- Myths or misconceptions surrounding the use of cryptocurrencies for transactions
The popularity of cryptocurrency has been hitting high peaks since its first introduction in 2009. Although rewarding in its ways, the crypto market is somewhat of a crazy ride for its users and investors. Cryptocurrencies’ complex and obscure nature is the perfect breeding ground for misinformation, trust issues, and confusion. This gives rise to many myths/ misconceptions, stereotypes, and rumors regarding digital currency that can perplex beginners trying their luck in the crypto market.
5 common misconceptions about Cryptocurrency
‘Crypto and Bitcoin are the same’ takes the first place in the list of myths people have about crypto. Cryptocurrency is a generic term used for various coins and networks with different properties and infrastructures. Although it is true that Bitcoin has been the single most influential game changer in the crypto market, now around 18,000 other types of cryptos are available.
The usage of cryptocurrency on the dark web for nefarious purposes (e.g., the Silk Road Raid incident) is not a fresh tale. However, the thriving misconception that crypto is only used for illicit activities is a far cry from the truth.
As reported by Chinalysis, in 2021, only 0.15% of all crypto transactions were done for illegitimate activities. Moreover, international governments are combating cryptocurrency crime issues by establishing agencies and teams (e.g., National Cryptocurrency Enforcement Team (NCET), USA) to investigate criminal cryptocurrency uses.
Cryptocurrencies are regarded as the destroyer of the environment because the computer power required for proof-of-work mining in cryptos consumes massive amounts of energy.
In order to considerably lower the environmental impact of crypto, miners have been steering towards renewable energy sources (including wind, solar, and hydro) to power the crypto mining operations.
Additionally, some popular cryptos like Polkadot, Ethereum, and Solana, have been transitioning from proof-of-work (PoW) to a proof-of-stake (PoS) consensus mechanism that is more environment-friendly.
Despite what is popularly believed, cryptos are backed up by blockchain technology and, therefore, are incredibly secure. It is impossible to get past the sophisticated encryption and consensus protocols and succeed in tampering with the blockchain network.
The major threat to the security of the cryptocurrency is not the blockchain network itself but the attacks on the platforms and software (e.g. cryptocurrency wallets and centralized exchange services) storing them. This can be avoided by making sure that the crypto asset keys are off the exchanges and not left vulnerable to the hackers’ attacks.
Since digital currencies are not backed up by material assets or physical commodities, users argue that cryptos do not have any real money value.
However, it is worth mentioning that value is a subjective matter, meaning, anything can be established as valuable if it provides clear utility and the society sees any value in it. The prime example of this concept is the gradual rise in popularity and real value of Bitcoin from less than a penny since its launch in 2009 to around $69,000 per Bitcoin as of February 2021.
Conclusion
Due to the presence of heaps of rumors and misinformation floating around crypto, many people are skeptical about exploring the technology. Though, educating newbie investors regarding the differences between the myths and facts of crypto can help them prevent making expensive mistakes.
