Bitcoin Myths

Popular myths about bitcoin

Bitcoin Is a Ponzi Scheme

Many have called bitcoin a ponzi scheme but this can’t be farther from the truth. A ponzi scheme requires new people to give up their money in order to pay people who have already paid and are waiting for their payout. It is unsustainable and exists solely through deception. There is no central controller of bitcoin to facilitate such a ponzi scheme. The competing self-interests of the bitcoin ecosystem help kept bitcon from being a pump and dump in beginning. The miners who had to buy specialized and expensive equipment in order to mine don’t want bitcoin to go away. The same is true for people who have built businesses around bitcoin (and the people who have invested in them). Besides, if you buy a bitcoin you are actually getting something in return and not a promise. That bitcoin can be used to buy a plane ticket, a laptop or real estate. I would say many altcoins are ponzi schemes or pump and dumps.

The government could/will shut bitcoin down

While governments around the world may still be figuring out how to approach digital currencies, many misinformed people fall into the trap of thinking that, like almost anything else we’re used to, bitcoin could be shut down by governments if one or more of them hoped to do so.Yes, governments have the power to make it very difficult for their citizens to use bitcoin and some form of government regulation is inevitable as bitcoin matures. Even so, because of its infrastructure, it would take considerable time, money and energy for any government to pose a serious threat to the global bitcoin network, if they even could at all.

Bitcoins have no intrinsic value

It’s heavily debated whether bitcoins have intrinsic value outside of their use as a medium of exchange. Sure, if society came to a screeching halt, the decentralized currency not backed by the government or pegged to any commodity likely won’t have any value. But there are also arguments to be made about the value of Bitcoin as a global network of exchanges and merchants. At the end of the day, value is determined by supply and demand. If usage grows and this currency becomes a mainstay, then its value will increase as well.

Bitcoins are used primarily to launder money

“If you look at the market cap of Bitcoin, that (would be) an awful lot of illicit activities,” said bitcoin user Jason Williams. “The Silk Road demonstrates there is a market but, then again, so does the drug dealer on the corner accepting cash.”Silbert of BitPremier weighed in by saying “the Bitcoin community wants to adhere to the rules,” and is willing to cooperate with governments to increase the crytocurrency’s adoption. “To paint them with this wide brush of money-laundering anarchists is not fair.” Besides, the US dollar is the preferred way to launder money, he noted.

Quantum computers would break Bitcoin’s security

The operative word here is would. True, quantum computers pose a risk for the bitcoin network as well as for any institutions — including banks — that rely on cryptography. But there’s one little caveat: Quantum computers don’t exist yet.

Bitcoin has been hacked

This is one of the most prevalent myths Bitcoiners have to defend against. Is anybody’s money secure if the network can be hacked?So far, Bitcoin vulnerabilities have included inadequate wallet security and attacks on websites that use bitcoins. But to date, there haven’t been attacks on blockchains that led to stolen money, heists from exploiting the protocol or thefts due to holes with the original Bitcoin client.

There are no advantages of bitcoin over cash or credit cards

Once people realize that bitcoin can, indeed, be used to buy real things, they may not see what the digital currency has to offer that their incumbent payment methods like cash and credit cards don’t. Luckily it doesn’t take long to debunk this myth.Some of bitcoin’s most obvious benefits are its low transaction fees. Typically, transacting bitcoin saves merchants 1-3% compared to transacting credit cards, and when compared to services like Western Union, bitcoin is clearly superior – especially for sending money abroad.

The only people who would ever use bitcoin are tech nerds and criminals

Some of the earliest adapters of bitcoin may be techies and dark market shoppers, but the same could arguably be said about the Internet – and look who uses that now. Regardless of how esoteric the bitcoin community may be right now (and it’s pretty esoteric), adoption takes time.As entrepreneurs in the space continue to build consumer-friendly apps with bitcoin and awareness of the digital currency spreads, a more diverse crowd will come to use it in their everyday lives. There’s also another important demographic that many forget about: the millions of unbanked people throughout the developing world who rely on mobile phones as their computer, bank and communication device all in one.Whether it’s any of the above myths or perhaps one of the 10 we previously debunked, bitcoin is ripe with misunderstanding. For bitcoin to reach its full potential, this knowledge gap needs to be bridged so that the myths and misinformation come to an end.

You can’t buy anything practical with bitcoin

Perhaps as a follow up to myth number one, a lot of people are surprised to hear that bitcoin is more than a speculative investment and that it can actually be used to pay for everyday goods and services.

Bitcoin accepting retailers

In addition to the retailers above, PayPal has announced partnerships with bitcoin companies and Microsoft recently began accepting bitcoin for a host of digital content like games and videos. Add in the countless small businesses that accept bitcoin either online or in their brick-and-mortar locations, and it’s safe to say there are options when it comes to spending your bitcoin.

Bitcoin mining is bad for the environment

Recently an article that was published in Bloomberg magazine claimed that Bitcoin mining consumes so much energy that it’s destructive to the environment.  But in fact if we compare the amount of energy used in other industries, or let’s say in printing and distributing fiat currencies, we would actually see that in comparison Bitcoin mining conserves energy.

Bitcoin Is Not Secure

Numerous stories about wallets, exchanges, and marketplaces being hacked have led many to believe that bitcoin itself safe or secure. All of the hacks have been of the infrastructure supporting bitcoin. Bitcoin, the currency and protocol – itself has never been hacked.In new industries and technologies, best business practices and security take time to develop. Secure methods of storing your bitcoin have already emerged, though. Storing your bitcoins offline and in a computer that has never been connected to the internet is the swiss storage of bitcoin storage. Hot wallets, or online wallets are the least secure and the most common form of wallet.

There can only ever be 21 million Bitcoins in existence and that isn’t enough

Of course it’s enough. If we should start “running out,” it’s important to realize that a Bitcoin is divisible up to eight decimal places. The value of an individual Bitcoin may rise quite high, but we can keep dealing with smaller and smaller portions of it. As little as 0.00000001 Bitcoins, to be precise.We’ll likely end up dealing with fractionally named Bitcoin measures, like millibitcoins and nanobitcoins.