Saturday, February 24, 2024
HomeTechnologyDebunking The Most Discussed Myths About Cryptocurrency

Debunking The Most Discussed Myths About Cryptocurrency

You may think 2023 is a more revealing year regarding cryptocurrency, but this is far from true. Many investors or potential market players still wonder whether digital currency is a good investment or not. And this is partly because of the numerous myths out there making this form of asset look a bit unsafe and, in some cases, dangerous.

Initially implemented in response to the 2008 financial crisis, digital currencies provided a new alternative to the conventional financial system. But owing to their relative novelty, numerous misconceptions have arisen, making potential investors doubt this form of asset. Thus, weighing up the pros and cons of investing in cryptocurrency, many people tip the balance towards the negative side of the coin. Nonetheless, the popularity and success of cryptocurrencies can’t be contested – some people earned a considerable return on investment due to their investing actions, some even becoming millionaires. Over the years, companies worldwide have considered virtual currencies, spanning a range of industries, from entertainment and media to healthcare and supply chain management. The technology underlying this digital asset has left its mark on the entire world, changing not only how businesses are now operating in their industries but also giving rise to a plethora of jobs. Anyone looking at the BTC price USD right now will notice that Bitcoin’s value – the first-ever cryptocurrency – exceeds expectations.

So, is there truth or falsehood to digital money? Let’s debunk together the most common myths surrounding cryptocurrency and discover the truth. This article will shed more light on cryptocurrency and help you decide whether it’s worth it or not.

It’s used for illegal activities

One of the most common myths about cryptocurrency is that it’s used by criminals and can’t be tracked. Although there is some truth in this statement, as the use of this digital asset started with the dark web, where individuals used it for illegal and ethically questionable purposes, the modern crypto market is far from that.

According to a recent Chainalysis report, only 0.34 per cent of cryptocurrency transactions were discovered to be illegal in 2020, which is actually less than the traditional banking sector. The truth is that these kinds of illicit actions have been taking place since the advent of money, so the fact that digital money is sometimes used to perform illegal transactions shouldn’t come as a surprise. However, we repeat – there is less than 1 per cent. Head of public policy at Chainalysis, Salman Banaei, claims that most activity on a blockchain is open, and each transaction, balance, and wallet can be tracked in real-time.

Apart from that, many influential figures and imposing companies trust cryptocurrencies. Bill Gates and Elon Musk are just a few big names investing in this kind of asset. So, why wouldn’t you do the same? As long as you take your research seriously and dispose of a top-notch investing strategy, you can add crypto to your holding portfolio.

It doesn’t have any underlying value

Just because they exist in a virtual environment doesn’t mean cryptocurrencies have no value. In fact, the value of any form of money, be it digital or fiat, depends on the perception and trust of the individuals. Let’s not forget how the price of Bitcoin has surged from just a few dollars to thousands of dollars, becoming the largest cryptocurrency by market cap (some even call it ‘digital gold’). Therefore, supply and demand market dynamics play a crucial role in this regard. Let’s delve more into what this means. Bitcoin, for instance, has a finite supply of only 21 million bitcoins, meaning no one can ever issue, print, create, or mine more than 21 million bitcoins. And the more this supply comes to an end, the more valuable Bitcoin is expected to become. At the time of writing, over 19 million coins have been mined, leaving room for only 2 million bitcoins to be explored. However, until 2140, you still have time to mine Bitcoin if this is your chosen tactic to earn cryptocurrency.

It’s just a fad

There is a pervasive misconception surrounding cryptocurrency, i.e., it’s only dedicated to a small crowd of people. However, the truth is that virtual coins can be used not only by wealthy individuals or tech nerds. In fact, the main purpose of this decentralized currency is to be used by common people. This is to be achieved by removing third parties, such as financial institutions and government authorities, from the transaction validation process.

Although it’s hard to tell where blockchain and cryptocurrency will be in the following decades, one thing is for sure: it has become more mainstream in recent years than it has ever been predicted to. A diverse range of services featuring digital currencies has entered the market, including peer-to-peer networks, brokers, and exchanges, aiming to facilitate consumer interaction with this revolutionizing technology. Many businesses are also investing heavily in virtual currency, including tech giants Microsoft, Tesla, Amazon, and Google.

It’s an environmental disaster

You’ve surely heard someone quip that digital currencies are harmful to the environment. Because of the large amount of computer power that the transaction validation process requires, cryptocurrencies have started to be perceived as a threat to the environment and not a sustainable solution. Well, this is not entirely false, but it’s obviously an overstatement. In reality, many blockchains are based on a more sustainable consensus mechanism, including Ethereum and Solana. Other blockchains that have taken steps to transition to reduce their carbon footprint are Polkadot, Avalanche, and Cardano, so if sustainability is one of your deciding factors regarding cryptocurrency investment, you definitely have lots of choices.

It’s not secure

Given the lack of regulation associated with this type of asset, cryptocurrencies are often perceived as unsafe, sometimes even dangerous, investment options. However, what many don’t know is that cryptocurrency relies on cryptographic methods (hence the name) to trace and verify transactions or any other activity on the blockchain. This involves advanced encryption techniques that are very daunting to break. Along with encryption, consensus mechanisms (PoW, PoS, PoH – Proof-of-History) and the blockchain’s linked blocks make it nearly impossible to alter information and steal virtual coins from one’s exchange or wallet account.

Still in doubt?

Saaim
Saaim
A computer science graduate. Interested in emerging technological wonders that are making mankind more approachable to explore the universe. I truly believe that blockchain advancements will bring long-lasting revolutions in people’s lives. Being a blogger, I occasionally share my point of views regarding the user experience of digital products.
RELATED ARTICLES

Most Popular