Since cryptocurrency and the associated blockchain technology are relatively new to most people, it is not surprising that they are grey areas. Moreover, the recent spurts in the prices of Bitcoin and other leading cryptocurrencies have resulted in large numbers of people trying to get a grip on this investment class. However, they often fall prey to innumerable myths and misconceptions that prevent them from understanding the phenomenon and acting on it. Some common cryptocurrency myths debunked:
Cryptocurrencies Are for Criminals
One of the most deeply ingrained myths about cryptocurrencies is they are mostly used for illegal activities. While it is true that many criminal activities are funded with cryptocurrencies, the same is true of conventional fiat currencies. The reason most people associate illicit activities with cryptocurrencies is they are anonymous. However, you must appreciate cryptocurrencies themselves are not responsible for the crime but are just a payment method adopted by some criminals. Even though when it was relatively new, Bitcoin was used a lot in the black markets for its cloak of anonymity; nowadays, conventional transactions are many times more than criminal ones.
Digital Currencies Have No Intrinsic Value
Governments and central banks the world over have been battling to categorize and regulate cryptocurrencies even since they came into being but with little success, according to an ambcrypto espanol report. Even the IRS has not provided the necessary clarity to investors regarding taxation. Because cryptocurrencies do not have the backing associated with fiat currencies, most people tend to think that they have no real value, and sooner or later, the bubble will burst. However, with the increasing prominence of cryptocurrency for investment and regular payments, it is clear that their owners believe they have real value. The theory is also supported by the fact there is a cost associated with the production of currencies using proof-of-work (PoW) consensus mechanisms like mining, which is reflected in the price of the currency.
Cryptocurrencies Lack Security
Among the numerous headlines cryptocurrencies have made in the past, some were regarding high-profile scams and thefts. If you are worried about the security of cryptocurrency, you should appreciate that fraud and theft can take place anywhere. However, blockchain technology is extremely robust, and it is easier to track down cases of theft whenever such incidents happen. Cryptocurrency exchanges and individual investors need to be alive to the potential of misconduct by bad actors and beef up their security measures accordingly. According to a CNN report, centralized exchanges and decentralized finance (DeFi) services are the main targets of hackers.
There is no end to the myths perpetuated by people who want to pull down cryptocurrencies and create confusion among investors for their nefarious ends. There is even big concern about the environmental impact of cryptocurrency mining that requires a lot of computer hardware and electricity. Unfortunately, even as it is something to be worried about, conventional banking and finance operations also consume a huge amount of resources that are equally detrimental to the environment. To avoid being misled by the many myths and misconceptions surrounding cryptocurrency, it is best to learn more about the subject in detail before investing in it or using it.