Everyone has probably come across their fair share of Bitcoin baloney. While it is true that this cryptocurrency does have some dark sides, which include the inability of recovering lost coins, the huge cost of mining bitcoins, and wallet vulnerabilities, there is still plenty of misinformation that has been spread around about the pioneer cryptocurrency. The problem is that most people don’t really do any research, so they don’t realize that there is a learning curve associated with it. The criminal activities have gotten attention and are tainting Bitcoin and cryptocurrencies in general, but they are not all there is where this digital currency is concerned.
Over the years, a number of myths have become known about Bitcoin like it only existing for illegal activities or that you can get it for free and even those like it has been hacked. None of these myths are true, but if you are new to this market, you probably still need to learn about it. The best way this issue can be tackled is by learning the top myths about Bitcoin and debunking them. Let’s check them out below:
Bitcoins don’t have any intrinsic value
There is significant debate over whether bitcoins have any intrinsic value other than them being used as a medium of exchange. Yes, Bitcoin wouldn’t have any value if society came to a screeching halt tomorrow because it is a decentralized currency that is not backed by any government and is simply not pegged to any asset or commodity. However, there have also been arguments made about Bitcoin’s value as a global network of merchants and exchanges. The important thing to remember at the end of the day is that the value of Bitcoin, like any other thing, is determined through demand and supply. Since usage of crypto is growing and it is becoming mainstream, its value is also going up, as seen through the recent bull-run in the market.
Bitcoins are illegal
Another question that people have had about Bitcoins is whether this digital currency is a form of legal tender. In the United States, legal tender comprises of bills and coins that have been minted and issued by the government. Since Bitcoins don’t fall in this category, people have declared them illegal, which is not so. In fact, it has been classified as a virtual currency by the US government, which is something that’s actually recognized by the US Financial Crimes Enforcement Network (FinCEN). Even if Bitcoins may fall into some gray areas, they are certainly not illegal.
Bitcoins are primarily used for laundering money
If you consider the market capitalization of Bitcoin, it would translate into a huge amount of illicit activities if the crypto was only for criminal activities. Yes, the Silk Road shows that there are some illegal activities and crimes conducted, but then again, they also happen in the form of fiat currency that we use on a day-to-day basis. The Bitcoin community is ready to follow the rules and is willing to cooperate with different governments in order to ensure the cryptocurrency’s adoption due to which it is unfair to paint it with the wide brush of money laundering criminals. Besides, the US dollar is the top choice of criminals for laundering money.
Bitcoins help in tax evasion
The argument that has been made here is that cash transactions are also anonymous, but they can be successfully taxed, but the same cannot be said for people using Bitcoins. But, the fact that should be noted here is that most tax evaders are caught when their assets and lifestyle don’t appear to be consistent with their reported income. So, Bitcoins don’t really give anyone an edge when it comes to evading tax.
Bitcoins are given away free of cost
There are a lot of people out there who believe that you can get Bitcoins for free because they don’t have an understanding of the mining process. The truth is that bitcoins have to be mined and this involves a computing process that’s resource-intensive and validates transactions by solving some mathematical puzzles. Blockchains are used for validating Bitcoins, which are ledgers holding past transactions. Miners processing and verifying the Bitcoin transactions are rewarded in the form of bitcoins, but there is some fee to be paid.
After all, it will cost you money to make some, and mining bitcoins can and does cost hundreds of dollars. This is rather intentional; to limit the number of bitcoins mined every day, the difficulty of mining has been built-in. Furthermore, there is also a cap on the total number of bitcoins that can ever be mined; there are a total of 21 million coins and they are expected to be mined by 2140.
Bitcoins are a giant Ponzi scheme
This is rather straightforward. A Ponzi scheme refers to a kind of fraud where investors are paid off with money collected from newer investors rather than the profits. But, with Bitcoin, you don’t have to worry about any such scheme because it is an open-source, peer-to-peer currency and there is no central authority leading it. While some huge returns have been enjoyed by early investors, it is definitely not at the expense of people who jumped onto this bandwagon later on.
Bitcoins will not generate profits after reaching their limit
As mentioned above, there is a limit to the total amount of Bitcoins that exist; there will ever be only 21 million bitcoins and no more can be generated after that. However, it should be noted that the network will still have to be kept secure, and even though people will not have an incentive for mining, but new blocks will still have to be generated to provide the network-distributed and publicly-available ledger of transactions. Hence, miners will still be able to make profits from transaction fees.
Bitcoin has been hacked
One of the most prevalent myths that you will come across about bitcoin is that it has been hacked. This myth creates doubts about Bitcoins because it means that no one’s money is secure. There have been some vulnerabilities associated with Bitcoin so far, but they have been reserved for attacks on websites using bitcoins and inadequate wallet security. But, there haven’t been any such attacks where blockchains are concerned and the protocol has not been subjected to any heists or thefts.
Bitcoins’ security could be broken by quantum computers
If you understand the workings of quantum computers, then you would know that they do pose a threat to the bitcoin network and other financial institutions, such as banks, since all of them rely on cryptography. This would be a valid cause for concern for anyone who has invested in bitcoin or is thinking about it, but there is one crucial thing that you have to remember right now; quantum computers do not exist as yet. They are far from development, so they are not really something that you need to worry about at this point.
Knowing all of these Bitcoin myths is important, especially if they are the ones that have been holding you back from jumping on the bandwagon and taking advantage of the profit-making opportunities that this leading cryptocurrency has to offer.