The heating up of the digital currency market has spread a lot of rumors about blockchain and crypto among people, which can be misleading without having enough knowledge about them.
The introduction of new investment methods has created many questions for investors to find best crypto to invest as well as analysts. Famous celebrities and investors announcing their support for cryptocurrencies on social networks daily by publishing tweets and various posts, and even people who are not active in this field are somewhat getting familiar with these concepts.
On the other hand, the acceptance of digital currencies in various companies as a method of payment is also considered a turning point for this industry and there does not seem to be any turning back from it.
With the significant increase in popularity of digital currencies in recent years, rumors and false beliefs have been formed about all cryptos. In the meantime, many people are fueling these rumors for profit and if a person does not have enough information about this industry, they may believe them.
In this article, while introducing the most common false beliefs about cryptocurrencies, we examine the reasons for their falsehoods.
Together we will cover:
- Digital currencies harm the environment
- Cryptocurrency transactions are anonymous and untraceable
- Blockchain technology and digital currency are complex and therefore not suitable for use by the general public
- Digital currency will be an alternative to traditional money (fiat)
- Governments are looking to ban digital currency
- Digital currency is used for illegal activities and money laundering
- Investing in digital currency is profitable
- Token and coin are not different
- Digital currency is not taxed
- Bitcoin is the blockchain or vice versa
- Digital currency has no backing
- After mining 21 million bitcoins, no more transactions will be made
- Cheap altcoins and shitcoins grow as much as Bitcoin
- Bitcoin and digital currencies are a temporary bubble
- Quantum computers threaten the security of digital currencies
- Only one whole bitcoin can be purchased
- Bitcoin is a Ponzi scheme and a scam like pyramid schemes
- Bitcoin loses its value due to multiple forks
- The Bitcoin network is not upgraded
- Lost Bitcoins are recoverable
Before starting, it is necessary to pay attention to two points:
- Many of the things that are referred to below as “false beliefs” may not be completely false in all circumstances and may contain a grain of truth.
- Some of the points have agree and disagree opinions on them among experts and observers in the crypto markets and world of economics. In these cases we leave it to the reader to decide on their own based on its pros and cons
All cryptos harm the environment
This proposition in itself is a true proposition. Digital currencies like Bitcoin that use a Proof of Work (PoW) system in their current form are definitely damaging to the environment. But it should be noted that according to the current sources of human energy, every product and phenomenon that consumes electricity somehow damages the environment.
In fact, what is a false belief in this is to highlight the role of digital currencies in producing greenhouse gases and harming the environment. For example, according to research results, Bitcoin consumes much less electricity compared to traditional banking system, gold mining and even gaming.
Using the phrase “waste of energy” can be considered correct only when no value is obtained in exchange for its consumption. The Bitcoin network is valued at $1 trillion, serving millions of people, including those without access to traditional payment networks. Most miners operate in places with abundant and free electricity resources. The electricity consumed in these places is often produced from renewable sources of hydroelectricity (electricity produced from water power plants) or geothermal electricity (production of electrical energy from geothermal energy), which have a fuel consumption equal to one eighth of coal fuel power plants.
In addition, today at least 39% of the energy required for Bitcoin mining is provided by renewable energy and this share is increasing rapidly. To compare, running and development of apps like TikTok and FedEx or the US Department of Defense apps also consume a lot of energy, or the modern financial and banking system needs a lot of electricity to run every branch, server and electronic payment network on a daily basis.
Like all other inventions, along with the positive effects of Bitcoin and digital currencies in general in human life, there are also challenges in this field. For example, the carbon footprint problem caused by Bitcoin mining is considered a challenge that needs a solution, but that doesn’t mean Bitcoin is a bad idea.
On the other hand, many cryptocurrencies are also self-sufficient, they do not depend on physical goods for production and valuation, and they are compatible with the environment by using a proof-of-stake (PoS) mechanism in their network.
