Admired by many, criticized by others: everybody has an opinion about cryptocurrencies these days. Yet, many of these opinions are not based on facts. Today, we will debunk the seven biggest misconceptions about cryptocurrencies and show what is actually the truth.
1. Cryptocurrencies are only used by criminals.
Admittedly, only very skeptical commentators harbour this negative belief anymore. Still, crypto has a negative stigma associated with it: it says that mainly thieves, hackers and drug smugglers on the internet use cryptocurrencies.
Well, this is plain out wrong. For example, studies have shown that money laundering with fiat money is much more common. The vast majority of crypto wallets is connected with strictly regulated exchanges like Blocktrade where the identity of every wallet owner is known, and all transactions are checked for suspicious activities. Bitcoin is used by crypto enthusiasts, thoughtful and diversified retail and institutional investors alike.
2. Cryptocurrencies will soon be banned.
Skeptical pundits warn that cryptocurrencies will soon be banned. Yet, there is no indication of this happening anytime soon. In fact, financial watchdogs worldwide have merely uttered they want more regulation for the crypto space.
If anything, the crypto space will become more accepted than banned as a result. An exception may of course be strict regimes like China or Iran that notoriously fear the influence of crypto.
3. Blockchain technology is only useful for financial services.
The Bitcoin whitepaper introduced blockchain technology, cryptocurrencies are the most popular and famous blockchain use case. Yet, blockchain technology has vast potential in dozens of other industries and fields, not only in financial services like banking and asset trading.
Among the most widely evaluated use cases for blockchain technology are energy trading, self-executing insurance policies, self-sovereign identity management, digital rights management (DRM) and many more.
4. The crypto-space comprises only hackers and geeks.
Well, first of all: is that an expression of admiration or aversion? Yes, the crypto space is full of incredibly talented and smart women and men, many of which have a background in coding, programming and other technical disciplines.
Equally, however, the crypto space is driven by ideologists, philosophers, economists, entrepreneurs, lawyers and doctors who all have to reason to be excited about an engaged in its development. And the crypto community is open and welcoming to everyone who wants to join!
5. Cryptocurrencies are not taxed.
Wide-held is the belief that cryptos are a way to evade taxes. Nothing could be further from the truth. More and more governments clarify how gains and proceeds from the trading and selling of cryptocurrencies are to be taxed within their jurisdiction. Users need to comply with these laws or face the consequences consisting of fines and penalties.
6. You cannot use cryptos for payment.
Satoshi Nakamoto envisioned Bitcoin to be “a peer-to-peer electronic cash system”, yet many still believe that cryptos are only used for trading and speculation. This is utterly wrong. Thousands of merchants have been accepting Bitcoin, Ethereum, Litecoin and other cryptocurrencies for years.
In 2020, more than ever, it is true that cryptocurrencies are becoming a widely adopted means of payment.
7. Cryptocurrency mining has a massive energy footprint.
A valid point of critic is that Bitcoin mining – the process through which coins are issued and transactions validated – is energy-intensive and hurtful to the environment. The reason is Bitcoin’s computing-intensive consensus algorithm “proof-of-work” that requires all blockchain nodes to process and validate every single transaction.
However, many measures are being taken to make cryptocurrency mining more efficient: Ethereum just released Ethereum 2.0 which introduces various measures for efficient, scalable mining – most importantly the consensus algorithm “proof-of-stake” (PoS).
PoS allows the mining process to be delegated to a smaller number of nodes without reducing the security of the blockchain platform. Many leading cryptocurrencies are already using PoS and even Bitcoin is likely to switch to PoS soon, thereby significantly reducing the energy footprint of cryptocurrency mining.
There are many misconceptions about cryptocurrencies that keep them from becoming more mainstream. Yet, as more and more users learn about Bitcoin and blockchain, awareness of the potential benefits of their usage spreads. Hopefully, our article helped in shedding more light on these applications and their advantages.