People have varied outlooks on cryptocurrencies and Bitcoins, ranging from highly enthusiastic to completely skeptical. Cryptos are viewed massively as a highly speculative craze or technical advancements that irrevocably change the banking system. However, investors need to separate the fact from the fiction to avoid costly inaccuracies. If you are new to crypto mining, here’s a simple guide on how to cash out cryptocurrency.
Today, we have enlisted five common myths circulating Bitcoin and other cryptos.
Myth 1: The terms Blockchain & Bitcoin are used interchangeably
Some individuals are not quite sure about the real meaning of Blockchain, and it has established several myths regarding its nature.
It means you cannot start trading Bitcoin on the Blockchain of Ethereum. It is vital since there are several cryptos, and each individual has blockchains while operating under their unique entities.
Myth 2: Bitcoin is entirely anonymous and hence illegal
Contrary to popular belief, Bitcoin is not completely anonymous as it uses pseudonyms rather than true identities. However, there is no audit trail connecting the creators to each transaction. Despite this, Bitcoin is legal in many countries, including Japan and Germany, where it is recognized as a legitimate currency. There are even online merchants that accept Bitcoin as a valid form of payment. While the central bank has the ability to regulate Bitcoin, it is still a developing and evolving asset.
Myth 3: Bitcoin is considered aPonzi scheme
The other most prominent myth surrounding Bitcoin is it’s being a Ponzi scheme. However, we should initially know about this scheme and check why Bitcoin is not such a scheme. The Pyramid or the Ponzi scheme is created based on the Greater Fool theory.
The creator of this scheme continues collecting funds from individuals who promise to offer alluring returns. While the funds start flowing, fresh capital gets used for paying the alluring returns. The Ponzi scheme pulls through as long as the money continues flowing in, and when the day comes when it stops, the whole scheme collapses.
So, why is Bitcoin considered a pyramid scheme? Initially, there is no point in focusing on the potential of Bitcoin. It is a decentralized system, and therefore, no promises are guaranteed. The Ponzi becomes fragile when people enter; however, Bitcoin is more like a network for telecommunications which attains greater potential for entering into this network.
Myth 4: Cryptocurrency/Bitcoin is used for illegitimate purposes
There is a common misconception that cryptocurrencies were created specifically for illegal or illicit purposes. However, this is not true. According to reports, only about 1% of cryptocurrencies are used for illegal activities, and this number has decreased in recent years.
While it is true that cryptocurrencies can be used for illegal purposes, just like any other currency, the vast majority of cryptocurrency usage is for legal and legitimate purposes. In fact, the percentage of illegal use for cryptocurrencies is actually lower than the percentage of illegal use for traditional currencies.
Myth 5: Cryptocurrency lacks real value as a commodity does not back it
It is one of the common myths related to cryptos. But, the value of the currencies is merely subjective. A few claims are made where this crypto does not possess an intrinsic value since it is not backed by commodities such as gold or silver as claimed by several fiat currencies. It does not account for the fact that fiat currencies these days are not backed by commodities, and these do not possess any intrinsic values that are objective.
The value in the buyer’s offer of the seller’s crypto is determined through the value. But, there are economic forces at play influencing the value. For instance, greater values of the cryptos appear less. Cryptos like Bitcoin are more stable than fiat currencies that are created constantly.
Conclusion
In conclusion, it is important to recognize that there are many misconceptions and myths surrounding Bitcoin and other cryptocurrencies. It is important to do thorough research and not believe everything you hear about Bitcoin and other digital currencies. It is also important to keep in mind that the cryptocurrency market is constantly evolving, and new developments and regulations may change the way that these assets are perceived and used.