Despite the growing adoption of cryptocurrencies and blockchain technology in recent years, there still remains a lot of skepticism. From something that started off very niche, Bitcoin (BTC) has grown into a jack of all trades, allowing people to experience financial freedom at its finest.
At this point, BTC has been declared more times than we can count—which, by now, you probably know isn’t true—but it’s been called many other things as well. Let’s break down some of the biggest Bitcoin myths we’ve seen so far.
Myth 1: Bitcoin is a Ponzi scheme
If you didn’t know, a Ponzi scheme is an investment scam that promises high rates of return with “little risk” to investors. In this type of scheme, the returns generated for earlier investors come from the pockets of new investors. Now, let’s talk about why BTC isn’t a Ponzi scheme.
First of all, the distributed ledger that Bitcoin is built on (the blockchain) provides transparency. Typically in Ponzi schemes, you don’t really know what’s going on or who’s behind everything—it all revolves around one person. That isn’t the case with BTC.
Second of all, Bitcoin is decentralized, meaning that there’s no entity controlling it. So even though it was created by the mysterious Satoshi Nakamoto (who may be one person or a group of people), it isn’t owned by him. In Ponzi schemes, most likely, it’s one person or group that controls the entire scam.
Lastly, BTC is a currency. When you partake in a Ponzi scheme, you’re promised something in return: money from new investors. However, when you buy Bitcoin, you get BTC—which you can hold, trade, or spend.
These three characteristics of Bitcoin alone prove that it isn’t a Ponzi scheme—but what about other types of schemes such as ICO scams?
Initial coin offerings (ICOs) are the cryptocurrency equivalent of initial public offerings (IPOs). In the early days of crypto, many people used the hype surrounding cryptocurrencies to scam thousands. Fake developers would pretend to be working on a new groundbreaking crypto and ask for donations to help fund the project, only to run away with the investors’ money.
With those instances happening, people flocked to the idea of BTC being an ICO scam. However, how can that be when Bitcoin was already a full-fledged crypto when it was created in 2009? In fact, BTC was the currency used for donations when the first-ever ICOs started popping up in 2013.
The vital thing to know here is that Bitcoin isn’t some type of scheme or scam—it’s just a new type of currency that many people still don’t understand.
Myth 2: Bitcoin is anonymous
Anonymity has been a word that has been thrown alongside Bitcoin for a while now. Although BTC being anonymous may not be wholly accurate, it isn’t entirely false either. Bitcoin is pseudo-anonymous, meaning that transactions can be traced, but your name isn’t directly tied to it. Instead, wallet addresses can be seen.
On the flip side, it’s worth noting that many crypto exchanges now have know-your-customer (KYC) guidelines to protect their users, taking a little bit of the anonymity out as well. However, KYC is a much better route in the long run since it can protect users from the bad apples out there.
Myth 3: Bitcoin is too volatile to invest in
If you’re looking at BTC in terms of pure investment, then yes, volatility can be a scary thing. The potential to lose a lot of money in a short amount of time can be intimidating. However, it can also work the other way around. You could also be earning a lot of money with volatility.
Just think about it: in May 2010, BTC was worth 0.01 USD. In July 2011, it was worth 31 USD. Since then, BTC has reached new all-time highs (of over 60,000 USD) and continues to reign supreme as the king of all cryptocurrencies in terms of market capitalization. If you got in at the start, you could easily be a millionaire—or dare we say, billionaire—at this point. So, yes, it’s volatile, but it also holds a lot of opportunities.
Additionally, with the surge of P2P trading, volatility can be irrelevant if you’re using BTC outside of investment. Suppose you’re using it to buy goods or services. In that case, volatility is automatically taken out of the question since you’re using it to make a payment instead of using it as an investment.
Myth 4: Bitcoin is used for drug trafficking and terrorism
After the Silk Road incident, many believed BTC to be a currency for criminals and terrorists mainly due to its “anonymity,” which we’ve already elaborated on.
Despite these accusations, there’s no proof that Bitcoin is being used by terrorists and drug dealers on a large scale. Yes, there may be a small percentage of people that use it for illegal activity. However, BTC has grown up a lot in the last 12 years of its existence—developing real-use cases such as making payments, sending remittances, wealth preservation, and more.
Myth 5: Bitcoin isn’t backed by anything and therefore has no value
Traditional currencies are often backed by something—stocks, commodities, or other things. However, just because an asset isn’t backed by anything means it doesn’t have value. Basically, it all boils down to confidence.
Even the price of gold, a commodity that you can actually hold in your hands, fluctuates because of how much confidence people have in it. Take the US Dollar as another example. For a long time now, it hasn’t been backed by gold. Instead, it was turned into a fiat currency—in which the value is underpinned by the strength of the government that issues it. That technically means that the US Dollar isn’t backed by any physical commodity—and following the logic of this myth, it should be worthless as well.
Bitcoin has a lot of factors behind its value. Some believe in the tech that came alongside it, while others acknowledge its potential as a peer-to-peer electronic cash system and vouch for its real-life applications. Either way, Bitcoin is real and it has value. With the growing number of merchants beginning to accept Bitcoin, we could easily buy a cup of coffee, gift cards for our favorite stores, or even luxury items like cars and jewelry. In its current state, BTC could easily be viewed as good as the dollar, if not better.
Myth 6: Bitcoin is terrible for the environment
Bitcoin uses a consensus mechanism called Proof-of-Work (PoW). Yes, by nature, it means that mining BTC and verifying its transactions is highly energy-intensive. However, energy-intensive doesn’t necessarily mean bad for the environment.
The main misconception here is that miners are using energy that produces a lot of carbon emissions. However, there have been developments in cleaner sources of energy such as hydroelectricity.
China, which is often considered the hub of crypto mining, focuses a lot more on hydro projects. Sichuan and Yunnan, Chinese provinces, are well known for this. In the dry season, these provinces account for 10% of global Bitcoin mining. In the wet season, they account for a whopping 50%.
With both retail and institutional investors getting in to help Bitcoin achieve a greener future, we could see significant changes in this aspect of mining.
Overall, it’s completely understandable how these myths came about. Whenever it comes to technology that shakes the foundation of current institutions, people are bound to attempt to take it down. However, it’s essential to know that something as new as Bitcoin will require you to do your own research and see how factual these claims actually are. So before you go straight to believing any wild claims, you should do your best to fact-check them first.