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Fact or Myth? 7 Truths About Cryptocurrency and BlockchainBy Shane Addinall Oct 07, 2022Media reports, public figures, and the neighbour that knows something about everything all have opinions on cryptocurrency, and some have caused damage to the industry because of their misconceptions.
When something seems foreign or complicated, or even just different from the mainstream, people tend to start rumours as they try to understand the unusual subject. These rumours often grow because other parties spread them, leading to damaging myths.
The cryptocurrency industry fell prey to many tales with questionable origins and sources that do not hold expert credentials. Because of various events in the decentralised finance market, it has been easy for bystanders to accept various reports as facts. However, upon closer investigation, we discover these are nothing but rumours spread by misinformation.
Let's jump in and bust some myths about cryptocurrency.
Although cryptocurrency has been around for more than a decade, it only recently caught the attention of the masses and a few unfortunate events fuelled false information.
Crypto technology is complicated and takes some tech know-how to understand. Because uninformed consumers showed interest in the decentralised finance (DeFi) market, opportunists tried, and in some cases succeeded, to pull the wool over people's eyes. These scammers duped people and caused vicious rumours about the industry.
Fortunately, the crypto industry is much bigger than these isolated events, and the truth about DeFi is much brighter than rumours will have us believe.
✓ Myth #1 Cryptocurrency Transactions are Completely Anonymous
If cryptocurrency transactions were completely anonymous, it would raise tremendous concerns for anti-money laundering and other anti-crime regulations in the financial sector. Full anonymity is as much a security threat as a lack of proper security protocols is, if not more. The blockchain technology used for cryptocurrency creation leaves a trail of information on a digital ledger.
Along with the ledger records, crypto accounts require certain identification information when users sign up for an account. These are like standard KYC requirements when signing up for other digital financial accounts and include identity documents, proof of address information, and more personal details.
The anonymity everyone raves about comes in with transacting. Crypto transfers from one platform to another offer anonymity because the account holder does not have to give their name and bank account details. This feature makes it an attractive option for online gamblers who worry about exposing their sensitive information.
✓ Myth #2 Bitcoin and Blockchain are One and the Same
Some use cryptocurrency and blockchain interchangeably, but this is an incorrect way to refer to Bitcoin and other crypto coins. Here are a few definitions to clarify the relationship between cryptocurrency and blockchain.
- Blockchain: Technology that works on a decentralised digital ledger of peer-to-peer networks allowing network participants to confirm transactions. Blockchain transactions cover more than cryptocurrencies and describe how data is processed and stored.
- Cryptocurrency: Today, there are thousands of cryptocurrencies, and these digital or virtual currencies are secured by cryptography built on blockchains. This means it is nearly impossible to make counterfeit coins and most argue that the decentralised nature of cryptocurrency renders it immune to government interference or manipulation.
- Bitcoin: This was the original cryptocurrency that started it all. Since its launch in 2009, thousands of other cryptocurrencies have joined the decentralised finance market. Today, many digital coins are used for purchasing goods, while others remain a means of storing wealth.
As explained above, Bitcoin and blockchain are different because Bitcoin is merely one of the results of blockchain technology. Blockchain offers an array of applications, and iGaming providers use it to provide provably casino games and more.
✓ Myth #3 Cryptocurrency is a Bubble Bound to Pop
Referring to DeFi as a bubble means exuberant market behaviour that is bound to crash drives the value of crypto. Economic bubbles include fast inflation followed by swift drops in value, all happening over a relatively short period. The major characteristic of a bubble is that it pops, and the critics who still believe cryptocurrency is a bubble have been waiting for this to happen for over a decade.
In reality, cryptocurrencies have experienced countless ups and downs, with Bitcoin having the longest history on the market with the biggest spikes and drops. However, crypto market values are highly volatile, and many consider any investment in digital coins speculative. Other investment professionals ascribe the oscillations of Bitcoin and other DeFi coins to the natural circumstances of a young market.
