Cryptocurrencies have become a hot topic in the discussion of investment and asset building. But all of this has created a myriad of rumors and myths that manipulate people's perspectives on cryptocurrencies.
Knowing the truth is important if you want to make informed decisions, including crypto assets and monetary investments. Here are some myths about cryptocurrencies that are completely untrue, such as Bitcoin and Ethereum.
1. Cryptocurrencies are not secure
Many people question the security and security of crypto transactions. This is acceptable as there are no organizations or authorities to contact in case of fraud. But the truth is that cryptocurrency transactions are safer than fiat records.
In a centralized system, organizations such as banks store transaction records in one common ledger. If an attacker breaks into the central network, it could tamper with all transactions. However, for cryptocurrencies such as Bitcoin, records are stored in block format in a central ledger called the blockchain.
Hacking the blockchain is almost impossible because the blocks are immutable. That is, no one can modify the block after it has been created. Also, anyone who wants to be part of the network can publish their records.
However, reports of various crypto hacks may violate this statement. However, you need to be aware that these incidents can be traced back to the vulnerabilities found on the cryptocurrency exchange website, not the cryptocurrency itself.
2. Cryptocurrencies are illegal
Many people are discussing this myth, but people need to know that the intent behind the transaction does not make the currency illegal. Criminals can also use paper currency to engage in illegal activities.
The anonymity behind blockchain transactions contributes significantly to this myth. Cryptocurrencies are increasingly attracted to this digital currency because there is no "finger information" associated with a particular person.
But that doesn't mean that no one can trace them back using transactional data. The blockchain transaction does not contain any specific information, but it does contain the user's wallet address that can be further linked to the actual ID.
3. Cryptocurrency assets are invaluable
For a long time, governments around the world have been discussing income tax rules for digital assets such as cryptocurrencies. This is evidence that even the government believes that the profits associated with investing in cryptocurrencies are realistic enough to be taxable.
Before the introduction of fiat money, the representative currency was the standard. These currencies were directly associated with physical commodities such as gold and silver. Like representative money, cryptocurrencies are backed up by the cost of producing new units.
Take Bitcoin as an example. Bitcoin mining is the process responsible for creating new Bitcoins. Miners need to run the system 24/7, so mining Bitcoin requires a lot of energy. As new miners join the network, total energy consumption will increase, resulting in higher (but potentially lower) Bitcoin prices.
The increased monetary value of cryptocurrencies is sufficient to uncover this myth.
4. Cryptocurrencies make you rich quickly
You may have seen advertisements or fake financial "guru" on the Internet promoting your products by offering "gambling scams" schemes to the general public.
People tend to believe in such counterfeits without considering the risks associated with cryptocurrencies. Of course, unless you're an expert, don't let anyone process your digital assets for your investment, as you won't trust strangers with your hard-earned cash.
Also, cryptocurrencies are really unstable. At the time of writing, the value of 1 Bitcoin is about $ 33,792. Look at the price chart for the last 24 hours.
The minimum value for this period is $ 31,633 and the maximum value is $ 32,756. This is enough to show that if you are looking for a short-term investment in cryptocurrencies, you are likely to have to face losses.
5. Cryptocurrency is a scam
Cryptocurrency-centric scams and scams are fast-paced. But that doesn't mean that cryptocurrencies are "scams." Before investing, it is important to understand the technologies behind cryptocurrencies and how they work.
As mentioned earlier, cryptocurrencies are more volatile than any other investment option. However, with careful consideration and a thorough analysis of its impact, you can maximize your profits while minimizing losses.
On the contrary, those who do not spend their time and effort on research will face unexpected peaks and valleys in price charts.
6. Cryptocurrency replaces fiat currency
Many people think cryptocurrencies are not secure and only hackers use them for illegal purposes, while others are stable enough for cryptocurrencies to replace paper currencies like the dollar. I believe you are doing it.
A few months ago, Tesla CEO Elon Musk tweeted that Bitcoin can now be used to buy Tesla cars.
While this clearly shows that cryptocurrencies are being accepted by people for serious transactions, Bitcoin as an alternative to fiat is still a big dream for crypto enthusiasts.
7. Cryptocurrencies are bad for the environment
The impact of crypto mining on the environment is an incendiary topic.
Many argue that cryptocurrencies like Bitcoin do not have a negative impact on the environment, but most industries and organizations use large amounts of electricity for their work, and cryptocurrencies are other financial processes ( Or claims to consume more energy than the whole country).
Some cryptocurrencies are self-sufficient. That is, it does not rely on physical commodities like gold for generation and evaluation. However, how Bitcoin and other cryptocurrencies work will someday make it very difficult for users to generate new units, and ultimately the amount of energy used to mine cryptocurrencies. Will decrease.
Also, some eco-friendly Bitcoin alternatives use a modified form of the traditional Proof of Work (PoW) mechanism known as the Proof of Stake (PoS) consensus mechanism.
Related: Proof of Work vs. Proof of Stake: Cryptocurrency Algorithm Description
Should You Invest in Cryptocurrencies?
In today's world, where everything is digital, cryptocurrencies are definitely a step in the journey. Unfortunately, that's also why many people are having a hard time understanding why they need to encourage cryptocurrencies.
Anyone familiar with how cryptocurrencies
and mining work can start investing in crypto assets. However, first, determine
your appetite for risk, keeping in mind the risks involved. You also have to
choose between mining cryptocurrencies yourself or purchasing using a
cryptocurrency exchange platform.