable energy sources are used then the impact is greatly lowered and mining can be a less excessive venture.
Using fossil fuels and energy-intensive sources for mining isn’t necessary and many developers are constantly working on ways to lower the carbon footprint and create environmentally friendly ways to mine any kind of cryptocurrencies.
5. Cryptocurrencies Will Replace Fiat Currency
A big worry that many people who don’t fully understand cryptocurrencies have is that they will replace fiat currencies in the future. This worry is unfounded as well as unnecessary.
Fiat currency is around 5,000 years old, whereas the first cryptocurrency, Bitcoin, has been around since 2009. There would have to be an unprecedented number of events, changes, and revolutions in a short amount of time for a crypto to replace fiat, which will never happen.
Furthermore, governments around the world would never accept a replacement of fiat currency even if citizens wanted it because fiat is regulated and can be controlled whereas crypto can’t. They would never give up the access and control they have where money is concerned.
The idea or rather a myth, that cryptocurrency will replace fiat currency isn’t even one worth considering.
6. Cryptocurrencies Are Unsafe
The technology behind cryptocurrencies is set up in such a way that it is incredibly safe, secure, and near impossible to break.
This security comes from the blockchain. The blockchain is like a database that uses encryption technology. All the transactions on the blockchain are verified and validated by other users. These steps ensure that someone cannot change or manipulate the blockchain or information on it for self-gain.
The part of the process where users may experience a data breach is how they store their Bitcoin. However, the vast majority of the time, this is down to user error.
If you put $1000 in cash in your back pocket and then got pickpocketed on the train, you wouldn’t blame your bank just because this is where you got the money out from in the first place.
There are several types of wallets, each has its own advantages and is used for different purposes.
However, it’s up to individuals to ensure they are storing their crypto safely and securely so they don’t get anything stolen from them.
If you’re concerned about how to store your Bitcoin, you can read an in-depth guide about wallets here which can help you understand what to do to keep your assets safe.
7. Cryptocurrencies Are a Scam
There is a huge difference between a system being designed in a way to scam users, and people using the concept of a system to scam innocent people.
For example, the Treasury Department's Bureau of Engraving and Printing prints paper money for the US. People use certain schemes and scams to steal money from others. This does not mean that the Treasury Department's Bureau of Engraving and Printing is a scam.
The same logic applies to cryptocurrency. Just because someone uses scams and schemes to steal crypto from others, this doesn’t mean the cryptocurrency is a scam.
Cryptocurrencies are very safe, as we have established above. But the scams that people set up have nothing to do with crypto technology nor are these scams set up on the blockchain.
Scammers are independent of the crypto itself and just take advantage of investors or individuals like scammers do when it comes to stealing fiat currency.
However, not every scam is on this level. The most common ones are small, with very few targets, and follow the same patterns as other types of scams.
While it’s unlikely that you’ll ever be the victim of a crypto scam, it’s always best to read up on what you should know and look out for so you can always protect your assets.
8. Cryptocurrencies Are a Fad
When something new comes along that is unique, it always causes a lot of suspicion and oftentimes mockery. Especially from those who don’t understand it or aren’t able to see its worth.
For example, when the internet first came along, it was seen as a technology only used by “computer nerds” that had no value in the real world.
Now, the world would be incomprehensibly lost without it.
The same thing happened when email was created. And again with mobile phones. Fitness watches. So on and so forth. What many people see as a fad, a trend, or irrelevant to life, often goes on to become a staple part of everyone’s life.
Cryptocurrencies are still in the very early stages. It’s only been 13 years since BTC launched and the community, opinions, and values have all considerably changed since the early days.
These factors will continue to strengthen and grow as the world slowly starts to see the benefits of digital currencies.
Until then, it’s best just to answer any questions someone has about crypto and take any mockery with a pinch of salt. People don’t like what they don’t understand.
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