Bitcoin has become a household name at this point. However, there is a lot of the chatter around the world’s largest cryptocurrency is false. Many realize in the thirteen years of Bitcoin’s existence, that it is a rather complex topic. For this reason, many misconceptions and outright falsehoods play on repeat by those who have not done their research. There are plenty of myths that are never get correction.
Myth #1: Bitcoin is Dead
On numerous occasions throughout its history, bitcoin has been proclaimed dead by various crypto skeptics. There is even a web page made for it, known as Bitcoin Obituaries. Currently, there are 453 different entries madeon the website. The first premature declaration of bitcoin’s death was back in 2010. This is when the cryptocurrency was trading for just $0.23.
For the most part, people usually claim that BTC is dead after a major price crash. It may take some time, but bitcoin has been able to recover from multiple crashes. Crashes in price of 75% or more. In many cases, bitcoin skeptics will claim the digital cash system is dead before the price has even fallen below the level it was at when they first started making negative statements about the crypto asset.
There is another misconception similar to the “bitcoin is dead” myth, which is that there was a hack in bitcoin and someone was able to steal everyone’s money. Although this misconception is less prevalent these days, it would usually pop up whenever a hack occurs at large crypto exchange. The collapse of Mt. Gox is the most notorious example of this phenomenon.
Myth #2: Anonymous?
It’s no secret that Silk Road was the first major use case for bitcoin as a medium of exchange. While Bitcoin proved to be useful for those who needed an unstoppable method of making online payments, the reality is Bitcoin transactions are far from anonymous. For Silk Road and other darknet markets, the key selling point was that BTC transactions are censorship resistant, not necessarily financial privacy.
There is not necessarily a real world identity to tie to every BTC address. However, the reality is much of the crypto network’s activity is under heavy surveillance by blockchain analytics firms like Chainalysis. Many BTC users willingly attach their personal information to their crypto holdings by using exchanges.
If anyone wants to use BTC with a higher degree of privacy, they’ll need to acquire their coins in a peer-to-peer fashion and use privacy-focused Bitcoin software. Even then, the fact of the matter is there are plenty of breadcrumbs for adversaries to follow on the blockchain. There are various proposals, such as Blockstream’s Minimint project, that intend to greatly improve the level of financial privacy for bitcoin transactions. Additionally, there are a number of privacy-focused altcoins, such as Monero and Zcash, available in the crypto market.
Myth #3: Bitcoin is a Ponzi Scheme with No Intrinsic Value
The final bitcoin myth we’ll cover is the idea that the crypto asset is some sort of scam. Usually a Ponzi scheme, or pyramid scheme. Many critics say that BTC has no intrinsic value. At one point, the World Bank even released a report that referred to bitcoin as a “natural occurring Ponzi scheme”.
There are two main issues with the claim that bitcoin is a Ponzi scheme. First of all, bitcoin does not require new investment in it to function properly. In a true Ponzi scheme, which involves a schemer paying out profits to old investors with money from new investors, the scam collapses when no new investors are found. This is not the case with bitcoin, as the digital asset can operate as a neutral, apolitical store of value even if no new users enter the system due to its deflationary monetary policy.
Continued
There is another other key issue with the claim that bitcoin is a Ponzi scheme. This is the arguments in favor of this criticism also apply to all other forms of free market money. While it’s true that gold has some use outside of money, such as in jewelry or electronics, the reality is most of the demand for this precious metal comes from its utility as a store of value.
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