Cryptocurrency transactions are anonymous and untraceable
Given that the inventor of Bitcoin, the mother of all digital currencies, is known by the nickname Satoshi Nakamoto, mistrust of the way transactions are carried out can be one of the most important concerns of any person after getting to know the world of cryptocurrencies.
The user’s personal information is not disclosed in the completed transactions, but the amount of money sent or received from one address to another is recorded in the blockchain.
Additionally, tools aimed at accessing more information and investigating illegal activities on the blockchain are available to various government and financial institutions. In fact, Bitcoin blockchain technology prevents transactions from being anonymous by storing transaction information and recording their time and location.
Of course, it should not be forgotten that apart from Bitcoin, other cryptocurrencies such as Monero and Dash, which are known as Privacy Coin, focus more on privacy and transactions are done anonymously.
Blockchain technology and digital currency are complex and therefore not suitable for use by the general public
Some believe that digital currency and blockchain technology is only suitable for people who deal with technology and it is too complicated for other people to understand. The same argument was once made for the use of the Internet and computer. But today we are witnessing the spread and maximum use of these technologies.
The code that is used to create cryptocurrencies is much more complex than the working process of banknote printing machines. But in order to use the product of both, it is not necessary to know the process of their creation.
Generally, people are afraid of entering this field and think it is only for financial activists, you don’t need to write code or smart contracts to work with digital currencies, it is enough to keep the password safe.
This also applies to cryptocurrencies. If you have ever transferred money or made a payment through the Internet, you will be able to easily perform activities related to this area. To buy and sell and hold digital currencies or invest in them, it is enough to know a series of basic concepts and which exchange or wallet (digital wallet) to use.
Of course, there is no denying the fact that the world of cryptocurrencies still seems complicated to many people, including the elderly.
Digital currency will be an alternative to traditional money (fiat)
In the most optimistic scenario, digital currencies can be used on a very large scale in the future. But they can never be a substitute for cash or traditional money. Travel did not replace train travel after the invention of the airplane, or telephone communication did not disappear after the advent of e-mail.
Cryptocurrencies were created with the aim of creating a financial system that is faster, safer, cheaper than traditional money and without the need for centralized third-party supervision. In fact, digital currency technology seeks to change the financial payment system and eliminate government or financial institutions in the transaction cycle (if both parties agree). However, the volatility of the digital currency market is very high and may change the trend (upward or downward) many times in response to the news published in the day, which is not so much a concern for traditional money.
Of course, digital currencies such as Tether (stable coins), which are backed by fiat money of countries, can replace traditional fiat money in many ways in the future.
Governments are looking to ban digital currency
This belief has gained strength again with the recent ban on the use of Bitcoin and its mining in China. But it should be noted that the use of YouTube, Instagram and even the Google search engine is prohibited in China. There is no doubt about China’s influence on global equations, but it should not be forgotten that the banning of any phenomenon in China does not mean the end of its global fortune.
Although some countries, such as Nigeria, Russia or Belarus, do not warmly welcome cryptocurrencies and Bitcoin in particular, but in others, digital currency technology is highly valued to the extent that even responsible officials are given familiarization courses with this technology, and even recently El Salvador introduced Bitcoin as its official currency!
Decentralization is the main difference between cryptocurrencies and fiat money, and because of this feature, with the daily progress of this technology and its forward movement around the world, it is not possible to suppress it by governments. But maybe a little more regulation will convince disgruntled governments.
Digital currency is used for illegal activities and money laundering
Some people think that the most use of cryptocurrencies is related to illegal activities, and this thinking is one of the oldest and most common beliefs about digital currencies.
Using the anonymity of Bitcoin transactions in black markets such as Silk Road (the online market for the sale of drugs) is one of the reasons for the spread of this rumor. But it should be remembered that the anonymity of transactions, the absence of fingerprints or signatures, does not make them an untraceable phenomenon.
