Ten years ago, only enthusiasts were interested in cryptocurrencies, and the coins themselves did not have much value. Now, almost everyone interested in finance is talking about cryptocurrency.
Cryptocurrencies in general and bitcoin, in particular, are attracting both professionals and ordinary people. Still, over the past decade, bitcoin has acquired a lot of myths and misconceptions, which we will try to dispel in this article. Let’s get started!
#1 What Does Real Bitcoin Look Like?
Everyone talks about bitcoin as if it were a physical object — it has a value, can be bought or sold on a crypto exchange, and is even called a coin. Still, what does bitcoin really look like? The answer is quite simple: it’s like a computer code. The cryptocurrency does not have any physical embodiment despite a huge number of photos of a gold coin with the ₿ symbol.
Let’s figure out what bitcoin is since it does not have a physical version. Roughly speaking, it’s a set of numbers and letters stored on the Internet. In this sense, Bitcoin is practically no different from dollars or euros on your bank card. It is no secret that most money exists in digital form — and that’s why the banking system will collapse if all people suddenly decide to cash out their accounts. And just for this reason, banks impose restrictions on cash withdrawals.
#2 Bitcoin Is Worth Nothing
One of the most common arguments supporting the lack of BTC value is that the cryptocurrency is not backed by anything. The problem is that modern money works the same way. For example, the United States abandoned the gold standard back in 1971. And since then, the dollar exchange rate has depended only on the economic situation in the country.
Bitcoin, in turn, has additional advantages over traditional money. For example, online transactions are anonymous and cannot be easily tracked. One has to pay a fairly low and fixed commission for instant transfers. In addition, you can send money to any owner of the wallet, regardless of the country of residence.
Another issue is that bitcoin is not a physical object at all. You just have to believe the machine that claims you have it. Yeah, it’s hard to give something abstract value, but we do it almost every day — our money has value only because we believe that it is worth something.
Let’s analyze one more detail: many objects are valuable because of the human efforts invested in their creation, like movies or music. Some people think bitcoins are created out of thin air, but they are mistaken. Miners around the world spend electricity and use high computing power, thanks to which the network exists and evolves.
#3 Only Millionaires Can Buy Bitcoin
If we are talking about 1 bitcoin whose current price is $47,211, then certainly. Still, you can buy at least one-thousandth of a coin. That is, the financial entry threshold is actually relatively low, which allows almost everyone to trade bitcoins.
#4 Bitcoin Is Not Safe Enough
Bitcoin and other cryptocurrencies are built on blockchain technology, which ensures the high security of the network. In fact, this is an open database that contains information about all transfers in the entire history of bitcoin.
This data is stored on all computers on the network simultaneously, which makes it almost impossible to falsify and steal bitcoins. To make any changes, hackers need to gain control over more than half of all PCs and make changes to the blockchain, but this has not happened so far.
Security problems can only occur when it comes to services for buying or storing cryptocurrency. For example, hackers can break into an exchange, but that’s why it is best to store assets in a separate wallet.
#5 As the Hype Subsides, BTC Will Depreciate
It’s a controversial statement that would have been relevant a few years ago. Recent events in the world of bitcoin rather indicate that the currency is gradually strengthening its position in the financial world. This year, the largest California real estate agency Caruso and the WeWork co-working network have started to accept BTC as a payment method.
The payment giant PayPal as well as its Venmo service, have also introduced bitcoin payments. Visa CEO, Alfred Kelly, spoke about the company’s plans to soon allow BTC to purchase using the company’s system. And its competitor, MasterCard, announced that the company intended to start working with cryptocurrencies.
Such institutional adoption means bitcoin is gradually moving toward a mainstream payment method. The question of whether this will happen in the coming years remains open. Still, for now, cryptocurrency has great potential.
#6 Bitcoin Is a Bubble That Will Burst Soon
After the dot-com bubble that burst in the early 2000s, it has become fashionable to call a bubble almost any rapid and sustained growth. Of course, anything can become the next bubble — Tesla shares as well. They have been called a bubble for several years, but so far, their growth continues.
Thus, the conclusion is the following — it is almost impossible to predict the appearance of a bubble. For example, the dot-com crisis only became apparent when it was too late. Moreover, it’s even more difficult to predict such events in the cryptocurrency market, which is characterized by high volatility.
#7 Governments Are Against Cryptocurrencies
This statement has some truth since the authorities are not inclined to trust money that their central banks do not control. At the same time, there is the phenomenon of the world’s reserve currency, which has been the US dollar for several decades. In most countries, citizens are free to keep any foreign currency.
Unless you can’t pay it directly — you need to swap it for the national one.
If we talk directly about bitcoin, the states gradually begin to reconsider their attitude towards it and other cryptocurrencies. Some see opportunities in using the blockchain for their own purposes, while others are gradually introducing digital assets into the legal field.
#8 Only Criminals Use Cryptocurrency
Let’s start with the fact that using cryptocurrencies does not make a person a criminal. Indeed, people can buy illegal things for bitcoins, but the scope of their application is not limited only to this. It’s like saying ‘secure messengers are used only by those who have something to hide.’
One should not forget that traditional money is also widely used for illegal purposes. Moreover, there are more and more places that accept bitcoins for payment. Thus, as mentioned above, the institutional adoption of bitcoin is growing. Therefore, the statement that only criminals use cryptocurrencies becomes less plausible from year to year.
#9 It’s Impossible to Pay with Bitcoins Without Internet
So far, the use of bitcoins is possible only with the Internet, this is true. The point is in the system itself — you need to connect to other network members to transfer coins. At the same time, many companies are developing technologies that will allow users to pay BTC in places with a cellular connection.
#10 Bitcoin Is a Pyramid Scheme
No, it’s not. The financial pyramid is always characterized by promises of a huge increase in the value of an asset. Bitcoin buyers never had a guarantee about its future value. The price of Bitcoin is entirely determined by supply and demand, just as for all other assets traded on the free market.
And although this phenomenon is not a pyramid scheme, the value of both Bitcoin and other cryptocurrencies can be significantly overestimated, and thus a fall in prices will follow.
With Bitcoin, this has already happened several times over its more than 12-year history of existence. We observed a price increase last year as well, but the most rapid, explosive jump in BTC price took place in the early years of its operation.
Conclusion
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