“They’re Ponzi schemes. They have no value. They’re not secure.” Many of us have heard a fair share of opinions about Bitcoin and these rumours are made up by people who probably haven’t yet researched digital currency. Fortunately, over the years, cryptocurrency has proved the naysayers wrong.
When it first appeared in the 2010s, Cryptocurrency was a new and weird technology to many people. How can a digital currency be created? Is it feasible? Can it be used for day-to-day transactions like fiat currencies? Does it even hold any value?
These were the questions of the then potential investors. Some opted out of it and those who did invest in Bitcoin did it with a lot of caution and scepticism. Many doubted whether it was the next big thing. However, over the years, bitcoins have proved them wrong. In this article, I will be analyzing 10 of the biggest myths about cryptocurrency.
- Bitcoins Aids Illicit Transactions
One of the most common beliefs about cryptocurrency is that it aids black markets and gambling. It is evidenced by its wide use in black markets like Silk Roads. However, that can also be said for any other fiat currencies. Dollars and Euros were used for illicit activities before the existence of Bitcoin.
Admittedly, the anonymous nature of Bitcoin makes it enticing to money launderers and black markets. However, it is the transactions made that are illicit, not the cryptocurrency. Bitcoin is only used as the currency for transactions, just like any other fiat currencies can be used.
Research recently established that even though there was a time when gamblers and black markets dominated cryptocurrency, its use for illegal activities had dwindled. Today, gamblers, money launderers and the black-market use of Bitcoin are below 1% of its total network. A much greater percentage of people use fiat currencies for these illegal activities.
- Bitcoins Are Scams and Ponzi Schemes
There is nothing else in this world that debunks the claim that bitcoins are Ponzi Schemes more than the existence of Bitcoins themself. So, what is a Ponzi scheme?
A Ponzi scheme is a type of fraud when investors’ returns are not paid with profits but from subsequent investors’ money. However, Bitcoin is far from that.
A central entity does not control it, so it has zero chance of being a Ponzi scheme. It also wasn’t designed that way. Early investors who made huge returns from bitcoins aren’t profiting at the expense of newbie investors.
With that in mind, it’s still important to be cautious when investing in cryptocurrencies. There have been numerous coins developed fraudulently; so, investing in Bitcoin or any other cryptocurrency should be treated with caution. On the other hand, fiat currencies are also prone to fraudulent activities.
Scaling through any form of fraud, in any form of transaction, whether cryptocurrency or fiat currencies, always requires in-depth research and analysis.
- They Are Not Valuable
Not being wholly accepted as a form of payment and being banned in some countries, among other factors, has made people believe that Bitcoin has no value. However, the claim can’t be further from the truth.
Bitcoins are gaining increasing popularity among individuals and companies and many now see Bitcoin as an alternative source of payment. After all, value is determined by the forces of demand and supply, and the need for Bitcoin is growing by the day.
- Bitcoin mining is free
The increase in demand for Bitcoin has led miners to look for alternative ways of mining bitcoin. However, that does not mean Bitcoin is given out for free; it increases its value.
The digital currency is mined on a proof-of-work (PoW) network, which requires miners to solve a complex cryptographic hash to mine a coin. As more people try to solve the code, the harder it becomes. It forces miners to deploy electricity-powered mining rigs for coin mining.
Being mined by high-powered mining rigs, Bitcoin mining has a draining cost effect on electricity. So, its market price hovers at that cost. The more miners involved, the more electricity is used and the more Bitcoin’s price appreciates. Bitcoin mining reinforces the famous saying, ‘it costs money to make money.’ The notion that mining Bitcoin is free is farced.
- After Bitcoin’s Hard Cap Is Reached, its Security Will Be Compromised
It is widely believed that 21 million is the maximum Bitcoin that can be mined. 18 million bitcoins have already been mined and expert forecasts believe that Bitcoin will reach its Hard Cap by 2041. So, what happens to the security of the network after then?
The incentive for decoding blocks is coin mining. So, with coins no longer available to be mined, no blocks would be created, and transactions would be compromised. It will threaten the security of the network.
While this is a real threat to the network, the developers can develop a solution that will solve this problem. On the other hand, alternative coins like Ethereum have no ceiling on the number of coins that can be mined.
- They Are Illegal As They’re Not Legal Tender
Another issue about Bitcoin pointed out by critics is whether it can be accepted as a legal tender. Legal tenders are bills and coins minted and issued by the government of a country. However, Bitcoins are not issued by any country, they are decentralized digital currencies.
Although this does not mean that virtual currency is illegal. It is gaining increased usage among individuals and bodies and is the latest mode of transaction, although it is not wholly accepted.
Some countries have banned cryptocurrency, for example, Algeria and China. So, its legality depends on the laws of your country. Most countries have accepted virtual currency, but it is also essential to check your country’s laws regarding cryptocurrency.
- Quantum Computers Can Breach its Blockchain
Would quantum computers breach cryptocurrency’s Blockchain and pose a security challenge to bitcoin’s network? These can only be speculations as quantum computers do not exist yet.
- Bitcoins and Other Cryptocurrencies Pose A Threat to The Environment
Admittedly, there is a valid reason to be concerned about cryptocurrency posing a threat to the environment. As Bitcoin becomes more and more popular, numerous mining rig operations are established, the computational power of rigs increases which in turn has a draining effect on the consumption of electricity.
However, like many other cryptocurrencies, Bitcoins are created with hard caps. After 21 million Bitcoins have been mined, there won’t be any more tokens available, which will reduce computational power and in turn, reduce electricity. Mining won’t go on forever.
- Its Blockchain is not Secure
As digital currency has increased in popularity over the years, so have scams and thefts. Scammers and hackers often capitalize on vulnerabilities in crypto wallets, transactions and websites of crypto-owning bodies.
However, no scam or theft has been recorded on the Bitcoin blockchain. The mining network and cryptography used in Bitcoin are so robust that its proneness to attack is zero.
There are many ways investors can guarantee the security of their crypto assets. Doing in-depth research into reputable crypto wallets will determine whether your assets are secure or not.
- Bitcoin Aids Tax Evasion
Like many other cryptocurrencies, Bitcoin is fast becoming a cash alternative. Many companies and bodies now accept virtual currency as the mode of transaction. However, it poses a big question, how would it be taxed?
So far, Bitcoin is not taxed by any country in the world. It has made investors convert their assets to cryptocurrencies. As the government doesn’t control transactions, it goes unreported. Therefore, tracking cryptocurrency income or exchanges is difficult for tax bodies. Admittedly, cryptocurrency is a significant factor that aids tax evasion.
All in all, Bitcoin has outgrown some of its criticism and scepticism over the years. It has debunked many myths but also confirmed a few. However, it is worth noting that fiat currencies have their downsides too. Bitcoin is so valuable for the modern age that its benefits vastly outweigh its downsides which have made it the new and growing mode of payment with many untapped potentials.