Debunking Common Misconceptions About Bitcoin

Even though the use of Bitcoin has increased recently, there is still a significant amount of skepticism among institutional investors, governments, central banks, and everyday people. The fact that Bitcoin’s price is rising and that more institutions are adopting it has shown that it has both long-term value and the potential to successfully upset the financial system. Although Bitcoin continues to be successful, many would-be users are still deterred from using it because of erroneous information and uncertainty about its fundamental concepts.

What exactly is bitcoin?

Bitcoin was developed in 2007 – 2009. Back then, a famous white paper titled “Bitcoin: A Peer-to-Peer Electronic Cash System” was published under the alias Satoshi Nakamoto.

Cryptography is used to secure Bitcoin, a decentralised digital currency. It is run independently of any governing body or financial institution and relies on a decentralised network of users to verify and validate transactions.

The distributed record that underpins the Bitcoin network, the blockchain, is maintained by a network of users known as miners. Miners utilise specialised computer hardware to solve challenging mathematical problems in order to validate transactions and add new blocks to the blockchain. Miners receive a specific quantity of bitcoins as payment for their work.

Due to their scarcity, bitcoins are frequently utilised as a store of value for both storing and transferring value. There are only ever going to be 21 million bitcoins in circulation, and the rate at which new bitcoins are put into circulation goes down with time. This aims to turn Bitcoin into a deflationary asset, meaning that as the supply grows increasingly limited over time, the value of each bitcoin should rise.

Due to their potential to facilitate quicker and less expensive financial transactions and to offer a safe and decentralised method of storing and transferring value, Bitcoin and other cryptocurrencies have attracted a lot of attention in recent years. The value of bitcoins and other cryptocurrencies can be extremely unstable, and investing in cryptocurrencies carries a high level of risk. Before making any investment decisions, it is crucial for anyone thinking about buying Bitcoin or another cryptocurrency to be aware of these hazards.

Bitcoin Is Anonymous

Bitcoin is designed to offer users the same level of privacy in payment sending and receiving as any other form of money. Although not anonymous, Bitcoin cannot provide the same amount of anonymity as cash. Numerous public documents are left behind when using Bitcoin. The privacy of users is protected by a number of techniques, and more are being developed. Before the majority of Bitcoin users are able to utilise these capabilities properly, work still has to be done.

Private transactions with Bitcoin may be used for nefarious ends, according to some worries. However, it is important to keep in mind that identical rules that are already in place inside of current financial institutions will surely apply to Bitcoin. Bitcoin cannot be any more anonymous than cash, and it is unlikely to stop prosecutors from conducting criminal investigations. Bitcoin is also intended to stop a wide variety of financial crimes.

Bitcoin is just like all other digital currencies; nothing new

The majority of other digital currencies are centralised. This implies: They can be printed based on the controllers’ arbitrary whims. Attacking the main control point will destroy them. The controllers have the power to impose arbitrary regulations on its users. Bitcoin addresses all of these issues since it is decentralised.

Bitcoin a bubble

A bubble is not created by a sudden increase in price. A bubble is an artificial overvaluation that will result in a swift downward correction. The price of bitcoin fluctuates as the market looks for a fair price due to decisions made by hundreds of thousands of market participants. Changes in attitude may be brought on by a lack of faith in Bitcoin, a wide disparity between value and price that is not based on the Bitcoin economy’s fundamentals, greater press attention that fuels speculation, fear of unpredictability, and plain old irrational enthusiasm and greed.

Bitcoin a ‘get-rich-quick’ scheme

If you’ve used the Internet frequently, you’ve probably seen advertisements for a variety of “get-rich-quick” scams. These advertisements typically make big financial promises in exchange for little effort. These are typically pyramid or matrix-style enterprises that profit off their own workers while providing nothing of genuine value. Most try to persuade you to buy packages that will pay you hundreds of dollars every day, but in reality, they just encourage you to spread more of these advertising and earn pennies on the dollar.

