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Crypto canards: nine misconceptions about the digital currency revolution

(Image credit: Image Credit: Geralt / Pixabay)

Cryptocurrency’s long march to popularity has been a mixed blessing. On the one hand, people are more aware of it than ever before and this has led to an increase in awareness, legitimacy, investment and cachet - consumer investors and major international banks alike take it seriously, which can only be a good thing.    

On the other hand, as digital currency has grown in stature, certain myths surrounding it have grown in kind. A degree of scepticism is understandable – especially if you are unfamiliar with the concept – and, to an extent, healthy. For the past couple of decades, new technology has been inescapable, with many projects promising the world and, quite often, delivering precious little.  

But cryptocurrency is different - it offers several advantages over fiat currency and these are worth exploring and seizing upon. Even if you have no interest in investing in cryptocurrency, understanding it is vital.    

The untruths and distortions surrounding digital currency hinder this understanding. If you’re a newcomer looking to learn more, here are nine of the most pervasive crypto canards you should dismiss immediately.   

1. It’s all about Bitcoin    

This one’s fairly easy to refute. Bitcoin has come a long way since its 2009 launch and, as cryptocurrency’s trailblazer; it deserves a great deal of credit. However, it’s very far from the only player in the field. Ethereum, ripple, monero, litecoin and others have made serious inroads in the market. Even dogecoin – which its creator notes is “a currency with a dog on it [that] hasn’t released a software update in over two years (opens in new tab)” – has hit a market capitalisation of over a billion dollars.  

Bitcoin isn’t the only game in town. In fact, it’s not even the only version of itself: bitcoin cash and bitcoin classic are two popular variants. Many other cryptocurrencies have been created with the specific intent of addressing its perceived flaws.   

2. Crypto transactions are totally private and perfect for criminals

Cryptocurrencies offer anonymity, but not complete privacy. The protocol has no means of recording identity, but every payment is logged publicly on the blockchain – the distributed ledger technology that underpins digital currencies. Transaction histories are permanent and cannot be altered by anyone.    

Consequently, if you’re a budding criminal looking for an easy way to launder your illicit funds, you should probably look elsewhere. The overwhelming majority of cryptocurrency investors are motivated by curiosity, profit, or – increasingly – good business sense. There are always those with nefarious motivations, but it’s arguable that cryptocurrency makes their life more difficult; after all, blockchain technology facilitates much greater transparency into transaction history.     

3. Cryptocurrency is only for those with an obsessive level of technical literacy    

Nope! This might have been the case in the early stages, but in 2018, it’s easier than ever to sign up with a safe and secure cryptocurrency exchange.

Furthermore, as knowledge, popularity and media coverage increase, more educational resources are becoming available to help newcomers get to grips with the basics.   

4. You can only buy BTC, ETH, XMR, XRP et al. in (sometimes very expensive) increments of one 

Cryptocurrency prices go up and down with some regularity, but a single bitcoin oten costs thousands of pounds. Naturally, this seems somewhat prohibitive to the average consumer - unless you’re a mega-investor, you probably can’t afford to buy it in increments of one.   

The good news is that you don’t have to. The average bitcoin is divided into increments of 100,000,000 called ‘Satoshis’ – named after the currency’s mysterious creator. The only barrier to purchase is your willingness to do so.   

5. It’s too late to invest    

If you’re worried that you’ve missed the bitcoin boat, the ripple raft or the litecoin longship, don’t be - there are plenty of opportunities to jump aboard the crypto canoe now and they likely won’t be exhausted in the near future. The World Economic Forum indicates that cryptocurrencies will account for 10% of global GDP by 2027. 

With most new technologies, it’s better to get on board sooner rather than later – but it’s certainly not too late. Cryptocurrency is just getting started.   

6. The government will shut it down    

Well, look. Governments can create punitive measures to target cryptocurrencies and, in this age of nigh-constant political uncertainty, it’s silly to rule anything out. China has already shut down some of Beijing’s crypto exchanges (opens in new tab) and JP Morgan CEO Jamie Dimon suggests that if cryptocurrency does get too big, some Western countries may follow suit.   

But China is something of an outlier. Most governments won’t shut cryptocurrency down because it’s not in their interest to do so. As federal prosecutor Kathryn Haun said, it’s “useful” to them - blockchain technology provides a secure, verifiable means of authorising and processing payments. Banning it would be counterproductive and – as she says – “the genie is already out of the bottle”. Cryptocurrency is here, it’s online, and you can no more shut it down than you can shut down the internet.   

As with prohibition in the ‘20’s and ‘30’s, banning cryptocurrency wouldn’t stop it proliferating - it would just drive it underground.   

8. There’s a huge amount of wealth stored in Bitcoin    

There’s a lot of money in bitcoin, make no mistake about it. That said, its total market capitalisation is only roughly 2.5% that of gold.   

It follows that, as an investor, it’s worth treating bitcoin as part of a diverse portfolio that also contains other popular asset classes.   

9. Cryptocurrency has no intrinsic value 

This depends largely on your definition of intrinsic value. It’s true that it isn’t backed by anything in the conventional sense – which purists might take as evidence that it doesn’t have any real worth as a currency.   

But this view doesn’t really hold up. Cryptocurrency serves as a medium of exchange and more; anyone can profit on it if they put the effort in to mine it. Add enforced scarcity, and it has considerable – and potentially colossal – value.   

10. Bitcoin is just a currency    

This is the biggest and most pervasive myth of all. It’s also the most egregiously wrong. Bitcoin is just the first example of blockchain technology – a tool that has the potential to transform industries and governments at all levels. It may yet bank the unbanked (opens in new tab); facilitate faster, safer contracts; and automate regulatory compliance, amongst many other things.   

There’s been a lot of talk about cryptocurrencies in the nine years since Bitcoin launched and it’s unreasonable to expect all of it to be positive. Indeed, every new technology has kinks to iron out and problems to solve. But cryptocurrency is subject to an unusual number of misconceptions, myths and outright falsehoods - canards that undermine its legitimacy and inhibit people from investing.    

A reluctance to believe the hype is understandable, but don’t believe speculation and misunderstanding either – especially when they could leave you on the sidelines of a revolution.      

Benjamin Dives, CEO and Founder of The London Block Exchange (opens in new tab) 

Image Credit: Geralt / Pixabay

Benjamin Dives is the CEO and founder of The London Block Exchange, the first cryptocurrency exchange dedicated to serving the UK.