Cryptocurrency is a hot topic right now, which means that users are getting a lot of new information every day. You might be shocked to learn that some of the things you think are true are actually myths. This article will talk about some of the biggest myths that people have about cryptocurrencies. A lot of these misconceptions are due to a lack of understanding or just plain ignorance.
Let’s look at the myths!
So if you’re curious about crypto but don’t want to be taken for a ride by scammers and snake oil salesmen, then keep reading because we’re going to set the record straight. It’s no secret that cryptocurrency has been around for a pretty long time. Bitcoin, the first-ever cryptocurrency, was created in 2008.
Since then, users have flocked over to this new way of transacting. But despite the many years that cryptocurrencies has been around, many still remain skeptical about how virtual currency actually works. Because of the ambiguity and complexity of cryptocurrency, a great deal of misinformation is being dispersed through various media channels in an attempt to influence the cryptocurrency market.
A lot of information regarding cryptocurrencies is being disseminated by many media outlets, from social media platforms to reliable news outlets, the majority of which is just untrue or mythical. Since most of the mainstream media outlets are responsible for spreading this news, a significant number of individuals have bought it as true and shared the same as such.
Let’s set the record straight in this article by debunking seven of the most prevalent cryptocurrency misconceptions, since we’re sure there are a few things about cryptocurrencies you may be wrong about. Let’s get started.
1. Cryptocurrency will make you rich
The first myth, which we’re sure you’ve heard before, is that cryptocurrencies will make you rich. As you’ve probably seen with cryptocurrency markets, only a few investors take out big returns. These ‘lucky’ investors are often the ones who receive the most attention, with news outlets printing flashy headlines about a random investor becoming a billionaire overnight.
A case in point is the early bitcoin investors who are now cashing out big returns or the four ‘ordinary people who shared their stories in the New York post of how they became rich through investing in cryptocurrency. But hey, before you’re swept over to the hype, make sure to do plenty of research about the million other investors who took a chance on cryptocurrencies.
You’ll likely find some people who got lucky returns, but you’ll also find plenty more who made huge losses trading in crypto. The overall concept to keep in mind is that cryptocurrency is very volatile. Prices can change overnight, for better or worse.
So, before investing, always make sure you’re investing not more than you can afford to lose, keeping in mind that things can go either way. There simply isn’t a surefire way to know whether you’ll get rich investing in cryptocurrency or not, as with anything else.
2. There is a way to predict trading profits
Another myth tying in closely with getting rich in cryptocurrency is that there is a way to predict trading profits. True. There are trading patterns that seem to work well in favor of price predictor applications out there. Such things as when a popular celebrity tweets that Cardano is the next revolutionary cryptocurrency, or say, a popular cryptocurrency exchange powering Ethereum happens to file for bankruptcy.
In the former, Cardano prices may spike up, and in the latter, Ethereum’s may drop. But it still remains impossible to predict exactly how much the price will change and for how long. It may happen that no change happens, or the change in price takes effect for a few hours before stabilizing again.
There simply is no logical way to predict trading profits, and anyone advising you on which cryptocurrency to invest in is probably relying on speculation, rather than actual facts.
3. Cryptocurrency’s energy consumption
Let’s shift gears a little bit to the ‘energy consumption’ side of things. You’ve likely seen rising concerns from conservation programs and influencers worldwide about cryptocurrency’s high amounts of energy use capable of powering many countries!
While there’s no denying the high amounts of energy cryptocurrency uses, specifically in the millions of computers needed to mine cryptocurrency located in stations all around the world, there is a flaw in how concerning the energy cryptocurrency uses actually is.
Take, for example, electrical energy powering all the home and industrial appliances we use. In a single home, there are likely many appliances that run on electricity. The financial institutions that cryptocurrencies rivals require many more computers and machines to run. Another major concern is the transport industry that relies on fossil fuels which release greenhouse and other toxic gasses into the air.