Bitcoin has nothing in common with these schemes. Bitcoin does not guarantee sudden wealth. The developers have no means to profit from your participation or take money from you. One of bitcoin’s biggest advantages is that it’s almost impossible to get one without the owner’s permission. The virtual currency known as Bitcoin is an experimental one that could succeed or fail. None of its creators anticipate making a fortune from it.

Bitcoin Has No Utility

Many Bitcoin critics only see the usage of money as a means of exchange. However, there are a number of useful features that Bitcoin provides by nature. The most secure database in history is Bitcoin, to start. There are several applications for a publicly available database with the highest levels of security and immutability, with Bitcoin as the most prominent one.

Over the past few years, Bitcoin has seen a growth of regulated, everyday use-cases. In addition to trading and long-term investing, an increasing number of shops and merchants are accepting bitcoin as a form of payment. It also has promise as a possible choice for loan collateral. Furthermore, Visa is creating a credit card with bitcoin benefits.

Bitcoins don’t address any issues that fiat money or gold don’t.

Bitcoins, in contrast to gold, are:

• Easy to transfer
• Easy to secure
• Easy to verify
• Easy to granulate

Bitcoins are not fiat money since they are:

• predictable, with a finite supply
• Not subject to centralised control
• Not debt-based

Unlike electronic fiat currency systems, bitcoins are:

• Freeze-proof
• Faster to transfer
• Cheaper to transfer

Miners, developers or some other entity could change Bitcoin’s properties to benefit themselves

Similar to how no one owns the technology underlying email, nobody owns the Bitcoin network. All Bitcoin users worldwide are in charge of Bitcoin. The Bitcoin protocol cannot be changed while developers are working on enhancing the software because each user is free to choose their preferred software and version. Users must all use software that complies with the same regulations in order for their systems to continue to function together. Only with perfect user consensus can Bitcoin function properly. All users and developers have a strong motivation to preserve this consensus as a result.

Members of the community (such developers, legislators, or investors) may attempt to use their position to persuade users to download and instal modified full node software that alters bitcoin’s properties in unethical ways. As long as opposing viewpoints can freely circulate through the media, online forums, and chat rooms, this is unlikely to be successful. Many bitcoin users don’t even speak English or regularly read the bitcoin forums. Every request to use other software should be evaluated carefully to determine whether the person agrees with the changes being suggested. Software for whole nodes should always be available as open source, allowing any coder to check the modifications themselves. Due to the coordination issue, there is typically a strong motivation to maintain the status quo.

Bitcoin is backed by processing power

The notion that Bitcoin is “supported by” processing power is untrue. Although you cannot trade bitcoins for the processing power that was used to create them, a currency is “backed” if it is tied to something else by a central party at a specific exchange rate. In this sense, bitcoin has no external support. It has its own value as money. The same is true for Bitcoin, just as gold is not backed by anything. The integrity of the block chain is safeguarded by the presence of a network of robust computing nodes from specific attacks. The Bitcoin money is formed by processing power.

Bitcoins are worthless because they aren’t backed by anything

Bitcoin is supported in the same way that traditional fiat currencies are backed: by user demand and support. However, Bitcoin is not backed in the sense that it has a guaranteed rate of exchange for another asset. Its market players and utility guarantee its worth. In contrast to traditional currencies, Bitcoin’s limited supply ensures its long-term worth. The scarcity of Bitcoin shields it from inflation, which has historically rendered many fiat currencies worthless.

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Bitcoin has no intrinsic value (unlike some other things)

Bitcoin has no single points of failure because it is decentralised. The Bitcoin network is distributed throughout the entire world and no one has the authority to execute unilateral changes to the protocol, unlike a corporation that has a CEO, headquarters, and a board of directors.

Any changes to the Bitcoin protocol must first occur in the minds and hearts of the users before they can be implemented in the protocol itself. The other nodes in the network will reject any node that tries to alter the code of Bitcoin. Any changes will become increasingly difficult to implement as the network gets larger. The fundamental structure of Bitcoin is similar to cement; it starts out pliable but becomes more solid with time.

