Since they were initially launched in 2009, cryptocurrencies have seen a huge increase in popularity. Due to their obscurity and complexity, there are many misconceptions and rumors surrounding these digital currencies.
Read more: How Do Blockchains Work?
Here are some of the most widespread cryptocurrency fallacies, in no particular order, along with an analysis of the facts to help you determine if they are true or not.
1. Only Illegal Activity Uses Digital Currencies
The idea that digital currencies are mostly utilized for illegal activities is among the most well-known and prevalent fallacies about them. While it’s true that both people and criminal groups have utilized digital currencies for bad purposes, this could be said of any form of money that has ever been employed.
The amount of cryptocurrency transactions connected to illegal activity decreased to 0.15% of all cryptocurrency transactions in 2021, according to Chainalysis, a business that uses blockchain data analysis to aid authorities looking into bitcoin crimes. 82% of the transactions in this limited amount were bitcoin frauds.
It’s crucial to remember that governments and the international community are taking tough measures against cryptocurrency use by organized crime and criminals. To prevent the use of cryptocurrencies in these criminal activities, agencies and teams have been created in several nations. These efforts include bitcoin anti-money laundering and opposing the funding of terrorism.
For instance, the National Cryptocurrency Enforcement Team (NCET) in the United States looks into and prosecutes cryptocurrency crimes.
2. Digital Currencies Are Worthless
Worth is an arbitrary idea; one individual, group of people, or society may place value on something that another person throws in the trash or recycles. For instance, the first cryptocurrency, Bitcoin, was only worth a few thousandths of a penny when it was originally introduced in 2009. As its acceptance grew, the price of a single Bitcoin surpassed $69,000 in 2021. Its increase in worth proves that a society’s perception of an asset is crucial in determining whether it has value.
Ethereum is the foundation for non-fungible tokens, decentralized financial applications, and other technical breakthroughs in the ownership of digital assets. Ethereum drives the blockchain ecosystem that underpins the cryptocurrency ether (ETH). ETH may not have the same economic worth as Bitcoin, but a firm creating financial services and products that leverage the Ethereum blockchain and smart contracts would value it considerably more because of its utility and potential.
Cryptocurrencies are now being held by businesses and investors for use in banking, investments, venture capital, and many other areas. For instance, as of July 2022, Galaxy Digital Holdings, a financial services and investment firm, managed almost $2.0 billion in crypto (digital) assets.
3. Unsecure Cryptocurrencies
Blockchain is the primary technology that underlies cryptocurrencies. A distributed database protected by highly difficult-to-crack encryption methods and technologies is known as a blockchain. Previous transaction data is encrypted and stored in new blocks when transactions are added to the blockchain’s blocks.
Each new block in the chain is built upon by a community of automated verifiers who must also concur that the data included in the transactions is accurate. It is almost hard to alter data on the blockchain in order to “steal” bitcoin because of encryption, linked blocks, and consensus procedures.
The method used to access and store cryptocurrencies, such as centralized exchanges or transaction-facilitating wallets, is where the problem resides. The infrastructure and software used to store and access cryptocurrencies can be hacked or altered, however sending cryptocurrency from one user to another is totally possible and secure.
To make sure your cryptocurrency is secure, there are a few highly safe techniques you may do. You could, for instance, store the keys to your cryptographic assets outside of exchanges in cold storage. Transfer just the amount you want to spend to your hot wallet when you need it via a secure connected connection on a non-mobile device, such as a desktop computer.
4. Negative Environmental Effects of Digital Currencies
Concerns over the effects of digital currency on the environment are warranted. Some cryptocurrencies utilize a consensus method that validates transactions by using a lot of processing power and energy. Large mining operations have formed to capitalize on the increase in popularity and corner the cryptomining industry as one currency, Bitcoin, has grown in popularity and value over time.
The mining rigs at each of these farms consume enormous quantities of electricity, which adds up to a network energy consumption that is comparable to that of a few small nations.
The energy source the mining operations utilize and the effect their energy usage has on the power system, however, have a significant impact on the environmental impact.
The effect is excessive carbon emissions for an intangible yet precious resource whose future and benefits to mankind are unknown if the mining activities are obtaining the majority of their electricity from fossil fuel-powered grids. On the other hand, the environmental effect is reduced if mining activities are mostly fueled by renewable energy.
In order to power their operations, bitcoin mining companies have also bought fossil fuel plants that had previously been shut down.
Environmentalists and nations that are presently working to minimize their carbon footprints in the next decades are now concerned about this.
5. Cryptocurrencies Are a Scam
Many businesses and merchants already accept cryptocurrency as a form of payment. Governments are attempting to discover methods to control them while people accept them in private transactions. The majority of cryptocurrencies lack any kind of programming, coding, or artificially evil purpose that is designed to steal your money.
Scams have been developed, though, in an effort to con you out of your bitcoin or cash. For instance, many initial coin offerings, which serve as an unregulated means of funding for brand-new cryptocurrency businesses, have proven to be frauds. Other cryptocurrency frauds may persuade you to accept unconfirmed transactions or phone you posing as a government representative and demand payment in cryptocurrency.
Even while it’s hard to completely prevent the possibility that you may fall for a scam, awareness and information can help you lower the likelihood that it will.