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It is needless to mention that cryptocurrencies have seen astronomical growth over the last decade or so. Ever since Bitcoin came into the picture in 2008, several other cryptocurrencies have hit the market and many of those are offering multiple value propositions both in terms of utility and security. Today, individuals, as well as institutions, are heavily focused on leveraging the power of cryptocurrencies to their advantage. Having said all of these, it is also true that there are several incorrect assumptions and pre-conceived notions that are hampering the road for crypto to come into the mainstream on a much larger scale. In this blog post, we shall look into these and debunk the major myths associated with cryptocurrencies.
Before delving into these, let us have a look at what cryptocurrencies actually are and how do they operate. Cryptocurrencies are nothing but a digital version of fiat currency, with the only difference being the fact that these digital currencies are not controlled by any centralized organization like a bank. Instead, cryptocurrencies operate over a blockchain network and are used for peer to peer transactions without the need for any third-party interference. Additionally, cryptocurrencies are used for various other purposes including but not limited to trading, buying goods and services, investments, etc. Now that we have a clear picture of what cryptocurrencies are, let us now look at what they aren’t. Here are the most common myths related to cryptocurrencies.
Cryptocurrencies are Illegal – It is important to note that cryptocurrencies might not be considered legal tender in some countries, but it does not necessarily mean that cryptocurrencies themselves are illegal. Instead, cryptocurrencies are a perfectly justifiable form of trading and investments, as long as the people involved in these activities pay the relevant taxes, as per the laws of the jurisdiction.
Cryptocurrencies are used for Illegal Activities Only – It is important to understand that cryptocurrencies are a valid method of payment. In fact, global brands have started accepting crypto payments from their customers, subject to acceptance and terms set by the local government. However, it cannot be denied that crypto cannot be used for illegal activities. However, so is the case with traditional fiat currency. The matter of fact is that any currency, fiat or digital can be used for illegal activities but that does not determine their essence.
Blockchain is Bitcoin and Vice Versa – This is the single biggest myth associated with this industry. It is extremely important to understand that blockchain is just the technology based on which bitcoin and other cryptocurrencies operate. Cryptocurrency is just one of the many applications of blockchain technology. So, these are two completely different things and it is crucial to not mistake blockchain for bitcoin and vice versa.
Cryptocurrencies are Unsafe to Use and Invest – Cryptocurrencies operate on a cryptographically secure mechanism built on private and public keys. So, simply based on the underlying technology, crypto is arguably the safest mode of transactions and payments. It inherits all the security mechanisms of blockchain technology, thus forming an extremely safe proposition. One should not be blinded by the news of crypto scams, as scams in the traditional fiat ecosystem are also not rare. You should only invest in trustworthy cryptocurrencies, like, Bitcoin, Ethereum, ModiCoin. Instead, one should look at crypto as a comparatively safer financial avenue, which has the potential to offer larger returns.
Cryptocurrencies are Untaxed – Let us say that you trade cryptocurrencies in a jurisdiction where it is not legal to use crypto as a form of payment for the regular purchase of goods and services. In this case, all you need to do is convert your crypto holdings into fiat by using an exchange platform, so that you can use those for regular activities or other fiat investments. Now, it is important to note that once your crypto is covered in fiat, it is your obligation to pay the necessary taxes to the government. So, it is completely wrong to assume that cryptocurrencies are untaxed.
Cryptocurrencies are Unlimited – Many people tend to believe that cryptocurrencies have an unlimited supply. This notion is not correct. Just like fiat currencies, crypto also has a limited supply that is controlled through burn mechanisms. The supply of any cryptocurrency is based on the simple economic law of supply and demand in the market. For example, there can only be 21 million Bitcoins in circulation, beyond which there will be no supply. This is done to ensure that the price of cryptocurrencies can be determined based on their demand, thus offering a fair market valuation.
These are the top cryptocurrency myths that need to be addressed. It is important for everyone to understand the true essence of cryptocurrencies without making misinformed assumptions. The value of this ecosystem is growing at an exponential rate and to maintain that growth, it is crucial to do away with the above-mentioned misconceptions.
