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10 Biggest Misconceptions About Bitcoin

2 December 2020

It Is Already Tough to Put Money in Something We Don’t Understand, Myths Push Us Farther Away. Let’s Bust ‘Em!

Bitcoin was the first cryptocurrency to successfully record transactions on a secure, decentralized blockchain-based network. Since it launched in 2009 Bitcoin has stayed the largest cryptocurrency measured by market capitalization and amount of data stored on its blockchain.

There is a lot of information about Bitcoin and crypto currency in general that swirls around the bbq conversation and across the dinner table. And while it’s easy to have an unfounded opinion, it’s harder to get to the hard facts and form an educated opinion on how it works.

One thing is for sure, there are plenty of misconceptions about the digital currency, and in this article we’re going to clarify 10 of the biggest misconceptions about Bitcoin so that even if you have 99 problems, Bitcoin ain’t one!

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If you find bitcoin a complicated subject, it’s best not to deal with a long article about it. Here’s a fun and short video version for this topic:

With that bit painted, let’s move on to the coin and the myths around it.

1

Bitcoin Is Anonymous

Bitcoin isn’t like cash, with cash once you trade it for goods or services there is no trace of you on the cash. Bitcoin is more like an infinite data ledger, and it keeps record of every cryptocurrency transaction ever made. This allows law enforcement to track down money trails and trace activity back to people because all Bitcoin transactions are stored publically and permanently on the network.

That being said, like all things online, there are ways to modify or hide your identity. So it’s not so straight forward if users don’t supply the correct information. In short, Bitcoin is pseudo-anonymous.

2

Bitcoin Is Used for Criminal Activity

Because of the structural fundamentals of crypto currencies, it does make it easy to facilitate crime. Mostly through money laundering income from nefarious activities into legitimate transactional funds.

This doesn’t mean that the whole web is alight with un-policed criminal cryptocurrency. Just like not all cash is used for criminal activity, but some is, it’s the same for Bitcoin. There are plenty of businesses set up to track and report money laundering to crypto currency exchanges and financial institutions.

3

You Need to Buy Full Bitcoin

While researching for this, Bitcoin values fluctuated between 16 and 17 thousand dollars. So, if you’re thinking of going out and buying Bitcoin this could be a bit of a daunting first investment.  The good news is that you can buy part of it. Because it’s digital it’s not like a dollar with only 100 cents in it, it can be divided into as many as one hundred million pieces. Meaning that you can own a fraction of Bitcoin with only a small investment. You can also sell, pay, and send these small bits and pieces of Bitcoin. So there you go, myth dispelled, now you know that Bitcoin is an option for any size investor.

But before you go out in the market, here are 15 Reasons Why You Should Invest In Crypto

4

Bitcoin and Blockchain Are the Same

As your gran would say: What is all the bitcoin and blockchain hocus pocus? Well here it is:

Bitcoin is a cryptocurrency, one of many, the same way each country has a currency, there are many different cryptocurrencies. Blockchain powers it, and any other cryptocurrency. It is basically a distributed database, which acts like a big log book of transactions. Blockchain has to follow similar rules to a bank, like having customer information and all their details. Whereas Bitcoin is pseudo anonymous as we already explained. With a system like Blockchain you can transfer other things, not just currency, it could change the way business is done with property transfers and providing sensitive information safely.

5

Bitcoin Can Be Hacked

Bitcoin uses cryptography to secure transactions. And all of the transactions are recorded in the blockchain ledger. Users and blockchain technology are constantly reviewing the system and looking for weaknesses and repairing them so that it is difficult to hack.

The more common way that Bitcoin would be stolen is if a hacker hacked into an individual’s computer and found log-ins to someone’s digital wallet and then stole their bitcoins that way.

Hacking via the blockchain and avoiding being caught is really difficult. It’s one of the many reasons that blockchain technology is truly changing the world.

6

You Can’t Pay for Anything With Bitcoin

By now you’re probably considering investing in some Bitcoin, but are wondering what the hell you will do with it once it grows in value, amiright?

Well the truth is that spending your Bitcoin is easier than you might think.

36% of small businesses in the US already accept Bitcoin. Heck, even in South Africa you can for your speeding fines with it!

So that means paying for a haircut, a coffee or even a dog-grooming service are all possible with your Bitcoin.

Big Companies like Microsoft and telecoms AT&T also happily accept Bitcoin. You can even use a custom search engine called spendabit.co that allows you to search for stores you can splurge at.

7

Bitcoin Is a Pyramid Scheme

A pyramid scheme in essence is a business model that needs its members to recruit new members to keep it afloat. It offers rewards for recruiting new members, and you get a knock on commission for what they sell.

Bitcoin doesn’t offer any reward or guaranteed return for buying its coins.

There are cryptocurrencies that have been caught in a pyramid scheme, like OneCoin, keep reading and we will give you the scoop in this scandal later on.

Scammers might use Bitcoin in their pyramid schemes, but Bitcoin itself as a currency isn’t to blame, in the same way that any currency could be the currency used by a pyramid scheme in the long history of pyramid schemes.

8

Bitcoin Is Complicated and You Need to Know Code

BitCoin is complicated in the same way that the car you drive or the phone you own is complicated. Of course, it requires a degree of technical experience and knowledge to build a car and a cell phone, but you don’t need to have this knowledge to own or use one.

The exact same principal goes for Bitcoin. You don’t need to be a miner or be able to code to be able to own the currency.  Because it is a new concept there is a natural curiosity to know how it works, and a healthy mistrust in it. But remember how people originally thought we would all explode from travelling at the speed of a steam train? Well don’t be that guy when it comes to Bitcoin.

9

Bitcoin Is Not Regulated

In simple terms bitcoin isn’t regulated in the traditional sense of some currencies or investments. But that doesn’t mean that it is a free for all. The trust in this crypto is that it requires no trust at all. It is a fully open source and decentralized. Everything about it is available to anyone at any time.

Everything is transparent and in real-time and all transactions can be seen. Payments don’t rely on a third party to be made. And most importantly the whole system is protected by peer-reviewed cryptographic algorithms like those used for online banking. No one person can control it, which means that even if there is a shady element in its users, there are plenty of regular Joes too that won’t let it go to garbage!

10

Bitcoin Is Illegal

In most countries Bitcoin is completely legal. Argentina and Russia have very strict bans on foreign currencies and in these countries it is illegal. In other countries, like Thailand for example, government limits the licencing of entities like Bitcoin exchanges which makes it harder to succeed.

As the use of Bitcoin grows, each country has a responsibility to provide its own regulations and rules on how individuals and businesses should use this new technology. They will also provide the rules on how it will integrate with their traditional financial system. In the US within the United States Treasury Department is a body called the Financial Crimes Enforcement Network (FinCEN), this bureau has issued non-binding guidance on how it characterizes certain activities involving virtual currencies. This kind of guideline and guidance will help cryptocurrency be recognised and used more and more in everyday life.

Question

What is your biggest hesitation when it comes to Bitcoin? What is the weirdest misconception you originally had about Bitcoin?