Debunking The Myths Surrounding Cryptocurrency
It’s easy to argue that one of the most promising types of fintech to enter the market in recent years is cryptocurrency. Indeed, many experts have called this the future of the financial industry. This is partly due to the blockchain. Through blockchain technology, it is possible to ensure that the cryptocurrency is protected from fraud while also being completely decentralized. Essentially, the middle man, which is usually the bank, is cut out of financial transactions completely through a peer to peer system. However, the growth of cryptocurrency has also brought a lot of myths and misconceptions that people were not prepared for.
So, let’s explore some of these myths and debunk each on providing the real facts that you absolutely should be aware of here.
Cryptocurrency Has No Value
The first myth that we need to address is that cryptocurrency has no real value on the market. Those who make this claim are missing a key point. There’s no currency we use today that has real value. Indeed, the only true currency is a precious metal like gold. That’s why when the economy is in a precarious situation, long term investors tend to commit to transforming their investments into gold.
The U.S dollar doesn’t have any real value except that of which has been imposed by the US government. The reason why money has no value is that the government can just print more money when it needs to. It’s not quite that simple but the entire financial situation operates on what is essentially a hypothetical balance beam.
Ultimately currency works by people deciding or believing that a certain thing is worth money. Currently, people believe that Bitcoin is worth a fortune and many suggest that it’s only going to get more valuable in the future. Does it provide a better alternative to real currency? In some ways this is absolutely the case but that’s another debate entirely.
Cryptocurrency Is Only Used For Illegal Purposes
This myth was first around when the currency first entered the market. It wasn’t true then and it’s not true now. Yet, the myth remains and continues to cause problems. So where does this myth originate from?
Well, when it was first introduced, criminals did find cryptocurrency incredibly useful, particularly across the dark web. However, things have changed and times have moved on. According to research companies such as Chainalysis the amount of illicit activity that involves cryptocurrency is about the same as the activity that uses typical banking methods.
Part of the reason for this is that the cryptocurrency market is now more regulated than ever. Every major business that uses cryptocurrency has to meet regulatory procedures to be allowed to continue to operate. Digital currency companies are also regularly audited to ensure that they are being run the right way.
It’s also becoming far more difficult for criminals to use crypto for illegal activities. People often believe that crypto is completely anonymous and therefore impossible to trace. While transactions are anonymous, analytical companies can easily track the different uses of cryptocurrency including if it’s being used for nefarious purposes.
Cryptocurrency Isn’t Secure
Another myth commonly held amongst people who know very little about the cryptocurrency market is that crypto isn’t secure. The reality is that cryptocurrency has insanely high levels of security. Indeed, there have been cases of people losing hundreds of thousands because they have lost the code that is needed to access the account. It’s believed millions in Bitcoin has been lost over the years, locked in totally inaccessible accounts.
Where does this idea come from? Well, it’s likely derived from the fact that there are two different ways to store cryptocurrency. You can have either a cold wallet or hot wallet. Cold wallet vs. Hot wallet: what’s the difference? The main difference is that one exists online while the other works offline. As such, it’s possible that a hot wallet will leave you more exposed to security risks. However, it’s worth noting that the issue with security won’t be with the crypto yourself but likely your internet connection. Even with a hot wallet, your money is probably still more secure than viewing it through digital banking or on your phone.
You just need to make sure that you are researching the best wallets available on the market which experts tend to recommend.
Crypto Is An Energy Drainer
Many people are more concerned about the state of the environment and the world than ever before. So, it’s not surprising that people have questioned whether or not cryptocurrency is energy efficient with some feeling it comes up short in this area. One of the ways that crypto works is through a process called mining. This requires huge amounts of processing power and that’s why some people claim that the process is not energy efficient.
There’s even been reports of this in the media and some influencers have stepped in to hit back against cryptos that they believe were hurting the environment. For instance, Elon Musk temporarily stopped Tesla from accepted payments in Bitcoin. However, it’s arguable that this was to weaken Bitcoin and boost Doge so that it could ‘go to the moon.’ It didn’t happen of course.
The good news is that while crypto may have been an energy drainer in the past, recently changes have been made to correct this problem. For instance, Ethereum is upgrading its network this year to ensure that energy consumption is down to one ten thousandth of what it used to be. It’s also worth pointing out that crypto isn’t the main issue here. It’s the internet which uses about 20% of the world’s energy.
Industries Which Can Use Crypto Are Limited
Finally, you might have heard that the industries which can use cryptocurrency are limited. This is commonly believed to be due to its fixed regulatory perimeter. However, this isn’t the whole story.
Recently, there has been widespread movement in terms of crypto being used by banks. Indeed, the biggest banks operating on a global scale are now investing a fortune into cryptocurrency as well as blockchain companies. Indeed, according to companies like Blockdata, 55% of the top 100 banks operating across the world now have significant levels of crypto exposure. These banks are investing directly in crypto and for good reason. They are slowly but surely starting to recognize that this currency is the future of their industry.
Federal and state regulators are also preparing to increase their focus on crypto in the future. This shows that governments believe cryptocurrency will have a major part to play in the next decade. The recent infrastructure bill was a strong indicator of the importance of crypto for the US government in particular. Congress is starting to pay a lot of attention with half a dozen hearings on the topic over the last year.
We hope this helps you understand some of the common myths that have surrounded the cryptocurrency market as of late and why it’s important to dispel these notions completely.
Ultimately, we’re only at the beginning on what cryptocurrency and the blockchain are likely to be used for on the market. Those who believe that this is a passing trend are likely to be proven wrong as cryptocurrency slowly but surely becomes the central financial system that is utilized on a global scale. One of the main benefits of cryptocurrency is that it provides equal opportunities across the world. Anyone can participate in investing and using cryptocurrency as long as they have a phone and an internet connection. This is why it is likely to stand the test of time.
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