When deciding where to invest your hard-earned money, it goes without saying that you must understand both where it is going and the risks involved. Cryptocurrency myths abound due to the relative newness of digital currencies. We look at the most common cryptocurrency myths below so you can weigh the pros and cons of investing based on facts rather than fiction.
Myths about cryptocurrency frequently muddy the waters for those curious but hesitant to invest. As a fresh substitute for the established financial system, cryptocurrencies were initially introduced in response to the 2008 financial crisis. Despite initial skepticism, the value and variety of cryptocurrencies available have skyrocketed in the intervening years. This article attempts to provide an unbiased overview of the topic and dispel some common misconceptions about cryptocurrencies and blockchain technology.
1. Blockchain Investment is only for Financial Wizards
On so many levels, this statement is incorrect. This statement may have been true in the past, but it is no longer valid. Many people are now entering the world of blockchains and cryptocurrency with no formal education in mathematics or computer science. Anyone interested in cryptocurrency and blockchains can learn everything they need to know through specialist online courses and e-learning.
Some online trading platforms are also essential because they offer advice and tutorials on trading. Finixio AI is a universally accessible digital trading platform that focuses on cryptocurrencies. Finixio AI is the place to trade, regardless of whether you have purchased a single cryptocurrency or engaged in a single stock market transaction. They’ll give you a foundational education and get you on your chosen career path.
2. Digital Currencies Don’t Have Value
Value is a subjective concept—one person, community, or society may place a monetary value on an object that another discard. For example, the first cryptocurrency, Bitcoin, was valued at thousandths of a cent shortly after its launch in 2009. Its popularity grew; by 2021, it had reached $69,000 per Bitcoin. Its rise in value demonstrates that how society perceives an asset is critical in determining whether it has value.
Additionally, Ethereum, the blockchain ecosystem that underpins the cryptocurrency ether (ETH), serves as the foundation for non-fungible tokens, decentralized finance applications, and other technological advancements in digital asset ownership. Although ETH does not have the same monetary value as Bitcoin, its utility and potential make it far more valuable to a company developing financial products and services based on the Ethereum blockchain and smart contracts.
3. Cryptocurrencies Aren’t Secure
Because central banks do not issue cryptocurrencies, they are not legal tender. They appear unsafe to some because they are not a recognized currency. Crypto, a blockchain-based digital currency, is stored on an exchange or in a wallet. It is not FDIC-insured in the same way that money in a financial institution is. Instead, crypto relies on cryptographic methods to ensure security.
Encryption, linked blocking, and consensus mechanisms protect your cryptocurrency. Significantly, the way that crypto is stored and accessed carries some risks, but there are ways to reduce these risks. You can shield your cryptocurrency from flaws or hackers using cold storage or storage not connected to a network or the internet.
4. Cryptocurrencies Are a Scam
Many retailers and merchants now accept cryptocurrency as a form of payment. People use them in personal transactions, and governments attempt to regulate them. Notably, most cryptocurrencies do not have any programming, code, or malicious artificial intent to steal your money.
However, people have devised schemes to defraud you of your cryptocurrency or money. For example, many initial coin offerings (ICOs)—unregulated fundraising for new cryptocurrency ventures—have proven scams. In other cryptocurrency scams, someone may call you pretending to be a government official and ask you to pay your debts in cryptocurrency.
While it is impossible to eliminate the possibility of becoming a scam victim, knowledge and awareness can help you reduce your chances of becoming a victim.
5. Cryptocurrency is Untraceable
This is a long-standing and utterly unfounded myth. It’s also one of the most damaging myths, casting doubt on cryptocurrency and blockchain transactions. This myth most likely began and spread when bitcoin was first used as a currency by the criminal underworld. They did, however, use traditional money. Bitcoin was popular at the time because the FBI could not monitor it. However, bitcoin and cryptocurrency, in general, can be tracked. Blockchains can also be fully traced.
6. Digital Currencies Are Bad for the Environment
There are valid reasons to be concerned about the environmental impact of digital currencies. Some cryptocurrencies use a consensus mechanism that verifies and validates transactions using computational power and large amounts of energy. One token, Bitcoin, has grown in popularity and value over time; large mining operations have emerged to capitalize on the rise and corner the crypto-mining market.
Each of these mining farms necessitates massive amounts of energy to power the mining rigs, totaling a network energy consumption comparable to that of some small countries. However, the environmental impact is heavily dependent on the source of energy used by the mining operations and the impact their energy use has on the power grid.
7. Blockchain Is A Cloud-like Database
It is important to remember that blockchain is similar to a ledger in that it only keeps a record of transactions. This is the entire ledger that supports cryptocurrencies and ensures that transactions are safe, non-repetitive, and transparent. Notably, no ‘files’ can be stored on the blockchain. It only has a code for the transaction that occurred.
Because cryptocurrencies are still being explored, more information can help investors decide whether they want to venture into the virtual currency space. However, if you are considering purchasing Bitcoin or other cryptocurrencies, carefully weigh the pros and cons of investing, dispel myths about cryptocurrencies, and understand their use and tax treatment.