Charles H. Miller
With all the media companies talking about bitcoin, it is getting hard to distinguish between the fact and fiction. You may’ve heard about the death of bitcoin or that its CEO has been arrested. Luckily for all of us, that is not true. And those are just two of the myths circulating around the interwebs — here we’re tackling 11 of the most popular myths about bitcoin. Let’s get started…
1. Bitcoin Is Dead
Unfortunately no one gives me a dollar every time I read about the demise of bitcoin; otherwise, I would be rich now. The truth is that as we speak, there is a record amount of bitcoin transactions. Also more and more bitcoin tech companies are raising money from reputable venture capital firms and even banks.
In sharp contrast to all the haters, we have a 2013 report from Bank of America Merrill Lynch which stated its belief that “bitcoin can become a major means of payment for e-commerce and may emerge as a serious competitor to traditional money-transfer providers.”
You can’t just say “nah” to Merrill Lynch, right?
2. Bitcoin Is Anonymous
The correct way would be to say that bitcoin addresses are pseudonymous. It is not the “anonymous currency of the dark web,” and there is an identifiable address (or more of them) for every user on the network, though no one necessarily knows who is behind each address.
Also, with every transaction being recorded on a completely public ledger, it would be possible for authorities to lock in on certain users presuming they use bitcoins to fund illegal activities. Related to that, a few blockchain analytics companies have emerged in the last few years, and were able to deanonymize large portions of the network.
3. Terrorists Love Bitcoin
Related to the previous point, terrorists love using bitcoins to buy illegal stuff on the dark web. Again, not true. The number one currency terrorists use in the world is dollar, followed by euro and other major currencies. In the world of untraceable payments, cash is still king.
In contrast, it may take some time, but bitcoin transactions can be traced. And there are certainly people and organizations that are on the watch list of all major security services, the fact that could help them more quickly trace transactions in the bitcoin network.
Adding to this is a Europol investigation which concluded that despite various reports suggesting the use of cryptocurrencies like Bitcoin by terrorists to finance their activities, “this has not been confirmed by law enforcement.”
4. Bitcoin Is Mostly Used for Illegitimate Purposes
Ok, terrorist may not be relying on bitcoin that much, but it is still mostly used for illegitimate purposes, right?
Sure some folks pay for adult content with bitcoins, but even that is not illegal. As noted before, there is no proof that bad people are using bitcoin in any large quantities, with “regular currencies” still dominating their “spending habits.”
On the brighter side, bitcoin is used by frugal shoppers to save up to 20 percent on their purchases at Amazon, Starbucks and Target. These users rely on apps such as Fold app and Purse.io.
Another neat bitcoin use case are international remittances with companies like Abra and Veem making it more affordable to transfer money around the world.
5. Bitcoin Is Completely Transparent
If it’s not anonymous, bitcoin is completely transparent, right? Wrong – it is another myth that needs to be debunked. As mentioned above, the true identities of the individuals or organizations behind bitcoin addresses are not always known. Also there are third-party services that allow users to enhance their privacy on the blockchain.
So, bitcoin is not anonymous nor completely transparent — it is somewhere in between.
6. Bitcoin Is Not Backed By Anything
This presumes that it doesn’t have any real value. We could say this for makers of many accessories and gadgets which too won’t make many people more productive or improve their lives in any meaningful way.
The fact that bitcoin isn’t backed by any government does come with a controversy and is arguably one of the reasons of bitcoin’s volatility — and the same goes for all other cryptocurrencies. Nevertheless, the major events such as Brexit also had an impact on “real-world currencies,” notably the British Pound which is backed by a powerful country.
The truth is that most of the world’s currencies are backed by confidence, not gold. By using the paper money, or a credit card, we hold belief that the authority issuing that money is here to stay; and the value of that money is in most cases determined by the good ol’ law of supply and demand. And the same goes for bitcoin.
7. Bitcoin is Too Volatile
Damn right it is volatile, and that’s what potentially makes it a great investment. And a great commodity to trade.
According to the risk management expert and faculty member in the Finance Department at Boston University — Mark T. Williams — as of 2014, bitcoin has volatility seven times greater than gold, eight times greater than the S&P 500, and 18 times greater than the U.S. dollar. As noted, this could make it a great investment, as well as a valid currency for things like tipping, online gambling, and international remittances. So the use case is there despite bitcoin’s volatility. Plus, let’s not forget that many major companies such as Microsoft, Dell and Newegg will gladly take your bitcoins.
Finally, it’s worth adding that some bitcoin exchanges allow users to store funds in U.S. dollars or other “regular” currencies before making Bitcoin transactions.
8. Bitcoin is a Ponzi Scheme
Again, not true. First and foremost, a Ponzi scheme requires an initial founder who would reap all the benefits — that’s not the case with bitcoin. Unlike a Ponzi scheme, bitcoin is decentralized system. And this is also unlike “regular” currencies, which are issued by a central/federal government — and we don’t think they run a Ponzi scheme.
Another reason why bitcoin is not a Ponzi scheme is that such scheme always requires new investors to pay off earlier investors. The reality is that bitcoin can work with practically any number of users, and there is a highly regulated way (bitcoin’s algorithm) when new bitcoins will be mined. And this algorithm will produce the same amount of new bitcoins whether there are millions of new users or just one.
9. Bitcoin Mining Uses Too Much Electricity
It is estimated that by 2020, the Bitcoin network could consume as much power as the country of Denmark. So yes, bitcoin is responsible for lot of electricity but is it all a waste?
It largely depends on your point of view. If you don’t think Bitcoin is valuable, maybe that’s a waste for you. On the other hand, if you believe the world needs a new kind of currency that isn’t controlled by any single government, you may be all in for bitcoin. Electricity is wasted in a number of ways, so why bother with Bitcoin? For one thing, it brought a new technology to the world — blockchain — which promises to decentralize of the existing centralized systems, and potentially revolutionize the way modern IT systems work (and make them that much better).
The bitcoin mining is energy-intensive for a good reason — you don’t want to allow for the new money to be created that easily. This is how things are kept under control; that’s the control of an algorithm rather than any government body.
10. Bitcoin’s CEO Was Arrested
First of all, bitcoin is not an organization and it has no any management structure. Which means — there is no bitcoin CEO.
Some of the companies that were mistaken for bitcoin were Silk Road an Mt. Gox. The former was an anonymous online black market that was shut down by the FBI in 2013, and the latter is the failed bitcoin exchange.
So when the Silk Road founder Ross Ulbricht and Mt. Gox CEO Mark Karpeles were arrested, some people thought it was bitcoin’s CEO. Nothing could be farther from the truth.
11. It Is Too Late To Buy Bitcoins
Yes, it would be better that you/we have bought bitcoins 5 years ago — we could’ve been rich, depending on the amount of bitcoins purchased; but there is still room for growth. Bitcoin’s algorithm halves the number of bitcoins that could be mined every 4 years, making bitcoin a scarce commodity in the long run. So yes, we expect it to further appreciate in value in the years ahead.
So don’t be left behind — get your bitcoins today!
