False! 5 Cryptocurrency Myths Debunked
For those not involved in the cryptocurrency market there are many rumors that move about the periphery. Here are five myths about cryptocurrency that can be put to rest.
Crypto Is A Ponzi Scheme
Due to the number of high profile ICO scams, a volatile crypto market and famous investors like Gary Shilling saying it lacks transparency and is therefore untrustworthy, people not associated with the crypto business are wary and believe it’s shady and underhanded. Cryptocurrency however, is not a Ponzi scheme.
The technology underpinning crypto, the blockchain, has been used for many other endeavors such as smart contracts and decentralized applications, proving the legitimacy of the technology of which Bitcoin and other cryptocurrencies are just a small part. The SEC, NASDAQ and other global markets’ acceptance and support of cryptocurrency also argue against the Ponzi scheme myth. And, unlike Mr. Ponzi’s famed scheme where he traded on Postal Reply Coupons, cryptocurrencies are world wide — Ponzi mostly duped rubes in Boston.
Crypto Transactions Are All Anonymous
This is a central crypto myth but it’s just a common misconception. Most transactions on the blockchain are fully transparent.
The exception to this would be with privacy or safety coins. Coins likes Monero were created specifically to give an added level of privacy to transactions. Safety coins keep both the sender’s and the receiver’s address as well as transactions private. This also keeps the balance of the crypto wallet private.
Apart from these privacy coins, all transactions are recorded on a transparent, public ledger known widely as the blockchain. This allows anyone to trace a transaction to a particular wallet address without referring to a central authority. Rather than being anonymous and covered in mystery, crypto transactions are well suited to public bodies that require complete transparency in all transactions.
Because The Price Of Bitcoin Is So Volatile It Makes the Blockchain Unreliable
Price volatility of cryptocurrencies is often tied to the underlying blockchain technology.
This is a bad association. Cryptocurrency is just one type of application that uses blockchain technology. The blockchain has universal appeal and is being used in an increasingly diverse range of marketplaces. Monitoring supply chains, retail loyalty rewards programs, digital IDs, copyright and royalty protection are just a few examples of how blockchain technology is being applied in the real world.
The cryptocurrency market may be considered moderately volatile but this has little relevance to the technology that underpins it. The blockchain should be considered as a separate entity to cryptocurrency, one that will continue to define a host of industry uses.
Crypto Is A Bubble
One of the main features of a bubble is that it deflates or bursts when no more investors are willing to buy into the market. This has not been the case with crypto. Since the beginning of the rise of Bitcoin, crypto has experienced highs and lows but the interest in the market has never stopped.
We will continue to see movement in the cryptocurrency market as price fluctuations are evident among almost every type of financial asset and market. This includes stocks and commodities as well as fiat currencies.
Crypto has evolved and diversified considerably since the inception of Bitcoin in 2009. This coupled with the underlying technology, the blockchain, which has uses beyond just cryptocurrency, as well as the development of stable coins whose value can be pegged to a currency or exchange traded commodities, such as precious metals, will spur further growth and stabilize the sector over time. These factors make cryptocurrency a far cry from, say, the dot-com bubble or any bubble for that matter.
Cryptocurrencies Are All The Same
If you know only Bitcoin, as is the case with most people, then it is easy to think that all cryptocurrencies are the same. This simply is not true.
Cryptocurrencies are set up for multiple purposes. Some, like Bitcoin, are designed to be used and spent like currency. Others like Ripple, are designed to speed up money transfers and international transactions. BAT facilitates online advertising whereas Ethereum was designed to be a one-stop shop for creating decentralized applications, like Golem or Augur, as well as smart contracts. Monero was designed with the idea of being a truly anonymous, private and fungible digital money.
Because Bitcoin was first, it has power of place and, like people calling the cotton swab a Q-tip, which is really a brand name, people on the fringes of the cryptocurrency world often refer to crypto as simply Bitcoin. But, truly not all crypto is alike.
Crypto, like stocks, are an investment and with investments come risk. Prices in crypto rise and fall with little apparent catalyst beyond the emotions of investors. Investing in cryptocurrencies is not easy and will not guarantee and peaceful night’s sleep. Like all investing ventures, cryptocurrency takes research, time, knowledge and you must be willing to lose money to make money.