Anyone can use bitcoin, and it does not discriminate. Bitcoin offers a platform where no one can be banned due to race, politics, or any other beliefs at a time when many Western governments and businesses are completely embracing the idea of censorship.
Bitcoin is unable to distinguish between different transactions. A transaction will be added to the blockchain if the mining fee is high enough ($1.37 on average as of March 2022).

Every 10 minutes, Bitcoin aims to settle transactions. One of Bitcoin’s most underrated but revolutionary capabilities is its capacity to flawlessly and unfailingly synchronise itself across time and location. Bitcoin uses the laws of thermodynamics through proof-of-work to make sure that the system cannot be manipulated.

Contrary to conventional currency, which can have its supply increased at the push of a button by a select few insiders, bitcoin’s 21 million supply limit is unalterable.

Value is ultimately determined by what people are willing to trade for – by supply and demand.

Is Bitcoin illegal

Because Bitcoin is not backed by any one particular government, it is not mean  illegal. In the U.S., Japan, the U.K., and the majority of other developed nations, bitcoin was legal. The legal position of bitcoin still varied greatly in emerging economies. China heavily restricted bitcoin without actually criminalizing the holding of bitcoins.

In a word, users can use Bitcoin without anyone’s consent. However, because national laws might differ from one nation to the next, it is important to confirm each nation’s laws and regulations. However, in reality, there are very few nations that have officially banned it.

Bitcoin use for terrorism

Cash, Visa, MasterCard, PayPal, and other payment methods all provide thieves with opportunity, but society continues to use them because of their acknowledged net benefits.It is crucial to remember that Bitcoin, like any other financial instrument, has the potential to be used for evil, including terrorism. It’s crucial to realise that using Bitcoin for criminal purposes is not limited to terrorism and is not a feature of the cryptocurrency itself.

Like any other group or person, terrorist organisations might try to use Bitcoin and other cryptocurrencies to transport money across borders, avoid discovery by law enforcement and intelligence agencies, or conceal the source of funds. It is crucial to remember that the use of Bitcoin and other cryptocurrencies for illicit activities makes up a relatively small portion of their overall usage.

Additionally, there are efforts underway to monitor and stop the usage of Bitcoin and other cryptocurrencies for illicit activities. For instance, law enforcement authorities all around the world have worked to track and look into the use of cryptocurrencies for illegal purposes like money laundering. Various regulatory controls have also been implemented to help stop the usage of cryptocurrency for illicit activities.

Bitcoin is a tool for tax evasion

It is crucial to remember that, despite the possibility that Bitcoin and other cryptocurrencies will be used to support tax evasion or other unlawful actions, they can also be utilised for legal reasons. It is up to individuals and organisations to use Bitcoin in a way that is legal and ethical since, like any financial tool or asset, it can be used responsibly or poorly.

It is important to remember that Bitcoin and other cryptocurrencies are not completely anonymous, and that blockchain transactions may be traced. Additionally, governments and regulatory bodies from all over the world have been striving to create frameworks for the regulation of cryptocurrencies and to make sure that their use complies with current laws and regulations.

While it is true that Bitcoin and other cryptocurrencies may pose some difficulties for regulators and law enforcement, it is crucial to understand that they may also have a number of positive effects, including the ability to facilitate quicker and less expensive financial transactions, to increase financial inclusion, and to offer a secure and decentralised method of storing and transferring value.

Finally, unlike conventional payment methods, the Bitcoin block chain provides a permanent record of all transactions and can be mined for information at any point in the future, making investigations, tracking down funds, etc. considerably simpler.

Bitcoins can be printed/minted by anyone and are therefore worthless

In the conventional sense, bitcoins are not printed or minted. Instead, they are made through a procedure called “mining” that entails employing strong computers to resolve challenging mathematical issues. A new block is added to the Bitcoin blockchain when an issue is successfully solved, and the miner is compensated with a specified amount of Bitcoins. The Bitcoin protocol places a cap on the total number of Bitcoins that can be created, stating that there will only ever be 21 million. One element that raises the value of Bitcoin is its restricted quantity.

