For those who have been involved in the crypto space for a while, it’s easy to forget just how confusing and mystifying the world of bitcoin was when we first encountered it.
A lot of us were probably unable to tell the difference between a bitcoin and a blockchain, or even what a private key was.
In this interest, we intend to uncover some common myths surrounding what is unarguably the world’s most popular digital asset.
This is so we can help disperse some of the troublesome fog that can obscure the true nature of crypto in the minds of beginners.
1. Bitcoins have no intrinsic value
It’s heavily debated whether bitcoins have intrinsic value outside of their use as a medium of exchange. Sure, if society came to a screeching halt, the decentralized currency not backed by the government or pegged to any commodity likely won’t have any value. But there are also arguments to be made about the value of Bitcoin as a global network of exchanges and merchants.
At the end of the day, value is determined by supply and demand. If usage grows and this currency becomes a mainstay, then its value will increase as well.
2. Bitcoins are illegal because they’re not legal tender
Another big question surrounding Bitcoin is whether it’s a form of legal tender. In the US, legal tender comprises coins and bills that have been minted and issued by the US government. But that’s not to say that bitcoins are illegal because the US government classifies it as a virtual currency … something that the US Financial Crimes Enforcement Network (FinCEN) actually recognizes. For now, Bitcoin might fall into some gray areas, but it’s definitely not illegal.
3. Bitcoins are used primarily for laundering money and illicit activities
“If you look at the market cap of Bitcoin, that (would be) an awful lot of illicit activities,” said bitcoin user Jason Williams.
“The Silk Road demonstrates there is a market but, then again, so does the drug dealer on the corner accepting cash.”
Silbert of BitPremier weighed in by saying “the Bitcoin community wants to adhere to the rules,” and is willing to cooperate with governments to increase the cryptocurrency’s adoption. “To paint them with this wide brush of money-laundering anarchists is not fair.”
Moreso, only 0.5 percent of Bitcoin transactions in 2019 were transacted on the ‘dark web’ – far less than paper money.
This equates to roughly US$829 million. Compare this with fiat money. The United Nations Office on Drugs and Crime estimates that in 2009, criminal activities generated US$2.1 trillion.
This is 3.6 percent of global GDP that year or 2,533 times the amount processed through Bitcoin!
4. Point of sale with bitcoins isn’t possible
It can take upwards of an hour to confirm transactions and ensure coins aren’t spent twice. Silbert’s e-commerce venture BitPremier is a luxury marketplace that brokers products such as yachts, sports cars, and jewelry. Because the company deals exclusively in high-end items paid for via bitcoins, “people don’t mind waiting for an hour,” he said.
I could see for low-ticket items how this could be problematic. I think the risk of double-spending is pretty low. For small points of sales, such as a cup of coffee or yogurt, it doesn’t behoove the vendor to have people wait around for confirmation. If it’s just one out of 100 people committing double-spending, which I think is highly unlikely, have them pay and let them be on their way. Vendors are also able to accept unconfirmed transactions by listening on the network or using a company to avoid double-spend transactions, a process that takes mere seconds.
With new headlines every day about yet another business accepting bitcoins, vendors clearly haven’t been scared off.
5. It’s a giant Ponzi scheme
Since its inception, Bitcoin has very often been accused of being a Ponzi Scheme by its critics. This attack is nothing new, as it frequently occurs when economists or politicians wish to criticize Bitcoin and find no real argument against it.
In order to put an end to this myth now, I suggest you refer to the detailed report on Ponzi Schemes published in 2014 by the World Bank.
This report was written by the highly respected Kaushik Basu, former Chief Economist of the World Bank but also Professor of Economics at Cornell University.
In his report, Kaushik Basu says in particular: “Contrary to a widely-held opinion, Bitcoin is not a deliberate Ponzi. And there is little to learn by treating it as such. The main value of Bitcoin may, in retrospect, turn out to be the lessons it offers to central banks on the prospects of electronic currency, and on how to enhance efficiency and cut transaction costs.”
I think there’s nothing more to add. Just read what Kaushik Basu says in his report, and even more so what he demonstrates.
The people who continue to think that Bitcoin is a Ponzi Scheme in 2021 are clearly misinformed people.
6. Bitcoin has been hacked
This is one of the most prevalent myths Bitcoiners have to defend against. Is anybody’s money secure if the network can be hacked?
Critics of Bitcoin, starting with economists, central bankers, and politicians, keep saying that its Blockchain is not really secure. To justify this accusation, they point to the fact that Bitcoin has been hacked several times in its history.
This is completely untrue because Bitcoin has never been hacked in its history.
Bitcoin is a particularly secure open-source software that is constantly being improved by the developer community.
Critics of Bitcoin equate the security of Bitcoin with the security of cryptocurrency trading platforms. They are two different things.
But it is these platforms that have already been hacked many times in the course of the 2010s.
To get into Bitcoin, your choice of platform to trade on should be heavily influenced by security structure and policies
7. Bitcoin Is Complicated To Use
Bitcoin is “A Peer-to-Peer Electronic Cash System” implementing the Blockchain concept. In order to function without a leader, while being permissionless and trustless, Bitcoin is based on a public/private cryptographic key system that is rather complex for the uninitiated.
This complexity of the technology at the heart of Bitcoin is used by its critics to argue that Bitcoin is too complicated for the general public.
However, in order to use Bitcoin on a daily basis, you absolutely do not need to master all of these concepts. There are many tools that make it easy to use, starting with intuitive wallets, web and mobile applications.
In 2020, making transactions with Bitcoin is as easy as sending an email. The complexity of Bitcoin for the general public is a myth since they don’t have to directly manipulate the concepts at the heart of its technology.
Bitcoin has been announced as dead nearly 380 times since its inception in 2009. In addition to these repeated obituaries, people who benefit from the current monetary and financial system have been constantly falsely criticizing it, creating many myths surrounding Bitcoin.
Like all myths, they are false, but they give a bad image of Bitcoin to the general public.
Today, I hope I have given you the answers to debunk these myths in your mind, and you can use them to help democratize Bitcoin around you as well.