5 Crypto Myths That Need Busting
May 2021 saw a few erratic tweets from Elon Musk and a potential China crypto ban crater crypto assets by 50% in a little over a week. Crypto and social media have always gone hand-in-hand, but it seems prices have become highly sensitive to rumors that fly around the Twittosphere.
Getting accurate information in the world of crypto is difficult. There are millions of self-proclaimed pundits on Twitter and by the time traditional news outlets have picked up on stories they are old news. This means that often false information can get circulated and picked up when it should be ignored.
With that in mind let’s get debunking.
Myth 1: Bitcoin isn’t bad for the environment.
According to an International Agency Report, Bitcoin mining accounts for 0.52% of all global energy consumption. This is slightly more than the energy used by the Netherland and slightly less than that used by the UAE. Regardless of how this energy is generated, Bitcoin is a net contributor to global energy consumption and there are less energy-intensive consensus mechanisms out there that could do the same job as Bitcoin if they had the same support it enjoys. The arguments around it replacing an expansionary economic system does not really take into account the world’s growing population or how we will get the billions currently in poverty to a better standard of living. Proof Of Stake is increasingly becoming the go-to consensus mechanism and requires orders of magnitude less energy than Proof of Work.
Myth 2: Cryptocurrencies are just a fad
What started as a small community of developers and a whitepaper by Satoshi Nakamoto has blossomed into a trillion-dollar plus market. Real-world use cases for cryptocurrency spanning remittance, insurance, lending, and even property rights are appearing every day. Central banks seeing the popularity of decentralised currencies such as Bitcoin are now exploring Central Bank Digital Currencies (CBDC) as a way of reducing the friction inherent in payments within the traditional world of finance. As their utility in everyday life continues to increase, we should see their popularity and value move in lockstep.
Myth 3: Cryptocurrencies can be counterfeit
One of the major differences between traditional money and cryptocurrency is that you can trace the history of a Bitcoin right back to the moment it was created. The Bitcoin blockchain is an immutable record of all transactions that have occurred within the Bitcoin ecosystem giving it a flawless transaction history. Now compare that to the Dollars or Sterling you might have in your wallet. It is impossible to have the same level of insight into the provenance of traditional currency. This leads us nicely onto our next myth.
Myth 4: Cryptocurrencies are only used for money laundering and crime
As the crypto market grows, one likely casualty is anonymity as regulators begin to take more action. When sending money through the traditional banking system you are required to identify both yourself and the person receiving funds. In crypto this same process is done via anonymised wallets, and it is impossible to establish who owns that wallet. Regulation such as the ‘travel rule’ in the U.S. will mean the same information may be required to do a wallet-to-wallet transfer in the future. Future regulation aside, you only need to look at the blossoming use cases being provided by emerging players in the DeFi space to realise cryptocurrencies are about far more than just crime.
Myth 5: Blockchain technology and cryptocurrency are the same
They are closely related by not the same thing. The blockchain is the technology on which a cryptocurrency is based. There are multiple blockchains and depending on which cryptocurrencies you hold it might be on the Ethereum blockchain or the Bitcoin blockchain or a host of others. Another way of looking at it might be comparing blockchain with the internet and cryptocurrency to Google which uses the internet to operate.
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