6 Cryptocurrency Myths and Misconceptions - Bitcoin Crypto Security

Wednesday, February 02, 2022

In order to help you separate fact from fiction, we're going to take a look at some of the most common cryptocurrency myths and misconceptions about this new form of currency. The cryptocurrency market has exploded over the past few years, and as it becomes more mainstream, so do the number of misconceptions about it.

People have speculated for years that crypto is only used to fund illegal activities or that it’s destroying the environment, but many refuse to do their own research to discover the truth. In this article, we’ll debunk six of the most common myths surrounding cryptocurrency today. By debunking these myths, you'll be able to make more informed decisions when it comes to your own cryptocurrency investments.

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6 Cryptocurrency Myths and Misconceptions

Just as there are many myths and misconceptions about other aspects of life, there are also a number of these that circulate around cryptocurrency. We all want to be knowledgeable when it comes to cryptocurrency, but it’s hard to know where to start. Here we will dispel some of the most common myths and misconceptions about cryptocurrency. Stay informed and in control with this information!

Myth #1: Crypto doesn’t have any real value

Value is determined by supply and demand. Some cryptocurrencies, like Bitcoin, are hardcoded to be scarce, which is a major driver of its value. But even without this scarcity, Bitcoin and other cryptocurrencies have become valuable within the global economy as an alternative approach to financing. If crypto usage continues to grow, its value will grow as well.

A major critique of crypto is that it isn’t backed by a regulating party like a central bank or the government. However, this is a driving factor behind cryptocurrency in general. There isn’t a central party that can print an endless supply of crypto and devalue it. Instead, it’s backed by trust in the blockchain.

Myth #2: Crypto is only used for illegal activities

One of the most common misconceptions about cryptocurrency is the idea that it’s only used to fund illegal activities and money laundering. While it’s true that crypto has been used by criminal organizations in the past, the same can be said about any form of fiat currency used throughout history.

According to a study done by Chainalysis, a global analytics firm that monitors crypto assets, only .34% of all cryptocurrency transactions in 2020 were related to illegal activities. With that said, governments all over the world are adopting cryptocurrency anti-money laundering measures and countering the financing of criminal activities. For example, the National Cryptocurrency Enforcement Team in the U.S. is tasked with investigating and prosecuting criminal cryptocurrency offenses.

Myth #3: Crypto isn’t secure

Blockchains, which are where all cryptocurrency data is stored, can’t be hacked. The cryptographic technology behind them makes it impossible. As transactions are processed, previous transactional information is recorded in the new blocks of the blockchain and encrypted. The chain builds on each previous block, and computer nodes must reach a consensus to verify the validity of every transaction.

Where hacks and money theft have occurred, however, are through attacks on services that make use of the blockchains. Cryptocurrency exchanges with insufficient security protocols have been hacked or have suffered data breaches. Personal crypto wallets can be hacked if the user doesn’t take proper safety measures to keep their information secure. But to date, there have been no attacks on the blockchains themselves that have led to stolen money.

Myth #4: Crypto enables tax evasion

The tax implications behind cryptocurrency are complicated. As a burgeoning market, tax information on crypto is hard to come by since the government still isn’t sure how to regulate taxes behind it. However, every U.S. taxpayer is required to pay taxes on any taxable event they incur during their crypto activities and can be audited.

Myth #5: Crypto is bad for the environment

While it’s true that mining cryptocurrency is energy-intensive, recent studies have found that crypto is more efficient than traditional banking on a global scale. Today, an estimated 70% of Bitcoin mining is powered by renewable energy sources such as hydro, solar, and wind, and Ethereum is moving to a mining protocol that will reduce energy use by over 99%.

Some have even made the argument that the economic incentives of crypto mining are helping to drive innovation in sustainable energy since miners are constantly seeking ways to increase their profit by lowering their energy costs. Renewable energy is quickly becoming a cheaper option than traditional energy sources, and many mining farms have already started taking advantage of that fact by switching to more sustainable options.

Myth #6: Crypto is a fad

People have been saying for years that cryptocurrencies are just a passing fad and soon, interest will fade. The same was said about the internet when it was created, and it’s now a staple of everyday life.

Bitcoin, for example, has gone through multiple price cycles since its creation over a decade ago and has recovered to new highs each time. While it’s impossible to predict exactly where crypto will be in a few years, the technology behind it and the products it has inspired will likely continue to grow in popularity.

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