Cryptocurrency will replace fiat money by 2020! Bitcoin will hit a value of $1 million, whoever has bitcoin will be rich!
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Who hasn’t encountered hyperbolic headlines like these online?
Ever since Bitcoin’s price reached its record high in 2017, many people have become attracted to cryptocurrencies. Unfortunately, this also led to the emergence of cryptocurrency scams and get-rich-quick schemes that take advantage of people who know little about crypto.
At present, there are still many people who are misinformed not only about cryptocurrencies, but also about blockchain, the underlying technology that powers cryptocurrencies. In 2018, $4.3 million was lost to crypto scams in Australia alone. If you’re looking to buy crypto this year, educating yourself about common cryptocurrency myths is one of the best ways you can avoid making wrong (and costly) decisions.
If you’re curious about cryptocurrency misconceptions and are doubtful regarding what you’ve been reading about the topic, check out the infographic below.
Misconception: Cryptocurrency is replacing fiat money.
Word is going around that cryptocurrency is growing fast and is going to be the future of how we make transactions. Cryptocurrency is perceived to work faster, be more secure and not be as regulated or government supervised than fiat money.
Fact: Fiat money and cryptocurrency can coexist.
Fiat money is the legal currency declared by government institutions—think of the US Dollar, the Philippine Peso, the Chinese Yuan. Although 57% of the world’s population is on the internet, not all of them are using digital payment schemes. Maybe in a dystopian 2020, cryptocurrencies will replace fiat money. But for now, cryptocurrency remains an alternative, albeit a fast and more secure one.
Misconception: Cryptocurrency is anonymous.
People are under the false impression that all cryptocurrencies are anonymous—unnamable and untraceable.
Fact: Cryptocurrency (Bitcoin, at least) is pseudonymous.
While personal data is not disclosed, Bitcoin is basically a public ledger wherein bitcoin sent to one person from another is traceable. While you won’t find a complete profile consisting of a name and contact details, the identity can be tracked via public information like one’s registered address or IP. On a more macro scale, there are sophisticated blockchain forensics companies that track cryptocurrency-related activity from governments and financial institutions all over the world.
Misconception: Cryptocurrency is only used for criminal activity.
A study about cryptocurrency from Australia reported that 25% of Bitcoin users and 44% of Bitcoin transactions were linked to illegal activity. While cryptocurrency does exhibit some characteristics—pseudonymous, decentralized—that could prove handy for illegal dealings, the same characteristics can be useful for anyone who may be living in an economically or politically unstable environment.
Fact: Any currency can be used for illegal purposes.
Cash, particularly the $100 bill, has been the primary mode of closing illegal activity. Roughly 34% of US currency is used domestically in the underground economy which is unaccounted for. In reality, anything from expensive technology to luxury goods can be used to pay for illegal activity, any item that can amount to a high value.
Misconception: Cryptocurrency is bad for the environment.
The mining, the coding, the algorithms consumes more energy than one bitcoin is actually worth because of the cryptocurrency’s volatility. On average, it takes 35,518 kilowatt hour (kWh) to mine one bitcoin. If 1 kWh has enough energy to run 6 laptops for a full working day, the energy used to mine 1 bitcoin can run roughly 213,000 laptops and serve the same amount of employees for a full working day. Even if this may be the case, 74% of bitcoin mining is powered by renewable resources, which makes it one of the few large-scale industries in the world that are renewables-driven.
Fact: Blockchain technology has the potential to solve environmental issues.
A 2018 report by the World Economic Forum identified 65 use cases for blockchain to promote environmentalism. Some of the key points mention how blockchain and cryptocurrency technology can create “see-through” supply chains which will improve transparency and create environmentally-sound supply chain systems. Another point is how cryptocurrency can provide a way to assign value to the environment, for example blockchain has the ability to transform the carbon market into one that has tradable and investable value.
Misconception: Cryptocurrency does not have intrinsic value.
One on hand, cryptocurrency is not government-backed in most countries and its value is too volatile to measure against the US dollar for example. On the other hand, the buzz surrounding cryptocurrency is mostly about blockchain or the portion of crypto in the word cryptocurrency (not on currency). Because of these reasons, the actual perceived value of cryptocurrency is constantly in the air and the focus of most remain on the technological aspect.
Fact: Cryptocurrency meets the criteria of what it means to be considered “currency.”
The 5 criteria are fungibility, scarcity, durability, transferability and divisibility.
- Cryptocurrency is fungible—it has units that are identical and interchangeable in the form of coins.
- There is a scarcity of cryptocurrency as there are currently only 21 million bitcoins will reportedly ever be released.
- Cryptocurrency is durable, as long as its networks exist, coins can be traded on a daily basis.
- Bitcoin is transferable and transactions can be made by transferring units from one account to another.
- Lastly, Bitcoin is divisible. For example, you can buy 0.01 Bitcoin or fractions of any type of coin.
Misconception: Cryptocurrency is too complicated to comprehend.
Non-finance tech folk may think that they won’t understand cryptocurrency, it looks too complicated. The newness and the use of industry vernacular in articles and news bits regarding cryptocurrency may look fairly intimidating to someone who isn’t keeping up with this topic.
Fact: Cryptocurrency can be understood and utilized by everyone.
While the actual mining and coding of cryptocurrency requires advanced knowledge, using cryptocurrency is as easy as understanding how to use an e-wallet to make a purchase from a vendor that accepts cryptocurrencies as a form of payment.
The technology behind cryptocurrency has the potential to solve problems like access to banking, insufficient transfer of payments, and even inflation. But for now, most of us need to do our part in making this technology accessible to as many people as possible. And one of the simplest ways to do that is to educate more people about facts, not myths.
Share this infographic on social media to inform more people about this technology. For more on cryptocurrency and blockchain, check out our blog.