If you’re baffled, mystified, or perhaps even intimidated by this whole “cryptocurrency thing” that everyone seems to be talking about — from politicians to teenage gamers — then be assured that you aren’t alone. Plenty of people feel like a blockhead when it comes to the blockchain, and it’s frankly not their fault. It’s because the conversation is riddled with fiction instead of facts.
To help set the record straight, here are clarifying truths behind five enduring cryptocurrency myths courtesy of blockchain technology expert Nando Caporicci:
- Cryptocurrencies aren’t real money
Since money is generally understood as means to purchase goods and services — or lend your cousin some dough so he can finally fix that leaky basement — then cryptocurrencies are as legitimate as cash, credit cards, debit card and checks. What confuses a lot of people is that cryptocurrencies are not tangible, like paper money or coins. But these days, so many people pay for things with through smartphones and smartwatches that the concept of tangible money is becoming less and less common. Just as that transaction process is valid, so is using cryptocurrencies. It’s just a state of mind and a matter of perception than objective reality. Nando Caporicci explains that some teenagers out there only see and touch cash when their older relatives’ gift them a $20 or $50 on birthdays and holidays.
- Cryptocurrencies are purely speculative
This myth is driven by the rather wild fluctuation of cryptocurrencies like Bitcoin in recent years, and by the mainstream media frenzy that has accompanied it. However, as governments get involved the volatility will stabilize, and cryptocurrencies in one form another will be part of the financial toolkit. Adds Nando Caporicci: “It’s worth nothing that the U.S. dollar, which is widely hailed as the safest and most trusted currency in the world, has no intrinsic value and is therefore arguably purely speculative. It’s just a different kind of speculation that is largely driven by institutions like central banks and multinational corporations, rather than individual retail investors. Once this hype subsides the volatility will be replaced by the more traditional ebb and flow that we see with fiat currencies like the US dollar or Japanese Yen.”
- Cryptocurrency is a Ponzi scheme.
Even Charles Ponzi — whose name is forever associated with pyramid scams — would balk at this allegation, simply because cryptocurrencies do not meet any of the defining characteristic of a Ponzi scheme. Specifically: there is no manipulative con game to get more people to invest, there are no fat cats at the top of the pyramid waiting to cash out, and most notably, there are no “too-good-to-be-true” promises. It’s true that some people have lost a significant amount of money investing in cryptocurrencies like Bitcoin. But this is not because any pyramid collapsed. It was because their speculation was based on dubious information or, in some cases, driven purely by greed. We see the same thing in the housing market, in the stock market, in the collectables market, and sometimes even in the money market as currencies overheat. Nando Caporicci does note however that some people have tried to use the growth of cryptocurrencies as a method of running a pyramid scheme of their own, these are not actually cryptocurrencies but rather people just trying to prey on the uninformed.
- You need an advanced computer science degree to use cryptocurrencies.
While cryptocurrencies are rooted in some seriously complicated algorithms, virtually anyone can use them to purchase all kinds of stuff — from booking hotel rooms to buying some creative wares from Etsy. All that folks need to do is get a Bitcoin wallet, and then use a credit card, bank transfer, or debit card to purchase Bitcoins from the Bitcoin exchange. Adds Nando Caporicci: “The process takes about two minutes and is remarkably simple. And it’s safe as well, since a Bitcoin wallet stores an individual’s long and complex private key; not their actual Bitcoins, which are not stored anywhere.”
- Cryptocurrencies are for dubious purchases — and hackers.
Of all the myths on this list, this one is probably going to take the longest for the pro-cryptocurrency community to shake off. Yes, it’s true that hackers — particularly those whose stock in trade is ransomware — prefer cryptocurrencies because transactions are extremely hard to trace. But the notion that cryptocurrencies are some kind of illicit currency for underground and “dark web” transactions is patently false. All kinds of businesses accept cryptocurrencies (typically Bitcoin), such as Overstock.com, Newegg, Shopify, and Microsoft for purchasing games, movies and apps in the Windows and Xbox Stores. Adds Nando Caporicci: “Once regulations kick in and governments start taking a piece of the action, it’s just a matter of time before virtually all e-commerce retailers, and then eventually brick and mortar stores, accept cryptocurrencies — because if they don’t, then they’ll be cutting themselves off from a major portion of their potential customers; especially digital natives, who are often the most coveted and profitable target market.”
Nando Caporicci concludes that cryptocurrencies have a lot of myths surrounding them not because they are dangerous but because they are a completely new form of currency that people are not used to. By taking the time to research cryptocurrencies on your own or talking to a financial advisor who understands the market, these myths practically debunk themselves.