Today, there are many myths surrounding cryptocurrency. Learn the definitions and facts about the most common ones to decide whether they are true or false.
The cryptocurrency world has exploded in popularity in recent years and has come a long way since its advent back in 2009. For most people, they are a rather obscure concept that can be challenging to fully understand. Due to this, confusion naturally takes place and leads to myths and mistruths that are now prevalent everywhere. To help you decide where there is any truth to these claims, we outline the most common crypto myths in no particular order, along with the relevant facts.
Cryptocurrencies are just a fad
As cryptocurrencies are now becoming mainstream and being adopted by more and more legitimate organisations as an accepted form of payment, crypto is now far from being just a fad. The same thing happened during the early days of the computer, the Internet, and email, which started small and gained attention only from tech fans. Now, they have become a staple in many aspects of modern life.
While no one can predict where crypto will be in the years to come, what is certain is that the technology they introduced will definitely be further developed and refined. Decentralised finance applications are gaining steam with growing interest from financial consumers and institutions. Government authorities are also exploring avenues for implementing legally-recognised cryptocurrencies pegged to something more stable.
Cryptocurrencies are not secure
Since crypto scams have been making headlines more frequently lately, it is only natural to deem them unsecure. But before going into the weeds, let us first discuss the basics of crypto. The key technology behind all cryptocurrencies today is the blockchain, a secured and distributed database protected with encryption technologies that are incredibly difficult to break. Transactions enter the blockchain as ‘blocks’, and previous transaction data get recorded into new blocks that are then encrypted.
The blockchain continues to build upon every preceding block, and communities of automated verifiers must agree as one regarding the validity of the data recorded in each transaction. The linked blocks, consensus mechanism, and encryption techniques all make it nigh impossible to edit information in the blockchain in the hopes of ‘stealing’ cryptocurrency.
The security weakness mainly lies in how crypto is stored and accessed, such as in crypto wallets and centralised crypto exchanges in Singapore that conduct transactions. It is entirely possible to send crypto from one to another worry-free, but the software and platforms used for storage or access remain vulnerable to hacking and tampering. There are many highly secure methods to protect your cryptocurrency, such as storing them in cold storage and keeping your crypto assets off cryptocurrency exchanges. Transferring only the required amount to a hot wallet via a secured and wired connection on non-mobile devices is highly recommended when you need to use your cryptocurrency.
Cryptocurrencies have no real value
Value is intrinsically a subjective concept. People, communities, and societies may hold something of value while another deems it insignificant. To put this into context, take the first-ever cryptocurrency, Bitcoin, which held a value of thousandths of a cent right after its launch. Over time, its popularity steadily grew, and by 2021, one Bitcoin became valued at around USD$69,000. This rise demonstrates that society’s perception of an asset is vital to establish whether it has value or not.
Cryptocurrencies are only used in illegal transactions
Certainly, some people and criminal organisations do use cryptocurrencies to conduct transactions for illegal activity. Still, the same can also be said for any other type of currency used in history. The reality is that most crypto transactions today are conducted with legal and legit intentions.
According to the latest analysis report by Chainalysis, crypto transactions related to illegal activities dropped in 2020, specifically just 0.34% of all transactions made during the year. It is essential to note that government bodies and the international community are already working to crack down on cryptocurrency usage for organised crime, with numerous countries adopting measures for anti-money laundering and financing terrorist activities using cryptocurrencies.
Cryptocurrencies harm the environment
Due to the way cryptocurrency works, this claim is not exactly a myth. Various cryptocurrencies use the consensus mechanism for validation, which requires significant computational power that demands high energy consumption. Moreover, some cryptocurrencies can be earned through ‘mining’ via the Proof of Work (PoW) model, which led to large crypto mining farms cropping up everywhere over the years.
Each of these farms consumes massive amounts of power to run, adding to a total network energy consumption equal to that of small countries. However, it is important to note that the environmental impact largely depends on the energy source used for mining and how their consumption affects the local power grid. If they are drawing power from fossil-fuel power grids, they are generating excess carbon pollution for something whose benefits and future to humanity remain uncertain. Otherwise, if they are powered by more sustainable energy sources, then the environmental impact is much lower.
Cryptocurrencies are a scam
As touched on earlier, many merchants and retailers now accept several forms of cryptocurrency as a legitimate means of payment. More and more people are also accepting them in personal transactions. Most digital currencies are not developed with malicious artificial intent or any sort of programming that works to take your hard-earned money.
However, there are malicious people that come up with all sorts of scams - from accepting unverified transactions to unregulated fundraising for new cryptocurrency ventures - to try and trick people out of their crypto or money. While there is no guarantee that anyone can stay clear of these scams, having the proper knowledge and awareness significantly reduces the likelihood of you falling victim to them.
With all that said, it is ultimately up to you to decide whether cryptocurrencies are safe. Just like any other myths and mistruths you may encounter, it is best to first learn all the fundamental things about the topic and conduct further research to shape your perspective properly.
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