Debunking Crypto Myths vs Facts: Misconceptions About Blockchain and Cryptocurrencies
Cryptocurrency, over the past decade, has grown at an extraordinary pace, turning itself into more than just virtual coins. However, despite its growing popularity and mainstream recognition, investors and innovators are skeptical due to some misconceptions surrounding crypto.
Some of these myths and misconceptions stem from outdated information, while others are caused by misinformation and oversimplified narratives seen online.
In this article, we will be busting some common myths and misconceptions, and separating them from verifiable realities, providing clarity for both new and active investors.
Myth #1: Blockchain is the Same as Bitcoin
Fact: Blockchain is the technology on which Bitcoin, or other similar cryptocurrencies, operates. Blockchain is a Distributed Ledger Technology (DLT) that works as a database for recording information in a secure and transparent manner, while Bitcoin is essentially a digital currency.
Myth #2: Crypto Is Mostly Used for Illegal Activities
Fact: A long-standing misconception about crypto is that it is mostly used by criminals for illegal activities and cannot be tracked accurately. The truth is that most of the crypto activities are transparent and open, where every transaction, wallet address, and balance can be traced. However, just like fiat currency frauds, the illicit activities happening on the blockchain contribute to less than 0.4% of the total transactions and have a history of being involved in several dark web activities.
Myth #3: Blockchains Are Public
Fact: While most blockchains are public, there are private and hybrid blockchains, with different uses. Federal or private blockchains are mostly used by corporations, where only approved participants can join. This is to ensure proper governance, speed, and privacy of data.
Myth #4: Crypto is a Threat to Sustainability
Fact: While blockchain was once considered bad for the planet, today, all the major networks use PoS, where validators lock coins instead of burning energy. This reduces the energy consumption by about 99.84%. However, the debates about energy usage are still ongoing in the case of PoW chains; the majority of the newer blockchains today are more or less sustainable.
Myth #5: The Era of Crypto Will End Soon
Fact: Many believe cryptocurrency to be a gimmick that will pass sooner or later. However, despite frequent predictions regarding the end of crypto since the early days, the cryptocurrency ecosystem has continued to grow and mature, while making its way into the global economy.
Myth #6: All Transactions on Blockchains are Anonymous
Fact: People assumed that every cryptocurrency transaction is anonymous. While this statement is not entirely false, the blockchain only records the public wallet addresses and does not disclose any other details of the buyer or seller.
Myth #7: Blockchain is Free of Cost
Fact: One of the most common misconceptions around crypto or blockchain is that every activity here is free of cost. While the core technology may be open-source, a significant amount is associated with all the activities linked to blockchain, including using, maintaining, and developing the network.
Myth #8: Crypto is a Scam
Fact: Just like every sector has positives and negatives, crypto also has some scams involved. However, the entire realm is not a scam. Since crypto is not considered a scam, it is also unlikely to be a scam, and is safe to invest in, as long as you are aware of the risks and concerns attached.
Myth #9: Tokens and Coins are the Same
Fact: Many people tend to use the terms tokens and coins interchangeably, without knowing the difference between them. Coins exist as currency and operate independently on the blockchain. On the other hand, tokens are built on top of an existing blockchain using smart contracts.
Myth #10: Crypto is Completely Unregulated
Fact: While Bitcoin or other cryptocurrencies do not fit into the traditional frameworks of financial regulations, the blockchain is not completely free from regulations. Financial authorities, along with the government bodies, have developed regulations that apply to every cryptocurrency.
Myth #11: Crypto Can be Easily Duplicated
Fact: The truth is that Bitcoin or other cryptos cannot be duplicated or forged, due to the high level of cryptographic security of blockchain and the consensus mechanism used by each network. Each Bitcoin is unique, and each transaction is verified by multiple nodes, making it impossible to counterfeit the coins.
Myth #12: Cryptos cannot be Used to Make Real Purchases
Fact: With crypto being more popular, a wide range of businesses currently allow customers to make purchases. As more sectors are adopting crypto as a payment method, it is solidifying its possibility of becoming an alternative payment method in the future.
Final Thoughts
Even though crypto might not be perfect, it is far more nuanced compared to the myths surrounding it. Clearing the misconceptions and misinformation around crypto and understanding the facts is essential for making informed decisions.
Just like any other emerging technology, cryptocurrencies have their own flaws and setbacks, and are continuing to evolve. Separating myth from reality can help you navigate the topic with more clarity and confidence.
