Cryptocurrency and blockchain have grown in popularity recently as new forms of digital currency, but in reality, they have been around for over a decade. Some consider them to be exciting investment opportunities, but they require some level of tech-savviness.
Because there is so much jargon, acronyms, and other unfamiliar words in the world of crypto, it can be very confusing. To get acquainted with the basics, read our essential guide to crypto payments.
In this article, we’ll be going further, and we’ll be busting the most common crypto myths circulating in the crypto-sphere:
Myth 1: Blockchain and Bitcoin are the same things
Most people confuse the common crypto coin Bitcoin with the technology behind it – blockchain. Bitcoin is a digital currency that can be exchanged without using a bank. Blockchain is an immutable, shared ledger that facilitates the recording of transactions and tracking assets in business networks. Whenever a transaction occurs on a blockchain, a record of that transaction is added to everyone’s ledger.
Myth 2: The use of crypto is for illegal or criminal activities
Although cryptocurrency can be attractive to criminals due to their ease of transfer, crypto-related crime fell dramatically in 2020, according to Chainalysis research. Last year, scams made up the majority of all cryptocurrency-related crime, at 54% of illicit activity, with ransomware increase being the most concerning type of crypto crime. As a result, governments globally are putting together task forces to deal specifically with the crypto crime and pushing legislation forward.
Myth 3: Crypto transactions are anonymous
It is a common misconception that all crypto transactions are anonymous. Cryptocurrency wallets tend to be pseudonymous rather than anonymous -your wallet gives you a fake name, a pseudonym. Though your name cannot be publicly displayed, your cryptocurrency wallet address can be tracked. Many government organisations have forged relationships with significant exchanges to complete the mapping of addresses to their owners. And because crypto transactions are taking place on the blockchain, anybody can see crypto transactions on wallets, although the owners are hidden behind a bunch of scrambled numbers and letters.
Myth 4: Participating in a token sale or ICO is not possible in the UK
Both main street investors and institutional investors in the UK can participate in a token sale, or ICO conducted in compliance with the Financial Conduct Authority (FCA). Most ICOs are not regulated by the FCA, but this can only be decided on a case-by-case basis. An ICO is an attractive investment and fundraising opportunity for blockchain startups with the right credentials and experience. Legally, the trick is to navigate the rapidly changing grey waters of regulation so that the ICO meets participants’ expectations. It all depends on the token sale terms.
Myth 5: Tokens = Coins
There are tokens on the blockchain and Initial Coin Offerings (ICOs). There is only one purpose for coins – to serve as a simple store of value. It is possible to store complex levels of value in tokens, such as property, utility, income, and fungibility. Tokens can also capture commodities or loyalty points.
Myth 6: Cryptocurrencies are just a bubble that will burst
Even though they are still volatile and not the best investment opportunities at the moment, cryptocurrencies are causing transformative changes in money and finance. They are democratising finance and improving the lives of even poorer households by expanding their access to savings and credit products. Small-scale entrepreneurs can secure financing from sources other than banks, which tend to have stringent loan underwriting and collateral requirements. And consumers, businesses, and even economic migrants returning home will benefit from cheaper and more efficient domestic and international payments.
Myth 7: Cryptocurrencies don’t have any value
A cryptocurrency can be exchanged for goods or services, and it has value depending on how its holders perceive it. At the moment, bitcoin is in a “price discovery” phase similar to gold during the 1970s, where big swings up and down are common. And according to research, Bitcoins do indeed have some intrinsic value based on the marginal cost of producing new bitcoins. Bitcoin’s price often hovers around this cost, which increases as the mining network expands, and as the block reward decreases over time.