There are many misconceptions about cryptocurrency, and Bitcoin (BTC) is no exception to this. You have probably heard conflicting opinions regarding cryptocurrency in recent times.
However, it is undeniable that BTC remains at the forefront of this controversy, and you may even find yourself wondering whether or not it is still a worthy cryptocurrency investment in 2021.
This informative article describes the most common misconceptions regarding BTC, giving readers the information required to conclude an educated opinion of their own. To make things easy, you can find a brief list of the five most common misconceptions about BTC below.
What are the Five Most Common Bitcoin Misconceptions?
The five most common Bitcoin misconceptions are as follows:
- Bitcoin is too expensive.
- Bitcoin is too volatile/risky.
- Bitcoin is slow.
- Bitcoin is bad for the environment.
- Bitcoin is only for criminals and money launderers.
If you want to understand why these claims are simply untrue, continue reading below for the down-low on each, featuring a detailed breakdown to make sure you leave this article truly crypto-educated.
Misconception #1. Bitcoin is too expensive.
The first thing that tends to turn off new investors to stacking sats (short for satoshis – the smallest denomination of BTC) is the price. Those unaccustomed to financial markets will probably get tripped up by this (somewhat meaningless) metric.
Thus, many inexperienced crypto-investors find themselves concluding that the lower value of all the various altcoins available on the market means that they must be cheap. Therefore, they must be a bargain in comparison to BTC… right?
In reality, an asset’s value can be more accurately determined using precise measures, like supply and market capitalization – or market cap for short.
Supply: The total number of units issued in a particular asset
Market Cap: The total cumulative value of all outstanding units.
(Supply × Price) = Market Capitalization
Misconception #2. Bitcoin is too volatile.
Admittedly, a valid concern, but a misguided one nonetheless.
Yes – Bitcoin is a volatile asset. Investors should, without question, carefully consider their risk exposure before allocating large portions of wealth to any financial instrument.
However, in a world where even a commodity as crucial as oil can quickly plummet into negative price territory, investors will need to reevaluate the reality of BTC’s unrivaled risk to reward ratio.
Misconception #3. Bitcoin is too slow.
By design, Bitcoin transactions can never settle any faster than 10 minutes – to solve the double-spending problem and eliminate fraud, meticulously inspecting the validity of every spend, ensuring users never send money without first proving ownership of their coins.
There are, however, efforts to build supplementary transaction networks on top of the existing BTC protocol (also known as Layer-2 solutions).
The Lightning Network, for example, enables users to create payment channels that allow them to transact with peers – instantly.
Misconception #4. Bitcoin mining is harmful to the environment.
Arguably the most vocal critics in recent memory, environmentalists have not been shy about their disdain for BTC.
The core security mechanism of the BTC network is more commonly known as the Proof-of-Work (PoW) model. Using PoW requires transaction processors, more popularly known as miners, to burn large quantities of energy to consistently mine new coins by solving new blocks and earning block rewards in the form of BTC (more info on this here).
However, everything is not exactly the way it at first may seem.
With a global network of participants, increasingly sophisticated equipment, and volatile energy prices, mining margins have dwindled over the years and are subsequently razor-thin. New entrants to the field of BTC mining can only hope to achieve a competitive advantage by acquiring access to unreasonably cheap energy sources.
As a result, research has shown that well above 74 percent of miners get their power from renewable energy sources. Some of these mining operations have clustered near unusual locations, including geothermal vents, hydroelectric dams, and the sun-soaked deserts of the southwest, absorbing the excess energy these remote power producers inevitably generate.
Misconception #5. Bitcoin is for money laundering criminals.
Dubbed The Silk Road, this marketplace enabled anonymous users to exchange cryptocurrency for all kinds of contraband. From heroin to hired goons, Silk Road found its place on the dark net back in 2011. Those who remember the early days of BTC are likely familiar with what was arguably its first mainstream use case.
It is no surprise that a 2017 survey found that nearly one-third of Americans believe the primary use for cryptocurrencies such as BTC is to purchase illegal goods and services through Dark Web marketplaces.
What many of these critics fail to mention, however, is that a public, open blockchain like Bitcoin is far from anonymous. In reality, BTC transactions tend to leave a trail of cryptographic bread crumbs, quickly signaling suspicious transactions to authorities.
Elliptic, a blockchain analysis firm, reports that less than 1 percent of BTC transactions today are associated with illicit commerce. In comparison to the US dollar – estimates claim that up to one-third of USD in circulation is used for criminal activities and money laundering!
Like any other technology, the Bitcoin protocol is far from perfect. With little reliable information available to the mainstream, many people have even fallen victim to the misconceptions promoted by both the media and ill-informed individuals.
Newcomers may come across an alarming amount of cryptocurrency critics — these misconceptions about Bitcoin are pervasive. After taking a hard look at the data, however, each claim can be considered officially debunked.
Despite how loud the FUD (fear, uncertainty, and doubt) gets by ill-informed critics and gatekeeping detractors, the price of BTC has continued barreling into the stratosphere regardless of temporary pull-backs and a handful of bear markets.
Controversy aside, if you’re looking for what is still an opportunity of a lifetime, Bitcoin is still one of your best bets.
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