Crash games like Bustabit and Space XY came to be thanks to those who enjoy the exhilarating thrill of stock markets. These games portray the spike of a bullish market, and players need to cash out before the tides turn to a bear market drop. Stock markets have always experienced rising, and crashing curves and the crypto market is no different.
✓ Myth #4 There is No Real-World Use for Crypto
Because cryptocurrency exists in the digital world, many find it hard to conceive where DeFi has a place in the physical world. This concept has many believing the myth that digital coins have no real-world uses. Digital coins have trade value in some areas of the real world, but the challenge lies with which coin you choose and what you want to get in return.
One Bitcoin has an extremely high value, $20,005 at the time of writing, making it difficult to purchase everyday consumables. On the other hand, countless coins with much lower market values and those pegged to fiat currency, like Tether USD and Binance USD, carry similar values to the Dollar. This has allowed service providers to accept digital coins as payment for products and services rendered.
Another key aspect of digital coins is their immunity to inflation which makes some coins akin to commodities like gold. Therefore, individuals and companies have funnelled millions of dollars into Bitcoin and other cryptocurrencies to store assets. A recent addition to online gambling is crypto casinos, allowing players to deposit and withdraw cryptocurrency.
✓ Myth #5 Crypto Trading is Akin to Gambling
Some critics refer to crypto trading as gambling because of the major fluctuations experienced in the market. As mentioned above, this is a natural occurrence with immature markets, and the influx of coins and stakeholders will settle at some point.
Most gambling games are driven by chance, and smart gamblers play the odds. When people compare crypto trading to gambling, they might have a point that a bear market may be lurking, but it is not entirely true. Games of chance rely on random number generators to determine the outcome and trigger a win, and stock markets are far more complex and much less random.
Adding cryptocurrency to your investment portfolio would mean taking a high-risk approach, but crypto trading would be more in-line with a game of skilled gambling than a slot machine.
✓ Myth #6 Some Coins have Carbon-Intensive Footprints
Some members of society have massive influence, and by some, we mean Elon Musk. As the face and voice of Tesla and Space-X, the billionaire has the attention of the masses, and when he made a U-turn on his offer to accept Bitcoin for Tesla purchases, his followers paid attention. According to Musk, executives at Tesla, and environmentalists, mining Bitcoin and other digital currencies place too much stress on the electricity grid.
Because digital currency is mined online and requires computer hardware for storage, the argument stands that cryptocurrency has a very high carbon footprint. The trouble with this argument is that traditional finance (TradFi) is the only current option to pay for goods and services. The electricity required in TradFi transactions requires far more carbon-intensive processes.
Recent studies concluded that DeFi mining and storing is much more power efficient and environmentally friendly than gold mining and traditional banking, which includes physically printing currency. According to the Cambridge Bitcoin Electricity Consumption Index, Bitcoin mining relies greatly on alternative energy sources like solar, wind and hydro.
✓ Myth #7 Cryptocurrency is for Criminals and Anarchic Folk
Another myth that keeps weary consumers away from cryptocurrency is that criminals use it for laundering money and funding crime. Others say that only conspiracy theorists who believe in coming anarchy invest in crypto. Both theories have holes, and when debated with logical facts, they crumble.
The first assumption comes from the misconception that crypto traders and investors are 100% anonymous, which we addressed above. Unfortunately, there are opportunists in every part of the financial market, and invariably some criminals use whatever means they have access to for their schemes and plots. Fortunately, statistics support that many more prefer fiat currency for their dubious deeds, and even on the dark web, a fraction of the financial crimes are in cryptocurrency.
As for the idea that digital currencies are only attractive to those who believe a future involving Mad Max vibes is imminent, current adoption rates crush this thought. Industry experts advise that the current rate at which consumers buy into crypto exceeds the adoption rate of the internet in its early years. The question we should rather ask is how quickly it will become mainstream.
Focusing on Facts and the Future
Perhaps these bring you closer to understanding what cryptocurrency is and what the future looks like with digital currency. With consumer adoption rates rising and more world leaders speaking about regulating crypto, it is clear that it is here to stay.
Once we figure out how to use it to our everyday advantage, the rest will be history.
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