True or False: The Biggest Lies You’ve Been Told About Bitcoin
Cryptocurrency bitcoin has made news for months now, as the market rose dramatically and began to flatten out again. But what do we really know about the new bank-based financial alternative? We gathered the biggest myths and legends surrounding bitcoin. See how many of these you believe — and which lies you can catch in the act.
True or false: Bitcoin supplies remain limited.
False, sort of: Supplies can be increased
According to The Washington Post, Goldman Sachs published a report stating that “bitcoin has a mathematically certain total supply.” Some buyers, such as Ron Paul, like the idea that no government can devalue bitcoin by increasing the supply.
The currency’s original design calls for creating the 21 million units slowly over the next 100 years or so. That said, the community can amend that by consensus, if a majority of participants decide otherwise. That has already occurred several times.
True or false: Transactions receive anonymous protection.
False: Officials or savvy users can trace transactions
Nakamoto, bitcoin’s founder, claimed that the currency offers privacy, since transactions do not get listed under real-world identities. Bitcoin’s blockchain, the permanent public record of transactions, also uses pseudonyms. Users can use as many pseudonyms as they want, and additionally, most Bitcoin software creates a unique pseudonym for every transaction. WikiLeaks actually encourages donors to use Bitcoin because of its “anonymous” nature.
That said, law enforcement or individuals can track a user’s pseudonyms by studying patterns in the blockchain. Several blockchain analysis firms already offer their services to law enforcement. Sorry, criminals. Your identity isn’t as safe as you think.
True or false: Bitcoin cannot be regulated by law.
False: Many laws already apply to bitcoin
Bitcoin Magazine reports that several states, such as New York, already regulate bitcoin exchanges. Elsewhere, rules on money transmission services regulate the transactions as well. All mainstream bitcoin exchanges at least try to comply with laws to prevent money laundering. The IRS also regards bitcoin as taxable property. In addition, the Securities and Exchange Commission recently began cracking down on initial coin offerings under its existing authority to regulate securities.
True or false: Mining uses a ton of energy.
True: But maybe not as much as you think
Because of its decentralized nature, nobody knows exactly how much power bitcoin mining computers suck up. Experts hypothesize the rigs probably eat up several gigawatts at any given moment, roughly equal to the output of the Hoover Dam. Reports exist that individual transactions use as much energy as a home uses in a week. Others say bitcoin will consume all of the world’s electricity within a few years.
That said, traditional currency does not come in looking rosy, either. Consider the costs of running banks, the mint, and all of those ATMs alone. When looked at comparatively, bitcoin’s energy drain — while not insignificant — does not look catastrophic.
True or false: Some countries ban the cryptocurrency.
True: But rules may change over time
According to Bitcoinist, a small number of nations have made cryptocurrency officially illegal. Ecuador actually launched its own digital currency after banning bitcoin. Meanwhile, the blockchain industry booms in places like the U.S., Japan, Hong Kong, Singapore, and Switzerland. Some experts believe bitcoin may even play an increasing role in geopolitics. “It’s impossible to ban bitcoin and cryptocurrency trading because the more you regulate, the more it will become popular,” explained Francesco Nazari Fusetti, co-founder and chief executive officer of Aidcoin.
True or false: The currency could get shut down.
False: Governments would have to shut down the internet
Hesham Rehman, CEO and co-founder of Bitxoxo, told Entrepreneur that every time the price of bitcoin surges, people get nervous. Rehman explained that if bitcoin could become too big to survive, that would have already happened. In addition, he said shutting it down entirely looks almost impossible. In order to do that, regulators would have to shut down backup servers, as well as the internet, in general. We don’t think Al Gore plans to retire his creation anytime soon.
True or false: Only criminals use bitcoin.
False: It would actually make a pretty terrible criminal currency
Because of its early links to the Silk Road, some people believe bitcoin works best for crime. In reality, all bitcoin transactions get broadcast on a public ledger. That makes it the most transparent value transfer system in history. Put another way, criminals would be better off using good old green or even banks.
In addition, an October 2017 report from the U.K. Treasury found that “there is no specific evidence of terrorists using [cryptocurrency] to store or transfer funds and the sector is assessed to be exposed to relatively low risks for terrorist financing.” The study also found “a lack of evidence” of criminals using bitcoin, noting that other methods offer “greater attractiveness.” Another study by cybersecurity firm Elliptic revealed that less than 1% of all bitcoin transactions have criminal origins.
True or false: Hackers can easily steal it.
False: But owners need to take precautions
According to InvestorPlace.com, cryptocurrency ranks as one of the most secure assets an individual can own. It does require that the investor secure it themselves, however. Cryptocurrency exchanges, as third-party platforms, can get hacked. If you want your bitcoin to stay safe, keep it off the exchanges. In addition, non-cyber currency also does not have a great safety record. U.S. credit reporting agency Equifax announced recently that the Social Security numbers along with other personal information of millions of Americans may have been compromised, and that happens alarmingly often. To keep your bitcoin safe, keep it yourself.
True or false: Buyers must obtain whole coins.
False: You do not need a lot of coin to buy into bitcoin
Entrepreneur notes that the most common myth about the cryptocurrency is that buyers can only get it by the coin. Saurabh Agrawal, co-founder of Zebpay, said that bitcoin can actually come in as fairly affordable. “[The currency] is divisible to about 8 decimals. As it is also available in units, one can even buy 10 dollars [worth of bitcoin],” he said. “The demand will increase and as the supply is limited, there will never be a good or bad price for bitcoin. You cannot time the market,” he said.
Follow The Cheat Sheet on Facebook!