Cryptocurrency is digital money based on blockchain technology and not backed by physical assets. It uses a unique data encryption technology called cryptography. Crypto is decentralized thanks to the computing work of nodes. The decentralization makes it an alternative to traditional finance.
Cryptocurrency has been a controversial topic since Bitcoin shook the entire old financial system in 2017. While some welcomed the new means of payment with open arms, others were more skeptical. And so it went on.
How to invest in crypto? How to earn on crypto? Or what are the risks of crypto trading? Some have asked these questions, while others have simply gone to battle, failed, and slandered the modern financial solution. Cryptocurrency skepticism has led to much talk and myths about this topic. Let’s take a closer look at some of them and see what basis these myths have and whether they are true.
Common crypto myths and why they are false
So, what is the most common myth? Of course, cryptocurrency is used only by criminals, has security issues, and is indeed a financial pyramid scheme. Are there any others? Let’s see.
1. Crypto is only used by criminals
Since many were initially skeptical about crypto, it’s not surprising that a myth arose that only criminals use decentralized currency. Crypto seems like an excellent way to launder money. However, it’s not. The crypto world doesn’t promise utopian conditions of anonymity and the absence of regulation because of AML (Anti-money laundering) and KYC (Know Your Customer).
AML is a set of measures and laws to prevent illegal activities in the financial sector, specifically money laundering. Verifying a user’s identity and crypto address is the basic but very efficient way to confirm that the user’s assets have not been involved in fraudulent schemes and don’t threaten other users and the exchange. KYC is a user identity verification by requesting personal data.
Both KYC and AML protect users in the first place. If you choose a platform with no KYC and AML, you should be prepared that such an exchange won’t be responsible for situations where your assets and personal data may suffer. Crypto exists for legitimate purposes and is gaining more and more rights in different countries.
2. Crypto is a Ponzi scheme.
A financial pyramid or Ponzi scheme is a financial scam where the first participants (depositors) profit from the subsequent investors’ money inflow. Read on to learn why this doesn’t apply to cryptocurrencies.
For example, Bitcoin needs to attract new participants, not their fiat money. New members add value to the Bitcoin network. The system generates coins during mining.
Profitability in financial pyramids is provided exclusively by the money of new investors. Bitcoin has no such thing as depositors and dividends at all. There are users who make money transfers between their addresses, as well as miners who ensure the system’s performance and receive a reward for this.
The Bitcoin growth or fall in value depends solely on the market mechanism, that is, supply and demand on crypto exchanges. Since the supply is limited (maximum 21 million units) and the demand is constantly growing, this ensures the growth of the Bitcoin market value. It’s similar to shares of successful companies.
The Bitcoin goal wasn’t to generate income from the growth in the crypto value but to create a fundamentally new, decentralized, and state-independent monetary system based on a peer-to-peer distributed computer network.
3. Crypto is not regulated.
It’s quite clear where the legs of this myth grow. But decentralization doesn’t equal chaos.
In some countries, Bitcoin has been introduced as a currency of account; in others, it is even legal tender with a purchase tax. Some countries prohibit transactions with Bitcoins for banks but allow them for individuals. In Switzerland, for example, crypto is subject to the same rules as foreign currencies.
The legal regime of crypto, particularly the Bitcoin system, varies considerably from country to country. In some countries, operations with crypto are officially allowed. Cryptocurrencies are usually viewed as a commodity or investment assets.
4. Crypto is too complex for ordinary people to use.
Crypto is hard to understand. Generally, it’s only for geeks, tech guys, and pros. Those who say so are wrong, but is it easy to get into if you don’t know anything?
The crypto world has become a user-friendly place. We are in 2023, and since 2017, when Bitcoin first put on noise, the situation has changed a lot. The Internet is bursting with cryptocurrency info for beginners and experienced traders. Crypto exchanges arrange training programs for beginners since it benefits both parties.
The WhiteBIT crypto platform, in particular, fills their blog with helpful content where you can get acquainted with all the basics. They will explain in the most accessible language what crypto and blockchain are and much more.
5. Crypto is not backed by anything.
There is an opinion that cryptocurrencies are worth nothing, and trading them is trying to sell air. As for Bitcoin, its value is provided by several factors: the ability to transfer funds to any part of the world, protection against falsification, and fixed transfer fees. Unlike traditional money, the number of Bitcoins is limited to 21 million. Therefore, BTC is often compared to gold, which also cannot be printed by order.
Other cryptocurrencies also have practical benefits, for example, the provision of smart contracts, privacy, lending, use on gaming platforms, etc. Actually, there are many coins for which there is no practical use. So, before buying a particular token, find out what it was created for.
Conclusion
In this article, we learned that cryptocurrency fights against criminal intent. We also dismantled the myth of the Ponzo scheme and found out why crypto doesn’t work according to the pyramid principle. Digital assets are actually gaining popularity across entire countries, seeking rights and regulation. All because they are pretty easy to use. You can find a sea of info about crypto in 2023. And what is important, it will be worthwhile since the crypto is of real benefit.
Like everything new, decentralized finance (DeFi) has been met with hostility by some, but it’s an inevitable future. The emergence of myths on this topic is understandable since these are projections of human fears. However, we must always think analytically and not believe all the information on the Internet.
Blockchain technologies are eager to make our lives easier. We should study this system now and how to profit from it. Crypto provides many advanced opportunities for raising capital. At least that’s why this should be taken seriously.
