7 Myths about cryptocurrencies!

October 4, 2021

Debunking Myths about Crypto

Due to the novelty of cryptocurrency, many myths and theories have been formulated to prove the negative impact of crypto. These include:

1. Digital Currencies Are Used for Illegal Activity

Some time ago, the utilization of digital currencies and transferring crypto from one hand to another without any forms of checks and balances was the norm. As such, crypto was a sort of power for criminals all over. However, we live in a new age. Currently, governments worldwide have taken bold steps to make the use of digital currency secure and legal.

For example, most countries have a “Know Your Customer” policy for all individuals who open a bitcoin wallet. Therefore, the use of crypto in the casino(s) and the black market is no longer significant. The latter proves that digital currencies are not used for illegal activity but offer a standard upon which one can trade effectively. CoinTurtle uses Know Your Customer and is registered with Canadian Anti-Money Laundering authorities.

2.Digital Currency Is A Bubble

Many laureates of the Nobel Memorial Prize in Economic Sciences have called digital currency values a bubble. You might also be wondering, is crypto a bubble?

A bubble is when an asset is traded at a price exceeding the asset’s intrinsic value. Accusations of the crypto bubble are informed by a belief that the sole purpose of digital currency is speculation and that it is difficult for digital currencies to be incorporated into the real economy.

Applications of the use cases of digital currency are growing daily, and just as Ethereum is proving, it is possible to have an entire ecosystem of decentralized financial and computing services.

Therefore, is crypto a bubble? The answer to this question is no. As digital currencies continue to prove their utility, then the basis for the value of these currencies, as stated by specialists, will be made much clearer.

3. Crypto Currencies Are Not Secure

You may be wondering, are crypto currencies secure? Its availability of counterfeit currency determines the security. However, with digital currencies, the risk for hacking determines its security.

Every device used to access the internet has a novel IP Address. The IP Address is used for logging into a server; therefore, it leaves a digital footprint that the device was there. The same applies to digital currencies. Each digital currency has a unique identifier code, thus locking out the possibility of counterfeits.

Note that there is also a risk of duplicates. What happens when two currencies share the same identifier code? Well, the computer system can locate duplicate blocks/transactions and keep them out.

While the risk of hacking usually exists even for fiat currency, digital currency still is secure if you take precautions on where you trade. Additionally, you should avoid connecting to public wireless connections and refrain from handing out your device to unknown people without reason.

So are crypto currencies secure? The currencies are just as secure as fiat money as long as you take precautions, as said above.

4. Bitcoin Has No Value Because It Is Not Backed by Anything

The value of all currencies, fiat or digital, is based on the rules of supply and demand. The value of money is based on the fact that currencies act as a store of value. Also, currency acts as a unit of exchange. Successful currencies; are scarce, have utility, divisibility, durability, transportability, and counterfeit.

Bitcoin has all attributes of successful currencies. Therefore, in the same way, fiat money is based on the faith that third parties will accept that the currency has real value and can be used to buy and sell goods.

5. Digital Currencies Harm the Environment

This myth is based on the process of mining crypto. Mining for crypto involves verifying transactions by various forms of crypto and adding them to the blockchain digital ledger.

Companies invest a lot of cash in equipment to mine crypto, which utilises a lot of electricity. Some people assume that this excess use of electricity may harm the environment. However, as long as clean electricity is used, there is no harm done to the environment.

6. Crypto Currencies Cannot Be Traced

If someone told you that cryptocurrencies act as a mask for criminals and leave no trace, then the person lied. People believe that since crypto is based on blockchain technology, it leaves no tracks. However, blockchain technology identifies and validates every transaction made, and it is automatically registered. Therefore, all transactions made using crypto can be traced and determined.

7. Digital Currencies Can Be Closed by Governments

As said earlier, digital currencies are decentralized. The latter means that governments cannot close them since any government or institution does not regulate blockchain. Additionally, governments cannot make changes or try and modify crypto. The difference between fiat money and crypto is that crypto is decentralized.

There will always be myths about crypto as it continues to poke holes into the traditional finance system. Digital currency is the prospect of money, and you should not fear investing.