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Tales from the Crypto | Myths About Cryptos

tales crypto

November 19, 2020 | 

JOHN K MWANIKI |  0 Comments| 

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Cryptocurrencies are changing everyone's perception of money. A decade ago, fiat currencies ran the economy. The government, through the central bank, had a monopoly over the economy. They would determine the supply and circulation of money. The primary intent being to control inflation.

This was until Satoshi Nakamoto launched Bitcoin in 2008. The coins' primary intent being to offer an alternative to the traditional currency.

Years later, Bitcoin has performed well. It has become a value of transfer and medium of exchange. It has also established itself as a safe haven. Most traders already recognize it as "digital gold."

Bitcoin's success has opened the crypto space to several other digital currencies. There are over 7000 cryptocurrencies available in the market today.

Even with success, some myths about cryptos would not go away. Some of the tales are as a result of some entities looking to block digital currencies. Others are also a result of misinformation or ignorance. This analysis debunks six of the top myths about cryptos.

These are:

1. Cryptocurrencies aid illegal transactions

Of all the myths about cryptocurrencies, use for illegal transactions takes the lead. Most of the jurisdictions have always had a suspicion towards cryptos. They tend to paint it as an unlawful currency used for illicit transactions.

The commercial banks and other traditional funds have been behind the speculations. Some entities feel the digital currencies aid transactions like drug and human trafficking. Other countries also use it to avoid economic sanctions.

Such claims are baseless. Reports show that cryptos are responsible for only 1% of illegal transactions. Instead, it's the commercial banks that aid the illicit transactions. They take advantage of authorities concentrating on digital currencies.

2. Bitcoin and blockchain are the same.

As a new entity, most people struggle with the different crypto factions. One such confusion is on the Bitcoin and blockchain.

Most people are yet to realize that Bitcoin is a currency, while blockchain is its platform.

The confusion tends to come from the fact that people believe there is only one blockchain. The same way they know Bitcoin is the same as crypto.

There are several blockchains. They support several entities other than finance. In the same way, there are several other cryptocurrencies other than Bitcoin. One can choose from Ethereum, Ripple, and the 7,000 more digital currencies.

Every crypto runs on its unique blockchain. For example, you cannot transact Bitcoin on Tether's blockchain.

3. Cryptocurrencies are not taxed.

Cryptocurrencies have paused a threat to the fiat currency economic system. The government and the banks believed the cryptos are a threat to them. For that, they had to look for reasons to curtail their growth.

One of the myths about cryptos by the government is taxes. They believe the decentralized nature of cryptos makes them untaxable.

That is far from the truth. Cryptocurrency transactions are like any other involving fiat currencies. You must pay tax on all payments.

Cryptocurrencies also operate as assets in the crypto exchanges. For that, they comply with all the income tax on asset trading.

4. Crypto transactions are untraceable.

Yet another famous myth about cryptos is anonymity. Most people prefer the use of cryptos believing they are anonymous and untraceable.

The truth is that digital currency transactions are traceable. The crypto blockchain comes with public ledgers.

The ledger records all the details for every transaction. They have records of the sender and receiver address and the amount involved. They also show the transaction time.

The more cryptocurrencies become mainstream, the lesser the anonymity. Anyone can access the public ledgers to verify transactions.

The increasing public transactions still do not work for everyone. This has led to the rise of privacy coins. They are, however, unlikely to gain the mass market as Bitcoin has managed.

5. Crypto is not secure.

The insecurity of crypto is a myth that works the same as its intractability. People have sold the lie that the decentralized digital currencies are insecure. That the lack of a control authority means anyone can swindle investors.

The security had been an issue earlier on without the regulations. Unscrupulous traders would provide fake offers.

The same period came with the rise of Ponzi Schemes and other scams. Fake crypto exchanges were also coming up.

The cryptocurrency market has evolved over the years. The early years saw the Financial regulators provide rules for the crypto operations.

Several governments also have in place financial regulations. As the cryptos become mainstream, the laws become fine-tuned to cover newer assets. The latest rules are the European Commission proposal on crypto assets.

The new regulations would streamline the whole crypto market. Crypto service providers would have to provide more documentation before starting operations. The crypto exchanges would also operate like any other stock exchange. They will apply all the anti-money laundering protocols. Still, they will have to provide a whitepaper before launching.

In the end, the security myths about cryptos will be a fallacy.

6. Cryptos don't exist

The world accepts physical fiat currencies. They have used printed money until other forms don't make sense.

Unlike fiat, virtual currencies exist on the internet. There is no physical representation of them anywhere. They also don't have any material assets backing them up. For that, most people are wary when it comes to the crypto asset existence.

Still, cryptocurrencies have records. They have all the features of fiat currencies. It for this reason why it qualifies as a means of exchange and can transfer value.

The myth will also become more redundant as digital currencies become mainstream. The mass acceptance by the merchants is all the digital coin needs for legitimacy.

Bottom Line

Several myths about cryptocurrencies have been running for such a long time. They are already entrenched with the until they look like the truth.

Debunking such myths is the way to go for digital currencies. As the people learn the truth, they get to accept the currencies more.

With digital currencies becoming mainstream, more crypto outfits will seek to provide the facts. With time, the myths about cryptos would be a thing of the past.

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