Criminals also use fiat money for their illegal activities. Any device that has useful uses may also be used for illegal purposes. Cars can be used for bombings and messaging programs can be used to coordinate terrorists. According to a study in Australia, 25% of Bitcoin users and about 44% of Bitcoin transactions were involved in illegal activities. But the most popular currency for such activities is still the dollar.
According to another research that was conducted to analyze the patterns of money circulation in the Bitcoin network, in the past, most of the activities carried out through Bitcoin were related to black markets and gambling, but today, such activities include a small share of the uses of this digital currency.
Investing in digital currency is profitable
With the increasing investment of investment funds or large banks such as Goldman Sachs and Morgan Stanley on Bitcoin and other digital currencies, many rumors about the profitability of digital currencies spread.
Digital currencies may be profitable, but this depends on various factors. In blockchains that use the proof-of-work mechanism, after mining all cryptocurrencies, miners will be rewarded in the form of subsequent blockchain transactions instead of cryptocurrencies.
On the other hand, advertising the profitability of investing in digital currencies encourages miners to participate in the network and mine. But it should be noted that not every cryptocurrency is suitable for every person. News and events around the world can cause a lot of fluctuations in the market in this field. Just as you exercise caution with any activity with your fiat money, weigh all aspects of any decision in the field of digital currencies and do not make a transaction or entrust your digital asset to anyone without checking.
Token and coin are not different
In simple words, a crypto currency that has its own blockchain is called Coin, and the cryptocurrency that is created on the blockchain of another crypto currency is called a token.
Token in blockchain technology is used as a crypto currency unit that can be exchanged and bought and sold. The token’s lack of a dedicated blockchain is its main difference from a coin. In fact, a coin can be a token, but every token is not necessarily a coin. A token that does not have its own blockchain, does not have a coin value and is only used for payment or used in decentralized applications (dApps).
Digital coins like Ethereum have their own native blockchain, but digital tokens like Shiba have been created on existing blockchains.
Digital currency is not taxed
In some countries, such as the Netherlands, South Korea, Denmark, Italy, and Singapore, digital currency technology is not yet widespread, and therefore the income from digital currency exchanges is not taxed in these countries.
However, in many countries, the tax imposed on digital activities depends directly on the amount of income versus the amount of expenses, and each country has its own rules: the United States, the United Kingdom, and Australia tax capital gains, Japan The result of the activity in this field is considered “miscellaneous income” and the German tax laws are also different depending on the purchase, investment or sale.
The more advanced the country’s regulatory system, the more complex the tax system.
Bitcoin is the blockchain or vice versa
Bitcoin is a digital asset that is used to buy goods or use online services, and transactions related to this digital currency are carried out on a digital network called Blockchain.
Digital currency has no backing
Many people believe that because Bitcoin is not under government supervision, it has no financial support and is just a number. This statement can be true about any currency in general. Because value is dependent on nature and the market can value anything as it wants and whenever it wants. The nature of the value of money and gold has been created in the same way from the beginning.
What gives credibility to traditional money (bills) is the compulsion to use it by the government and the agreement to use it by the people. The high speed and low cost of transactions and the lack of centralized oversight for a currency like Bitcoin give it the same credibility as any circulating currency.
What determines the value of Bitcoin and all digital currencies in general is supply and demand in this system, and anything that is used for payment can be considered as money.
After mining 21 million bitcoins, no more transactions will be made
Many people do not have enough information about the fate of Bitcoin after all 21 million are mined, and they think that after that miners will no longer have the motivation to continue working and the network will be destroyed.
When all bitcoins are mined and there are no more bitcoins to mine, transaction fees will still be a source of income for miners.
Cheap altcoins and shitcoins grow as much as Bitcoin
This case is also one of the disputed cases. Many members of the Bitcoin community and “Bitcoin Maximalists” believe that no digital currency can replace Bitcoin and its total market value will exceed Bitcoin.
On the other hand, the argument of those who are optimistic about the future of some altcoins is that Bitcoin was once worth only a fraction of a penny, and based on this, they offer exciting predictions about the future of cheap altcoins.