Yes, anyone may participate in the mining of Bitcoins, but it costs a lot of money and energy and necessitates specialist computer hardware. Additionally, as more and more people have begun to participate in the mining process, the process of mining bitcoins has grown more and more competitive over time. As a result, without a substantial investment in specialised technology and a cheap supply of electricity, it is challenging for an individual to mine Bitcoins profitably.

Although everyone can take part in the mining of Bitcoins, it is untrue that anyone can arbitrarily “print” or “mint” Bitcoins. The Bitcoin system tightly regulates the production of new Bitcoins, making it impossible for anyone to produce more than what is permitted.

21 million coins isn’t enough; doesn’t scale

Although the 21 million bitcoin maximum supply may appear little in comparison to other currencies or assets, it is important to remember that each bitcoin can be broken down into smaller units. A satoshi, or one hundred millionth of a bitcoin, is the smallest unit of the digital currency bitcoin (0.00000001 BTC). This indicates that even with a maximum supply of 21 million bitcoins, a sizable number of satoshis can be used for transactions and value storage.

The value of “1 BTC” represents 100,000,000 of these. In other words, each bitcoin is divisible by up to 10⁸.

As the value of the unit of 1 BTC grew too large to be useful for day to day transactions, people started dealing in smaller units, such as milli-bitcoins (mBTC) or micro-bitcoins (μBTC).

Lost coins can’t be replaced and this is bad

There being fewer bitcoins available poses no issue for the currency because each bitcoin is divisible to the power of 0.00000001. Indirectly, all other coins are worth more if you lose your coins because there are less of them in circulation. Think of it as a gift for all other bitcoin users.

Why don’t we have a system to replace lost coins? is a related query. The explanation is that it is impossible to tell the difference between a coin that has actually been “lost” and one that is just inactive in someone’s wallet. Furthermore, there is no evidence to suggest that redistributing sums that are demonstrably lost or destroyed is a bad idea.

Bitcoin is not scalable

For any technology, including Bitcoin , scalability is a crucial factor. The term “scalability” describes a system’s capacity to handle a growing number of users or transactions without experiencing performance degradation.

Bitcoin can be scaled to handle the enormous payment throughput required for it to become the dominant global currency. Currently, Bitcoin’s blockchain can only process 7-10 transactions per second. This is not nearly enough throughput to allow Bitcoin to serve as the global currency in a world of 8 billion people. The size of each Bitcoin transaction is determined by the size of the Bitcoin blockchain. Most transactions today are around 1.3MB in size.

Additional methods for transferring bitcoin, called layers, are needed to increase efficiency and speed up payments. The Lightning Network enables instant and free or nearly free payments between parties using channels.

It’s a giant Ponzi scheme

A Ponzi scheme is a fraudulent investment enterprise that pays investors’ returns from their own funds or the funds contributed by later investors rather than from earnings made by the people in charge of the organisation. When there aren’t enough fresh investors, ponzi schemes are meant to fall apart at the expense of the last investors.

A free software project with no centralised control, bitcoin. As a result, nobody is in a position to misrepresent the returns on investments. There is no guaranteed purchasing power, and the exchange rate is allowed to fluctuate, just like other significant currencies like gold, the US dollar, the euro, the yen, etc. Due to this, the value of bitcoins is volatile, meaning owners may unexpectedly profit or lose money. Beyond speculative, thousands of individuals and businesses utilise Bitcoin as a payment system with beneficial and competitive features.

Quantum computers would break Bitcoin’s security

The speed and power of various types of computations, including some cryptographic computations, could be greatly increased by quantum computers. The security of cryptocurrencies like Bitcoin, which rely on specific cryptographic algorithms to encrypt transactions and guard against fraud, is feared to be threatened by the advent of quantum computers.

