We’ve all heard them before.
As a groundbreaking innovation, bitcoin naturally attracts skeptics just as strongly as it attracts supporters, and the technical and theoretical complexity of the digital currency can cause a considerable amount of confusion with those who are not ‘in the know’.
The result is that critics of bitcoin oftentimes fall back on one or two euphemisms to express why they think it will never succeed – simplified statements like “bitcoin is a ponzi scheme” that higlight often misunderstood characteristics of the digital currency but rarely fully address the situation.
One of the first articles published on CoinDesk was dedicated to debunking these “bitcoin myths”, and because they still pervade the industry, we’re revisiting the topic.
Here are six (more) bitcoin myths, debunked.
1. It’s just a speculative investment opportunity
Many people first hear about bitcoin in the context of its price. Whether it was the bubble of late 2013 or the recent dip below $300, a good chunk of the general public thinks of bitcoin only in terms of how volatile the price is and how good (or bad) of an investment it could be.
The truth is, of course, that bitcoin goes far beyond its classification as a commodity. The decentralized peer-to-peer payment network made possible by bitcoin is only one example of how bitcoin is breaking down doors. If the price of bitcoin were theoretically to stay the same forever, it would still have utility in many other areas other than as a speculative investment.
2. The blockchain is the real breakthrough and bitcoins are unnecessary
It’s true – the blockchain is arguably the real genius of Satoshi Nakamoto’s invention. The distributed ledger and trustless security of the blockchain is what gives bitcoin its magic, but oftentimes when people first realize this, they discount bitcoin as just one use case of the blockchain.
In reality, mining is the bread-and-butter of the bitcoin protocol, and without miners there would be no blockchain. Consequently, miners need to be rewarded for their work, otherwise they would have no incentive to contribute their time and computing power to maintain the blockchain. As its native reward token, bitcoin is essential to the functionality of the blockchain.
3. The government could/will shut it down
While governments around the world may still be figuring out how to approach digital currencies, many misinformed people fall into the trap of thinking that, like almost anything else we’re used to, bitcoin could be shut down by governments if one or more of them hoped to do so.
Yes, governments have the power to make it very difficult for their citizens to use bitcoin and some form of government regulation is inevitable as bitcoin matures. Even so, because of its infrastructure, it would take considerable time, money and energy for any government to pose a serious threat to the global bitcoin network, if they even could at all.
4. You can’t buy anything practical with bitcoin
Perhaps as a follow up to myth number one, a lot of people are surprised to hear that bitcoin is more than a speculative investment and that it can actually be used to pay for everyday goods and services.
In addition to the retailers above, PayPal has announced partnerships with bitcoin companies and Microsoft recently began accepting bitcoin for a host of digital content like games and videos. Add in the countless small businesses that accept bitcoin either online or in their brick-and-mortar locations, and it’s safe to say there are options when it comes to spending your bitcoin.
5. There are no advantages of bitcoin over cash or credit cards
Once people realize that bitcoin can, indeed, be used to buy real things, they may not see what the digital currency has to offer that their incumbent payment methods like cash and credit cards don’t. Luckily it doesn’t take long to debunk this myth.
Some of bitcoin’s most obvious benefits are its low transaction fees. Typically, transacting bitcoin saves merchants 1-3% compared to transacting credit cards, and when compared to services like Western Union, bitcoin is clearly superior – especially for sending money abroad.
6. The only people who would ever use bitcoin are tech nerds and criminals
Some of the earliest adapters of bitcoin may be techies and dark market shoppers, but the same could arguably be said about the Internet – and look who uses that now. Regardless of how esoteric the bitcoin community may be right now (and it’s pretty esoteric), adoption takes time.
As entrepreneurs in the space continue to build consumer-friendly apps with bitcoin and awareness of the digital currency spreads, a more diverse crowd will come to use it in their everyday lives. There’s also another important demographic that many forget about: the millions of unbanked people throughout the developing world who rely on mobile phones as their computer, bank and communication device all in one.
Whether it’s any of the above myths or perhaps one of the 10 we previously debunked, bitcoin is ripe with misunderstanding. For bitcoin to reach its full potential, this knowledge gap needs to be bridged so that the myths and misinformation come to an end.
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