Updated: Mar 13
As with any other fringe product or service, there are many myths surrounding cryptocurrencies. Cryptocurrencies aren’t just for computer geeks and drug dealers trying to avoid the government. Relieving yourself of these myths will permit the formulation of a more accurate opinion. It’s easier to make informed decisions when your knowledge is sound.
Myths regarding cryptocurrencies abound:
1. Cryptocurrency is illegal. It depends on the country. It’s legal in the United States, but there are other countries, such as Russia, that have deemed it illegal. It’s unlikely the legal status will change anytime soon in the United States. It’s possible that it will become regulated, however. People frequently believe that cryptocurrencies are utilized for criminal transactions. That, however, is not the case. Although there have been instances of unlawful acts involving cryptocurrencies, this does not prove that they are illegal. People have a misconception that this currency is only utilized for illegal operations, which is not true. This money, like any other, has unlawful associations, yet it is also used in legitimate trade.
2. Bitcoin is the only relevant cryptocurrency. There are several other cryptocurrencies. All have their strengths and weaknesses. Bitcoin, released in 2009, is the oldest and most well-known of them. Most of the other cryptocurrencies are less than three years old:
3. Only criminals have a use for cryptocurrencies. While cryptocurrencies continue to be used for illegal activity, cash is still king for illegal transactions. There are reputable retailers that accept cryptocurrencies, including Microsoft and Dell. Much of the link between cryptocurrency and criminality can be traced back to the demise of the black-market website Silk Road in 2013, which used Bitcoin as its principal currency. The truth is that it's just as easy to say the same thing about cash, which has always been the preferred medium of exchange for criminals. Following the collapse of the Silk Road, governments all over the world implemented Know Your Customer (KYC) procedures and other verification regulations to eliminate the criminal element as much as possible. According to the BBC, the US authorities seized $1 billion in Bitcoin from an account it said was linked to Silk Road in 2020.
4. I can get rich with cryptocurrency. The potential for profits does exist. People have gotten wealthy through increases in the value of cryptocurrencies. However, just as many people have lost a tremendous amount of money, too. The majority of those active in the digital currency industry aspire to become millionaires, if not billionaires, through cryptocurrency. If Bitcoin and cryptocurrency continue to climb in value over the next few years, many people will surely become billionaires - tiny investments in genuine coins will yield big gains in the future, just as they did for early investors. Before you invest, do your research first.
5. Cryptocurrencies are fiat currencies. Most of them are. That’s true. But so are the Euro and the US Dollar. All major world currencies have abandoned a gold standard. The US decoupled the value of gold and the US Dollar in 1933. The value of all fiat currency is based on the willingness of the public to agree that it possesses value. Currencies have two primary functions: they serve as a medium of exchange and as a store of value. The rapid growth of cryptocurrency investment has generated concerns about whether fiat currencies will remain the dominant medium of trade. With the invention of Bitcoin in 2009, cryptocurrencies were born. They are virtual currencies that, unlike government-issued fiat currencies, are governed by a decentralized network rather than a single authority.
6. The government can shut down cryptocurrencies. The government could make cryptocurrencies illegal but shutting down the system would be next to impossible. There’s no central server or location that houses a cryptocurrency system. The information is stored on the computers of every user. Unless the government can find a way to shut down the internet, it would be challenging to put an end to cryptocurrencies.
7. It’s easy to mine cryptocurrencies and make money. Entire companies have been built for the sole purpose of mining cryptocurrencies. It requires a tremendous amount of computer hardware and electricity to be successful. Unless you have several hundreds of thousands of dollars, you can’t even begin to compete.
8. Cryptocurrencies are subject to hacking. Bitcoin merchants and wallets have been subject to hacking activities. However, Bitcoin itself has never been hacked. Other cryptocurrencies have similar security profiles. Insufficient security is always a potential problem with cryptocurrencies and cash. Protect your wallet and you should be fine.
9. It’s impossible to trace cryptocurrency transactions. It’s not easy, but it can be done. Regarding Bitcoin, the blockchain ledger lists all the transactions that have ever occurred with Bitcoins. The challenging part is linking the wallet address with the owner. With enough time and effort, the government can eventually track you down. The government has seized and auctioned off millions of dollars worth of Bitcoins.
Have you been guilty of believing these myths? It’s easy to be led astray. Cryptocurrencies still aren’t very common, and myths are easily formed and spread. Become more knowledgeable about cryptocurrencies. They might just be the wave of the future. They’re certainly becoming more popular each year.
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