In the last ten years or so, cryptocurrency has gained a lot of traction and popularity, becoming the talk of the town. However, due to its complexity, many people still don’t understand exactly how it works or what they have to do to join the crypto community. That has led to many crypto myths and rumors running around, leaving people even more confused. Today, we will take these myths one by one and uncover the truth together.
Myth No. 1: Crypto is mostly used for illicit activities
Fact: Just like with any form of money, some of it might get used for illicit purposes. However, cryptocurrencies have proved to be useful and have a high potential to solve many traditional banking problems. Several companies that do blockchain analytics have shown that illicit activity in crypto is actually less than in traditional banking systems. Why? The answer is pretty obvious; cryptocurrency transactions can all be tracked through blockchain analytics, making it more difficult for criminals to use them.
Myth No 2: Crypto is bad for the environment
Fact: Many believe that digital currencies consume a lot of energy, having a negative environmental impact. There is a certain truth to this, as crypto mining indeed requires a lot of energy to validate transactions and add them to the blockchain. Mining farms can consume a tremendous amount of energy equal to some small countries. However, things are not so black and white, as it all depends on the energy type used. Many miners use renewable energy sources, like hydro, solar, and wind. Also, other consensus mechanisms have emerged besides mining, using way less energy. Staking is such a mechanism, a more environmentally friendly alternative to crypto mining.
Myth No 3: Digital currencies have no real value
Fact: How do we determine the value of something? Value is actually a highly subjective concept, as one person can place greater value on the same item someone else discards entirely. Suppose you take into consideration Bitcoin’s value through the years. In that case, it becomes clear that the value of a specific asset is strongly connected with how the asset is perceived by society. We are the ones that give value to things; they do not possess value on their own.
Myth No. 4: Crypto is a bubble
Fact: As with most things in life, there will be those who adhere to a certain system or concept and those against it. Some are concerned that cryptocurrencies are just a speculative bubble that will burst eventually, leaving all the people that invested in it without anything. But boom and bust cycles are to be expected with a digital currency, just as with any new technology. Digital currencies have gone through their ups and downs in the past 12 years, and after each fall, they have recovered to reach new heights. Let’s not forget that not long ago, in November 2021, Bitcoin reached a new high of over $65.000. The fluctuating price cycles are normal and do not demonstrate an unsustainable rise in market value, specific to economic bubbles.
Myth No. 5: Digital currencies aren’t secure
Fact: Some people who aren’t very knowledgeable in the crypto sphere might think digital currencies are not secure. But, as we've explained in previous articles, all crypto transactions are made on the blockchain. This distributed ledger technology is heavily encrypted, and it’s extremely difficult to break. So if you think that anybody could easily steal your coins, that’s not as easy as, let’s say, stealing your money from your bank account. A more real issue is forgetting your private keys and not having a recovery system in place. In that case, your cryptocurrency might be lost forever.
When there’s as much buzz around something as there is around cryptocurrencies right now, it’s understandable why so many rumors appear. Our advice is always to check the facts and make sure you understand how these digital currencies work. Most of the crypto myths that you’ll encounter are just that: myths. Once you have all the data at hand, you can make an informed decision on what type of investment to make.