Claiming that Bitcoin is inherently worthless or a massive pyramid scheme are just two of the most common myths about Bitcoin. With so much false information on the web today it’s no wonder there’s such an array of misconceptions regarding Bitcoins. Some might say Bitcoin is only for true believers (known as “Bitcoin maximalists”) and that nothing could be said to change the mind of skeptics. However, that view is only the basis of another myth; that there’s no evidence to prove the value and longevity of Bitcoin. The good news is that with the right information it’s easy to debunk the common myths surrounding Bitcoin.
5 Common Bitcoin Myths Debunked
- Bitcoin is worthless. One common myth attributed to Bitcoin is that it’s worthless since it isn’t backed up by anything. This is often stated as Bitcoin’s supposed lack of intrinsic value. By contrast, gold is said to possess inherent value as it can be made into jewelery or used for industrial processes. This myth is invalid on two fronts. Firstly, Bitcoin can only be issued and maintained through the use of massive computing power powered by electricity. Thus, Bitcoin is backed by both hardware and energy. Secondly, digital fiat money has no inherent value either, other than its backing by the state and its usefulness as money due to its wide acceptance. As Bitcoin is more widely accepted on a global level than many nation’s fiat currency, Bitcoin has a lot of value simply due to its usefulness as money.
- Bitcoin is just a big pyramid scheme. The basis of a pyramid scheme lays in the fact that there is one main company or organization that promises its investors a guaranteed profit. But since Bitcoin has no authoritative body to make such promises and is after all a peer-to-peer based cryptocurrency, there is no basis to the claim that it’s just some pyramid scheme. Furthermore, pyramid schemes invariably collapse because the rate of new entrants slows to the point that old entrants can no longer be paid from join-up fees. In Bitcoin, the system can still function without any new users.
- Bitcoins enables criminal activity. Criminal transactions are done on darknet markets, such as the infamous Silk Road (which was seized and taken offline years ago). These darknet markets, mostly used to trade soft drugs like marijuana, somewhat tarnished Bitcoin’s reputation in the early days, mostly due to a lot of negative media coverage. While it’s true that some people take advantage of the pseudonymous nature of Bitcoin for illicit purposes, _ the greater truth is that criminals also use all other forms of money, from cash to bank transfers, to achieve the same ends. The fact that a certain form of payment is used in the context of illegal activity doesn’t mean that the currency itself is criminal in nature, otherwise we’d have to declare all national currencies as criminal vehicles too. A study by Ellptic reported that less than 1% of Bitcoin transactions are of illicit origin.
- Bitcoin mining is bad for the environment. Recently an article that was published in Bloomberg magazine claimed that Bitcoin mining consumes so much energy that it’s destructive to the environment. But in fact, if we compare the amount of energy used in other industries, or let’s say in printing and distributing fiat currencies, we would actually see that in comparison Bitcoin mining conserves energy. Furthermore, a lot of the energy used in Bitcoin mining – by some estimates around 74% – is from renewable power sources.
- Bitcoins can’t be used as money. This misconception stems out of the fact the after all Bitcoin is relatively new and can’t be used in a widespread manner across the world as a payment method. But the truth is that every day you can find more and more marketplaces online and offline in which you can use BitCoins. A great example of how you can use BitCoins in your day-to-day life can be seen in Forbes’ Kashmir Hill’s article series “Living on Bitcoin for a Week,” first published in mid-2013. By now, the situation is vastly improved, with major corporations from Microsoft to Tesla accepting Bitcoin and Bitcoin debit cards allowing it to be spend anywhere with a card machine.
It’s important to remember that since Bitcoin is such a hot topic these days, it’s expected that myths and misinformation will continue to appear on the subject. Skeptics, rivals and critics will continue to dismiss the value of Bitcoin and continue making new claims, often because it’s in their financial interest to convince of the superiority of their favored altcoin or monetary platform. It’s important to be aware of that and not accept every claim made at face value, even if it’s from an authoritative person or group, but rather double check the information you are given.