The growth of the value of altcoins or shitcoins is different depending on their characteristics. But according to many, Bitcoin will never lose its position as the world’s largest crypto currency for reasons such as “being the first” and “being the most well-known”.
Bitcoin and digital currencies are a temporary bubble
It can be said that Bitcoin is recently becoming popular among ordinary people.
With the acceptance of Bitcoin and digital currencies in different communities as a method of payment, this technology is becoming more official every passing day and due to the limited resources of Bitcoin, the demand for it is increasing.
With a high probability, it can be said that the debate about Bitcoin and digital currencies in general being short-lived will be raised for many years. But it can be said with certainty that once privacy in transactions and their decentralization is proposed in the world, it will be impossible to go back and it will not be possible to stop this flow.
Note that the price of Bitcoin (or any other digital currency) is currently in a bubble, another discussion. The temporary bubble in this case means the transitory nature of the whole phenomenon, market and technology of digital currencies, which is probably a false belief.
Quantum computers threaten the security of digital currencies
As quantum computers become more powerful, many users worry about blockchains being decrypted and their digital currencies (especially Bitcoin) being stolen by them.
But this prediction will only happen if the Bitcoin network does not experience any development in the coming years. Even in such a case, at least five to 10 years are needed for this to happen. As a result, today’s users do not need to worry about Bitcoin being decrypted by quantum computers.
Assuming that one day quantum computers can take over blockchains and the entire encryption mechanism is broken, in addition to digital currencies, all financial institutions, including banks, will be at risk.
At that time, we will have much more important concerns about digital currencies and blockchains, and this issue will no longer be limited to the field of digital currencies.
Only one whole bitcoin can be purchased
Today, the value of a whole bitcoin is so high that new buyers in the network are shocked. But since Bitcoin is a digital network, it can be divided into more than a hundred million pieces.
Therefore, there is no need to buy a whole bitcoin and can buy, sell or send and receive a small part of it. As the value of Bitcoin increases, the value of each share you own will also increase by the same amount.
Bitcoin is a Ponzi scheme and a scam like pyramid schemes
A Ponzi scheme works like a pyramid scheme in which the profits of the initial investors are financed by the money of the later crypto currency investors in the network, and if new participants do not enter the network in sufficient numbers, it will collapse with losses.
This is not the case with Bitcoin, because Bitcoin is a free software project with no central authority. Bitcoin is open source and its performance is visible at every stage.
This digital currency is currently considered a registered asset and its profit is subject to tax. Therefore, Bitcoin cannot be considered a Ponzi scheme, because it does not have the features and characteristics of this scheme.
Bitcoin loses its value due to multiple forks
Fork means branching and branching. In blockchains, the non-agreement of the nodes in the network about the future state of the blockchain leads to the creation of various forks and altcoins, and as a result, the main chain of blocks is divided into two or more branches, all of which are valid. For example, Bitcoin Cash was created as a result of one of the forks of Bitcoin.
With every fork in the Bitcoin network, many people worry about Bitcoin inflation. But in fact, these forks only create a separate network and do not affect the Bitcoin network. In addition, altcoins with different uses can cause more people to participate in the field of digital currencies, and this in itself is beneficial for Bitcoin.
The Bitcoin network is not upgraded
Since the inception of the Bitcoin network, many changes have been made to optimize it, increase privacy, and increase the capacity of smart contracts. However, the Bitcoin network still has a long way to go to reach the status of networks like major credit card networks. In general, Bitcoin intends to remove the limitations in its network with various updates.
Lost Bitcoins are recoverable
Bitcoin is not paper money that falls out of our pockets or gets lost. But it is still possible to lose them by forgetting the private key or losing the information related to the digital wallet.
Once bitcoins are lost, there is no way to access them and they remain in the blockchain just like all other bitcoins. This can cause an increase in the price of Bitcoin, because with the reduction of available Bitcoins for exchanges, the demand for the remaining Bitcoins increases, and to compensate for this demand, its value increases.