All new technologies invariably bring in myths about their nature and utility. If it was Luddites in the Industrial Revolution, today it is confined to a much smaller section of the populace. This is probably due to our approval of the idea that technology drives change for the better. In this article, let me share the most common myths about Bitcoin (and to some extent, other cryptocurrencies).
Bitcoin is Illegal
The primary reason for this myth is due to the assumption that currency which has not been issued by a government is illegal. On the contrary, computer games often require users to purchase in-game tokens for real money. In India, the trade of Bitcoins and other cryptocurrencies was banned in April 2018, but after two years, the ban was revoked by the Supreme Court of India. Cryptocurrencies are legal in the United States, Brazil, Uzbekistan, Japan, Germany, Switzerland, along with many other countries. The conditions under which such digital currencies may be used differs from country to country.
Bitcoins will cause tax evasion
This is far from true. Transactions on Bitcoin are pseudonymous at best, and all transactions can be verified on the blockchain. Spending money on tangible goods using Bitcoins and other cryptocurrencies is difficult to hide. Just as evading tax to buy the same goods is difficult. In fact, cash transactions offer more anonymity than Bitcoins. One reason for pseudonymity is the presence of tracking cookies on web browsers. You can find a detailed explanation here.
Bitcoins have no intrinsic value
A way to understand this conundrum is through an example. Physical coins can be made from metals or alloys. These often have a value stamped on one side. Other than the value stamped, coins also have an intrinsic value, also called the melt value of the coin. This is the cost of the material used to make the coin, and sometimes may be higher than its face value. Proponents of this myth believe that Bitcoins don’t have intrinsic value only because a digital currency is not a tangible object. This is not true.
Another example may be that of gold. The world consumption of new gold is about 50% in jewellery, 40% in investments, and 10% in industry.link Out of the three categories, only the industry depends on the intristic character of the metal. However gold is priced much higher than its intrinsic value. As is well-known, supply follows demand.
Bitcoins give the holder of the coin, the ability to embed a large number of in-transaction messages in the blockchain. This ensures that the embedded messages are present on a collection of distributed nodes, which nobody can tamper. You may think that these messages aren’t useful, but they can be used to prove the existence of a document. Assume that you wrote a research paper about a new way to utilize the blockchain. However, at the same time, someone else also publishes similar research. If you had created a hash of the document and embedded it in the Bitcoin network, you can convince others that you are indeed the first to discover a new potential of the blockchain. Not only in research, but in areas such as sale of property, this can help solve disputes regarding the rightful owner, and even the date and time of sale.
Bitcoin encourages criminal activity
All forms of currency can be used for criminal activity to some extent. Bitcoins are pseudonymous in nature, which means that transactions conducted using it aren’t truly anonymous. However, the level of anonymity varies among cryptocurrencies. In most cases, the public nature of the blockchain acts as a deterrent to criminal behaviour. Moreover, if law enforcement agencies are able to connect an individual to a particular Bitcoin wallet, then the individual’s entire transaction history is revealed. A word of caution though. Some cryptocurrencies such as Zcash and Monero provide higher levels of anonymity, and the addition of smart contracts and improved anonymity can degrade the situation in the future.
Bitcoins can be hacked
Banks are sometimes robbed, but that doesn’t prevent people from storing money in banks. Similarly, Bitcoin too has a risk of being hacked. Large scale hacks have often targeted crytocurrency exchanges, instead of individual holders of cryptocurrency, and the methods used are often complex and involve mistakes on the exchange’s end, not on the blockchain supporting Bitcoin. The large volume of cryptocurrencies stored in exchanges makes them a sitting duck for hackers. Don’t put all your eggs in one basket. So goes the idiom. You can find the list of identified vulnerabilities in Bitcoin here.
Developers control Bitcoin
Not really. Most people who think this is the case often forget the fact that changes to the core Bitcoin software are agreed by community consensus. Moreover, as the Bitcoin protocol is open source, other developers have created Bitcoin clients, thus reducing the power of primary developers over the Bitcoin network. A real issue may be the concentration of mining power in the hands of a few, which hasn’t been mitigated by Bitcoin, though some other cryptocurrencies have succeeded.
Enfin
These are just a few myths which hold back a significant number of people from investing in Bitcoin. Even more troubling is that myths give rise to ignorance of the subject. Other misconceptions about Bitcoins are explained in the official Bitcoin wiki. Hopefully, this article informed you about the misconceptions. Stay tuned for more.
Techprodezza 