It’s certainly a valid concern about the amounts of energy powering cryptocurrency’s specialized mining machines. But, there is that much more concern about our everyday-use machines that consume much more electricity. Furthermore, there exist several measures for using renewable energy mines continually being implemented worldwide.
China, for instance, banned all domestic crypto mining following reports of China hosting the second-largest mines, most of which heavily relied on coal. Tesla also dropped bitcoin as a payment option when environmental concerns spiked up, a move that could influence further use of renewable energy.
According to a study by Cambridge University, 75% of miners use some renewable energy, making up 39% of the total energy used. So, when you compare the benefits virtual currency presents, to the energy used, whereby close to 40% of it is renewable, it’s fair to say that cryptocurrencies are the main perpetrator of high fossil fuel use and thus, global warming, is a myth.
4. Cryptocurrency encourages criminal activity
Right, back to cryptocurrency uses. A popular myth that has put down its roots over the years is that cryptocurrencies encourage criminal activity. It’s easy to deduce that anonymous transactions help get away with illegal activity. But there is much more to cryptocurrency that might actually reduce criminal activity.
If statistics of crypto-related crimes are to go by, cryptocurrency may potentially reduce financial crime when compared to fiat currency as the industry only reported 0.62% in 2022, and 0.15% in 2021. Fiat is reportedly used by criminals to launder money 800 times more frequently than cryptocurrency.
The reason for the high disparity is mainly because every cryptocurrency transaction is permanent, unchangeable, and publicly accessible to anyone, at any time. So, while physical cash is in essence, untraceable, cryptographers can always trace suspicious transactions to their source in a blockchain.
Some hackers have millions sitting in an account, simply because moving even a single token risk exposing their location to the authorities. A case in point is the Colonial Pipeline hack, where authorities recovered ransom payments paid to the hacker/hackers through cash flow analysis and other techniques.
5. Cryptocurrency is private
This brings us to our next myth that cryptocurrency is private. It’s widely believed that cryptocurrency is anonymous. The founder of bitcoin, for starters, is in the wind, only known to most by the pseudonym, Satoshi Nakamoto (is he an individual? A group? We only hope that we will live to know who actually started all this).
Mysteries aside, cryptocurrency is pseudonymous, but it’s not very private. The information that holds the most value when dealing with money is never what your name is, or where you live. Rather, it’s how much money you have in your account and your transaction behavior over time.
All your transactions are visible to anyone on the blockchain through your public key. So, there really isn’t a way to make transactions privately on the blockchain.
6. Cryptocurrency investments are safe
The other myth that ties in closely with making private transactions is that your cryptocurrency investments are safe. Not to scare you, or anything, but as long as anyone on the blockchain can see how much you have, and you’re transacting on the internet, hackers will always look for security vulnerabilities to exploit.
We’ve seen this happen in a number of high-profile hacks where users lost their cryptocurrency investments due to a million-dollar worth hacking attack. Some popular blockchains like bitcoin that maintain high-standard security protocols have never been hacked.
However, the marketplaces and exchanges where people interact with these cryptocurrencies are vulnerable as previous hacks have proven, so always stay on high alert while investing in crypto.
7. Cryptocurrency is a Ponzi scheme
Finally, let’s wind up with a popular myth you’ve probably heard before: cryptocurrency is a Ponzi scheme. Admittedly, there are quite a few similarities between cryptocurrency investments and Ponzi schemes, where the first few investors seem to make the most profit. But also note that there never is a constant climb in cryptocurrencies that would suggest a Ponzi scheme.
If anything, users seem to make losses or gains within a highly volatile space. Also, cryptocurrencies have a real-world value that has a higher likelihood to replace fiat currency than the other way around.
That wraps it up for what you should know about the biggest cryptocurrency myths! Are there more cryptocurrency myths you’ve heard of before? We’d love to know what your thoughts are! Please share your thoughts in the comments block.