10 Myths About Bitcoin
- Bitcoin Is Not Secure
Numerous stories about wallets, exchanges, and marketplaces being hacked have led many to believe that bitcoin itself safe or secure. All of the hacks have been of the infrastructure supporting bitcoin. Bitcoin, the currency and protocol – itself has never been hacked.
In new industries and technologies, best business practices and security take time to develop. Secure methods of storing your bitcoin have already emerged, though. Storing your bitcoins offline and in a computer that has never been connected to the internet is the swiss storage of bitcoin storage. Hot wallets, or online wallets are the least secure and the most common form of wallet.
- Bitcoin Is Anonymous
In Satoshi’s white paper, he described Bitcoin as anonymous and ever since it has been reported as such. The truth is much less straight forward, though. Anonymity is sliding scale and you can never have perfect anonymity. Bitcoin is pseudo-anonymous since there are no gatekeepers in the network (there are gatekeepers when obtaining bitcoins through exchanges). Anyone can create a bitcoin wallet and address.
The public blockchain shows all the transaction that have been made and will be there forever. Many of these transactions have leaked their IP, which can be seen when searching for addresses on blockchain.info. Bitcoin is far from an ideal amount of anonymity
- Bitcoin Isn’t a Currency
Many economists, keyboard warriors and new hosts have said bitcoin is not a currency. The reasons given are bitcoin’s fluctuating value, digital existence, and lack of central bank or government sanction. It is not too surprising that in age of fiat currency that the volatile (but increasing in value) value and lack of government sanction is troubling for people.
A currency has to been something that is scare, divisible and able to exchange value. Bitcoin does this expertly and better than gold or fiat (government) currency. Currency is a exchange of value and value is subjective. That is why shells, nuts, gold, paper and now, bitcoin, have been used as a currency. Each prior currency fell out of favor when a new currency emerged that was more innovate, just like any other technology. Bitcoin has gold’s scarcity (bitcoin is actually more scare) and fiat currencies divisible attribute (bitcoin is more divisible) making it the ideal choice of the two.
- Bitcoin Is Just a Currency
Other people, who aren’t impressed by a new currency blow off Bitcoin as something simple and trivial. Though, bitcoin’s innovations in currency are truly amazing – Bitcoin is much more than simply a currency. All bitcoins are is data and the network that runs the bitcoin can be run used to send many forms of data such as contracts, messages, and more. The blockchain can be used for voting and elections. Making elections more transparent and less corrupt. People are also working on using the blockchain to change how we use stocks, options and other financial instruments.
- Bitcoin Isn’t Backed By Anything
This statement that a currency could be backed something. Many people have claimed that gold should back bitcoins but what backs gold? People often say that gold has underlying utility because of its use in computers and jewelry but that makes a small portion of gold’s price. The majority of the value in gold’s price is from it being a store of a value. Value is subjective. The same reason people value bitcoin is why people value gold.
- Bitcoin Will Be Replaced By Altcoins
Since bitcoin’s release and especially, since it got popular there has been many altcoins, or alternative crypto-currencies, that have been lunched. Altcoins vary in a great degree. Trying to serve many different groups and innovate in many different ways. Some are simply bitcoin with a face lift. Nonetheless, there is a lot of them, and many people are worried that one or several could replace bitcoin.
Bitcoin will not be replace by them anytime soon and maybe, never. Bitcoin is positive feedback loop that has never been seen before. Many of these coins are small and have small networks which leave them much less secure than bitcoin. The fact bitcoin has gotten so many people mining the currency is powerful and this will drastically increase as industrial bitcoin mining emerges.
There is not that much innovation in altcoins but general speaking, innovations made by altcoins, could be absorbed into bitcoin. There might be special features, like anonymity, that require a new crypto-currency but that will be a limited and would be able to co-exist with bitcoin.
The amount of news, users, and venture capital bitcoin has cannot be understated and is a huge reason why it will stay around and continue to grow.
- Bitcoin Is the Ideal Currency for The Drug Trade
Bitcoin is called by many in the mainstream as the ideal currency for the drug market and all kind of “horrible” black market trades but this is far from the true. Cash is actually a lot more anonymous and easy to use for many in the black market. That is why your local weed dealer is not accepting bitcoin (yet).
Bitcoin has gotten a lot of traction on the deep web, but even there it is awkward fit. Bitcoin’s lack of transaction anonymity and difficulty running through Tor or Tails make bitcoin less than ideal. That is why there has been a lot of interest in altcoins that are better suited for providing users the financial anonymity they want.
- Bitcoin’s Price Doesn’t Matter
Many activists and people focused on other parts of the bitcoin’s technology often remark that bitcoin’s price doesn’t matter. Wedbush Securities released a report called “Embracing Volatility: Trading as Bitcoin’s First Killer App” which explained the moving price provides opportunities for investors and traders. As investors and traders come to bitcoin, they bring volume and money to bitcoin. Most people heard about bitcoin because of its price.
- Bitcoin Is Only Popular In the West
People in the west obviously have some advantages over people in developing countries when it comes to adopting bitcoin. People in the west know English and most of the material about bitcoin is in English. They are also generally, have more knowledgeable about finance and computers. Even with these challenges, many of the bitcoin hubs in the world are in developing countries. Argentina, Cyprus, and the Philippines have thriving and growing bitcoin communities and businesses. Bitcoin is growing immensely among developing countries. Bitcoin businesses and communities are popping up in Africa, the Middle East and South America.
- Bitcoin Is a Ponzi Scheme
Many have called bitcoin a ponzi scheme but this can’t be farther from the truth. A ponzi scheme requires new people to give up their money in order to pay people who have already paid and are waiting for their payout. It is unsustainable and exists solely through deception. There is no central controller of bitcoin to facilitate such a ponzi scheme. The competing self-interests of the bitcoin ecosystem help kept bitcon from being a pump and dump in beginning. The miners who had to buy specialized and expensive equipment in order to mine don’t want bitcoin to go away. The same is true for people who have built businesses around bitcoin (and the people who have invested in them). Besides, if you buy a bitcoin you are actually getting something in return and not a promise. That bitcoin can be used to buy a plane ticket, a laptop or real estate. I would say many altcoins are ponzi schemes or pump and dumps.