Since Bitcoin first appeared on the scene in 2009, you might have heard many myths and misconceptions about cryptocurrency, or crypto. Some people believe that only criminals use it, while others think it’s not a viable investment. To clear up some of the confusion, we’re looking at five of the most common misconceptions about cryptocurrency.
Misconception 1: All Crypto Is the Same
This is one of the most common misconceptions about cryptocurrency. In fact, there are over 4,000 different types of cryptocurrencies. They all share some similarities, such as being based on blockchain technology, but each has its unique features and purpose.
For example, Bitcoin is the original cryptocurrency and primarily used as a digital currency, while Ethereum is a platform that enables developers to build decentralized applications.
Misconception 2: You’re Guaranteed High Returns
Investing in cryptocurrency is risky, and there are no guaranteed returns. The price of Bitcoin, for example, has been incredibly volatile through the years, sometimes rising and falling by hundreds of dollars in a matter of days. There’s potential to make a lot of money from investing in cryptocurrency, but it’s important to remember that there’s also the potential to lose money.
Misconception 3: US Dollars Back Cryptocurrencies
No government or central bank backs cryptocurrency. If the value of a cryptocurrency falls, there’s no government to bail you out. This also means you’re not protected from fraud or theft, as there’s no government regulation of cryptocurrency exchanges. Bitcoin, for example, uses Bitcoin miners to verify transactions and add new Bitcoin to the blockchain. These miners get rewards such as Bitcoin for their work, which creates new Bitcoin.
Misconception 4: Crypto Isn’t Secure
Another common misconception about cryptocurrency is that it’s not secure. It’s true that there have been some high-profile hacks of cryptocurrency exchanges, such as the Mt. Gox hack in 2014, but the Bitcoin network itself has never been hacked. This security is because Bitcoin (and other cryptocurrencies) use decentralized ledger systems, meaning hackers have no single point of attack.
Misconception 5: Crypto Is a Scam
Perhaps the most common misconception about cryptocurrency is that it’s a scam. There have been some scams involving cryptocurrency, such as Ponzi schemes and fake ICOs (initial coin offerings), the technology itself is not a scam. Cryptocurrency is a new, innovative way of handling transactions, and many legitimate businesses are on top of it.
There are a lot of myths and misconceptions about cryptocurrency. However, by understanding the technology and how it works, you’ll see its potential to work in various legitimate ways. Find a way to get involved, and start learning more about cryptocurrency today.