Like any other myths, cryptocurrency myths are a mere misinformation of some sort seeking to explain different issues for different reasons. They can be positive about cryptocurrencies, but most are probably negative.
Here are top myths about cryptocurrencies and the truth behind them.
1. Crypto is used by criminals trying to avoid the law and taxes
Many governments have been racing against Bitcoin and cryptocurrencies largely informed by this notion. No doubt cryptocurrencies has been used for illegal operations such as during the famous Silk Road drug trafficking, but the use of Bitcoin and crypto in drug trafficking, money laundering and other crime is no different from the use of fiat in these and all of other crimes.
Actually, going by the figures recently released, the amount of crypto used in illegal activity is much less to a minor fraction than the amount of fiat used and being used in drug trafficking and money laundering.
As a matter of fact, many Bitcoin users know that the transactions are broadcast publicly.
Also, there are many benefits of Bitcoin such as fast transactions, profits and low cost of transactions and choice making many people to get into crypto dealings. Still, while it is widely thought that many Bitcoin and crypto users want to avoid taxes, there are many customers using cryptocurrencies and already reporting and paying taxes.
Many regulations already treat Bitcoin and crypto as assets and require tax reporting for capital gains and trades.
Additionally, some countries have already put into place regulation and crypto trade and exchanges are still ongoing in these markets.
2. Cryptocurrencies have no real value at all; not backed by anything
Why anyone would want keep fiat is basically because they believe someone else somewhere will need it to exchange for something else. Historically, for instance, fiat came to be valuable for the challenges barter trade presented to the economy and its own use. Paper money and physical coins turned to be so valuable for such reasons.
Even if you are looking at it from the side of the very high inflation happening in some countries where local currency is considered worthless, you would see that the notion and believe behind the value for fiat is really the value.
Same with cryptocurrency: it does not have to be backed by anything to be valuable or have intrinsic value. Like fiat in its history, cryptocurrencies present some crucial advantages that are hard to ignore in terms of the modern banking systems.
Additionally, Gold and silver aren't backed by anything yet they are valuable all around the world and even traded.
Although cryptocurrencies are not fully integrated into the modern day society all-over, that is not to mean they will not. In addition to their currently limited economy, there are real tech, social and political and economical challenges to overcome to make cryptocurrencies globally acceptable and popular.
That said, every cryptocurrency project is not always a Ponzi or a zero-sum or win-lose game. Instead, most are a win-win where holders win from an increase in demand in a real market.
3. Cryptocurrencies always prioritize anonymity
High privacy and security are not always equal to anonymity. There is also confusion between anonymity and pseudonymity. Cryptocurrencies use the latter where it is hard to reveal the user's identity. However, the transactions are secured by cryptography and the public addresses made public in a public network.
However, in most cases, identities are revealed during purchases. Pseudonymity means there are several pseudo names but the names have their origin if desired. Also, it is possible to link the user's pseudonyms together by studying patterns in the blockchain.
4. 21 million Bitcoins is not enough for a currency
Bitcoin blockchain is set to supply 21 million Bitcoins. Some people are of the opinion that this could be troublesome when the amount is reached. However, since each Bitcoin is divisible to 100,000,000 atomic units, it is possible that these smaller units can solve supply and scaling issues when there was one.
Today, it is possible to trade mili-bitcoins (mBTC) or micro-bitcoins (μBTC).
In fact, such high divisibility would make most cryptocurrencies sustainable and still accessible to the masses even at very high prices of a one coin.
Controlled supply is also a good thing. For instance, the elaborate controls means that the rate of deflation is not only controllable but also will occur in a controlled manner that markets will have time to adjust.
5. Cryptocurrencies are illegal to trade and deal
Not so in many countries today. The fact that most countries do not have regulations for cryptocurrencies in place does not mean they are illegal. Many people who are convinced that they are only used for illegal motives and money laundering would be dubbed to think crypto is illegal to deal in.
In fact, many countries are unwilling to have regulations that singles out digital currencies because they feel there is no need to do so and that their current regulatory framework can contain the situation.
And they have a strong point. For instance, even if some argue digital currencies are increasingly being used in money laundering, most countries have anti-money laundering regulations that can apply regardless of the tools, methods and processes involved for as long as the crime occurred.
Additionally, most countries view them as securities and assets and not a competing money system to fiat.
6. Crypto and Bitcoin will finally tumble
There is no doubt that pursuit of digitization of economies in any part of the world will continue. And crypto and blockchain have a huge role to play in such an economy. And while some people are highly and overly optimistic that crypto could replace fiat entirely in the foreseeable future, pessimists think the projects will come crumbling.
In an entirely digital world, it is possible that digital currencies will outdo physical money or fiat. It is also likely that countries will create digital versions of their currencies or cryptos and probably use blockchain in these projects. That can take time though. Crypto does not currently have all the requirements for replacing fiat in the foreseeable future.
However, it is not entirely hard to imagine cryptocurrencies and digital currencies replacing all of fiat in the future, but it would take time to have one cryptocurrency or digital currency ruling the world where no other digital currency is existence.
Therefore, we are only beginning to see or imagine what the future could hold. For instance, could it be possible that we shall experiment with as many digital currencies as possible for the longest time and then after that think of some sort of or attempt to unify or have dominance of some crypto versions as a result of market forces?
Think of it this way. The most dominant fiat versions in the world right now are the dollar or euro or whatever. And these are preferred (due to their benefits) for trade in exchanges and use in markets world over where there are local currencies. But each country has its own fiat version trade-able and exchangeable with the rest. So before a single digital currency version will dominate the world that is entirely using digital currencies, there will be numerous digital currency projects ongoing.