The development of quantum computers that can compromise Bitcoin’s security is still many years away, and there are continuing attempts to counter this possible threat.

Using post-quantum encryption, a kind of cryptography that is made to be resistant to attacks by quantum computers, is one solution that has been suggested to address the possible threat of quantum computers to Bitcoin. Post-quantum cryptography algorithms are currently being developed by certain researchers in an effort to safeguard Bitcoin and other cryptocurrencies in the future.

In addition, quantum computing technology is still in its infancy, and it is uncertain whether or when quantum computers will gain the necessary capacity to seriously jeopardise the security of Bitcoin or other cryptocurrencies. In order to handle any potential threats to the security of Bitcoin and other cryptocurrencies, it is crucial to keep an eye on the advancement of quantum computing technology.

Bitcoin mining is a waste of energy and harmful for ecology

It is never a waste of energy to invest in the security and operation of a payment system. The use of Bitcoin incurs processing fees, just like any other form of payment service. Banks, credit cards, and armoured vehicles are just a few of the energy-intensive services required to run the present, widely used monetary systems. Although, in contrast to Bitcoin, their overall energy consumption is opaque and more difficult to gauge.

The operating expenses of mining should continue to be proportional to demand because bitcoin mining has been intended to become more energy-efficient over time with specialised technology. Some bitcoin miners decide to cease operations when the industry becomes too crowded and less lucrative. Furthermore, all of the energy used in mining is eventually converted into heat, and the miners who have successfully utilised this heat will be the most successful. A mining network is most effective when it is not using any additional energy. Although this is the goal, mining’s economics force each miner to work toward it.

Bitcoins will be shut down by the government just like Liberty Dollars were

Liberty Dollars started as a commercial venture to establish an alternative US currency, including physical banknotes and coins, backed by precious metals. This, in and of itself, is not illegal. They were prosecuted under counterfeiting laws because the silver coins allegedly resembled US currency.

Bitcoins do not resemble the currency of the US or of any other nation in any way, shape, or form. The word “dollar” is not attached to them in any way. The “$” symbol is not used in any way.

Bitcoins have no representational similarity whatsoever to US dollars.

Of course, actually ‘shutting down’ Liberty Dollars was as easy as arresting the head of the company and seizing the offices and the precious metals used as backing. The decentralized Bitcoin, with no leader, no servers, no office, and no tangible asset backing, does not have the same vulnerability.

Bitcoin can be easily hacked is not secure

The Bitcoin network has never been compromised. The decentralised nature of the network, which makes it impervious to fraud and tampering, and the use of cryptography to ensure the network’s security.

However, it is conceivable for specific bitcoin exchanges to be hacked and have their holdings of bitcoins stolen. These instances are frequently the result of lax security procedures or deliberate attacks against particular exchanges or wallets. People and organisations should take precautions to secure their bitcoin wallets and utilise trusted and secure exchanges when purchasing and selling bitcoins.

Bitcoin Has High Barriers to Entry and Is Difficult to Understand

Bitcoin may seem frightening, but there is a wealth of information explaining its history, development, and workings. In order for anyone to engage in the Bitcoin market, Satoshi Nakamoto, the person who invented Bitcoin, made sure that both the Bitcoin blockchain and its white paper were made available to the general public.

Additionally, creating a personal wallet is quick and easy for Bitcoin transactions. Last but not least, bitcoin is extremely divisible into units called satoshis that may be bought for a fraction of a cent.

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Bottom Line

It’s crucial to remember that many of these Bitcoin misconceptions and lies are untrue. A genuine form of money, bitcoin is based on a decentralised network and is protected by cutting-edge cryptography. It has value because it is rare, extensively used, and useful as a decentralised, secure means of trade and store of value. It is accepted by an increasing number of businesses and individuals worldwide. Although using and investing in Bitcoin carries some dangers and difficulties, it is not a fraud or a Ponzi scheme, and it is not just utilised for unlawful purposes.