Bitcoin can be polarizing. Bitcoin diehards claim the cryptocurrency will soon replace gold, all government-backed money, and credit cards, as well as turn the banking system on its head. Rational exuberance aside, that is unlikely to happen, at least in the short term. On the flip side, media critics often badly mischaracterize Bitcoin as nothing more than a speculative tool, an environmental disaster, a bubble, or worse.
This makes an honest, sober analysis of the facts by an investor almost impossible, which is a shame. As a new asset class, investors must do their homework on Bitcoin and carefully consider the risks before jumping in.
So in that spirit, it’s keep reading to fact-check a few common Bitcoin misconceptions-
1. Blockchain is Bitcoin and Bitcoin is Blockchain
False. Bitcoin was the first widely known or adopted use case of cryptocurrency that was built on blockchain technology. Blockchain technology can be used for applications beyond the financial world. Blockchain is a type of distributed ledger technology, but not all distributed ledgers are effectively blockchains.
2. A cryptocurrency is real money that can be used for payments
Cryptocurrencies such as bitcoin and Ethereum were designed as a way to make payments without relying on traditional modes such as currency notes, debit cards, credit cards or checks. The bitcoin white paper, which set off the cryptocurrency revolution, envisions an electronic payment system that allows “any two willing parties to transact directly with each other without the need for a trusted third party,” cutting governments and banks out of the financial loop.
As Lissa Edwards, a technical writer at 1 Day 2 write and Write my X puts it- “It has become very expensive and slow to conduct transactions using cryptocurrencies. It takes about 10 minutes for a bitcoin transaction to be validated, and the average fee for just one transaction was recently about $20. Ethereum, the second-largest cryptocurrency, processes transactions slightly faster but also has high fees.”
3. Cryptocurrencies are a good investment
This doesn’t necessarily have to be a myth per say, but it definitely calls for some caution. Investment funds in bitcoin and other cryptocurrencies have proliferated. Even major banks such as Goldman Sachs and Morgan Stanley are getting into the game. And you would certainly have made a fantastic return if you had bought any of the major cryptocurrencies last year. A typical article in the Motley Fool debates not whether cryptocurrencies are a good investment but “which one is right for you.” The website Business Mole claims: “Even with adjustments made, Bitcoin and Ethereum are very profitable. It’s simple.”
But beware. Part of the allure seems to be that, like gold, the supply of most cryptocurrencies is tightly controlled (by the computer programs that manage them). For instance, about 18.5 million bitcoin have been created so far, and there will eventually be a maximum of 21 million bitcoin. This is a cap set by the computer program that manages the supply of the currency.
4. You Need an Advanced Degree to Work with Blockchain
Not at all! To build on or use blockchain technology, there are many tools in the market to assist in leveraging the technology, and several blockchains allow you to develop applications in almost any contemporary coding language.
5. Blockchain Is Better than Traditional Databases
Eleanor Smith, a business writer at Brit Student and Next Coursework says- “To some proponents, blockchain has never met a use case it didn’t like, but the individual use case will determine the best database. Blockchain has its pros and cons but may not be the best fit for a specific environment.”
6. Enterprise businesses are not adopting blockchain
Not true! Fortune 500 companies across all sectors including banking, fintech, pharmaceutical, technology, agriculture, retail, and more are driving blockchain development.
7. Bitcoin is only used for speculation
This is not accurate. Every day, the Bitcoin network settles approximately $10 billion worth of transactions. Bitcoin’s average of 305,000 daily transactions is not far behind Fedwire, the Federal Reserve’s settlement system for wire transfers between financial institutions, at 550,000 transactions. Some of these transactions represent investment purchases, and some of those may be for speculation, but many others are for regular use like remittances, especially in the global South.
Guest article written by: Michael Dehoyos assists companies in their marketing strategy concepts, and contributes to numerous sites and publications. Also, he is a writer at Origin Writings. He is a business writer and editor at Dissertation writing service and Write my research proposal.