Bitcoin has become a favorite investment asset among many, but it wasn’t always so. The digital currency has had a very bad reputation, and even today still has such a reputation among some people. The governments are particularly skeptical about Bitcoin and everything it represents.
This explains why there’s so much pressure being mounted on the entire crypto industry right now. The US in particular has been harsh on the industry, causing many top crypto businesses to ditch the country and move to more friendly climes.
All these are as a result of the initial perception they had concerning Bitcoin. Since it was the first cryptocurrency, the sentiment has spread to other cryptocurrencies as well. In fact, altcoins are seeing more harsh regulations than Bitcoin due to these perceptions.
As a result, many who would have invested in bitcoin are currently on the sidelines. The following are some of the misconceptions or myths about bitcoin that are keeping them away. If you’re one of such people, maybe this will help to destroy those misconceptions.
Bitcoin is a Ponzi Scheme
A ponzi scheme is an investment scheme that promises you a high rate of return with very little risk, which is usually quite the opposite. In ponzi schemes, the first batch of investors generate revenue from new investors and can run off after that, causing the business to crash naturally.
Bitcoin isn’t like that. First, nobody owns Bitcoin, and it is not controlled by any central authority. It is built on blockchain technology, so it has full transparency. You don’t usually know who is behind a ponzi scheme, but you own the bitcoin network as much as any other user of the network.
Bitcoin is also a currency that you can spend, so if you buy bitcoin, you’re buying something you can spend without having to change to another currency. Ponzi schemes promise money, not a currency. These characteristics clearly show that Bitcoin isn’t a ponzi scheme.
Bitcoin Is Anonymous
Bitcoin does come with some anonymity, because the transactions cannot be traced back to you as an individual. This is because no personal information of yours is needed to complete a Bitcoin transaction. However, the anonymity isn’t complete because the transaction is clearly traceable.
Anyone you give your wallet address to can easily check and see your transaction history from the first day you created the wallet. Therefore Bitcoin isn’t anonymous, and if anything, it is getting less anonymous with the current KYC requirement for using crypto exchanges.
Bitcoin Funds Terrorism and Money Laundering
This is the biggest “concern” that governments have when it comes to Bitcoin. However, it isn’t a valid concern because there is no evidence of large scale use of Bitcoin for these purposes. Before Bitcoin came, there was drug dealing, money laundering and terrorism, so how were they funded then?
Maybe the Silk Road incident did give Bitcoin a bad name, but fiat currencies have been used for illegal activities for centuries. On the contrary, Bitcoin has so many useful purposes too, such as payments and hedging against inflation.
Bitcoin Isn’t Backed by Anything
Fiat currencies are usually backed by commodities and precious stones such as gold. This was true many years ago but not anymore. The US Dollar for example is currently not backed by anything, and the Fed can print money out of thin air.
This invalidates the argument that Bitcoin is worthless because it isn’t backed by anything, since the asset has its own intrinsic value. The US Dollar on the other hand is currently only backed by the strength of the US government.
Bitcoin is Bad for the Environment
Because Bitcoin is mined using a lot of electricity, Bitcoin antagonists have argued that is it bad for the environment. They claim that the intensive use of energy releases carbon into the atmosphere, but this isn’t entirely true, because any source of energy can be used to mine bitcoin. This includes clean sources such as hydroelectricity and green energy.
In fact Tether recently announced it will be starting a green energy bitcoin mining arm in Uruguay. This completely decimates the argument that bitcoin mining destroys the environment.
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