Some say that Bitcoins have taken the world by storm, while others beg to differ. Since its recent introduction in 2009, Bitcoins have questioned the financial feasibility of existing currencies. However, many financial analysts and economists have questioned the effectiveness of Bitcoins as a form of digital currency.
Since Bitcoin has not YET evolved as a generally acceptable source of exchange and payments, it has a list of myths associated with it, some of which are listed below.
Myth # 1: Bitcoins Do Not Have a Value Attached to Them
Whether or not Bitcoins have a considerable worth or value attached to them is a highly debatable matter. According to many financial analysts, since bitcoins have no centralized regulatory body, they lack financial and government back up. However, many critics argue that the relative value of a currency is influenced by its respective demand and supply in the market. Therefore, as long as bitcoins are demanded and supplied, their value will, likewise increase.
Myth # 2: Bitcoin is a Currency
Bitcoin is, at times, referred to as the digital or crypto currency of the 21st Century. However, given its extensive network of buyers and sellers makes it more of a system than a currency. Instead of a currency, Bitcoin is merely another alternative to making payments through means such as credit cards and PayPal. Therefore, Bitcoin is truly rewarding as a system, but lacks credibility and authenticity when it comes to labeling it as a currency denomination.
Myth # 3: Bitcoins Promote Terrorism and Drug Abuse
Due to the convenience and ease of payment transfer involved with Bitcoins, it is known to be widely used by a mafia of drug dealers and terrorists. However, the fact that Bitcoin is the most fluctuating means of payment, is perhaps overlooked by the majority of people. Unlike an entrepreneur, drug dealers and terrorists want a zero or minimal capital risk in their transactions. Due to the high level of volatility offered by Bitcoins, they become a risky source of payment for drug dealers and terrorists, alike.
Myth # 4: Bitcoin Transactions Cannot Be Traced
Bitcoins are not totally anonymous. Since Bitcoin is an open source system, the transactions that are taking place, quite literally, are visible to all. Although Bitcoin is big on anonymity and refrains from giving out names and addresses, it does not make it “untraceable”. Always remember, nothing is private or hidden anymore on the internet. With the right skills and expertise, every transaction can be traced back to the actual owner of the Bitcoin.
Myth # 5: Bitcoins are Used for Money Laundering
Given the level of anonymity offered by Bitcoins, it would be a hasty generalization to say that Bitcoins are used to launder money. If nothing, Bitcoin has a well integrated system which can easily be traced, making all the transactions transparent.
“If you look at the market cap of Bitcoin, that (would be) an awful lot of illicit activities,” said bitcoin user Jason Williams. “The Silk Road demonstrates there is a market but, then again, so does the drug dealer on the corner accepting cash.” The bottom line is that if a person wants to launder money, he would do so, regardless of whether he uses cash, online wiring or Bitcoins.
Myth # 6: A Hacker Can Easily Gain Access to the Bitcoin Network
Bitcoin uses advanced technology, which is quite ahead of its time. It is, at times, difficult to find a hacker with such a level of technical expertise. However, even if someone manages to gain access to it, there is only a little he can get his hands on. The system is devised in such a manner that it becomes next to impossible for hackers to create coins, transactions or steal anyone’s money.
To say the least, an attacker can only be able to alter his transactions and restrict others from getting a confirmation of their transactions. Realistically, the effort and energy devoted by an attacker would not be of much use, even after he gains access to the internal operations of the Bitcoin network.
Myth # 7: Bitcoin is Everywhere!
According to various financial analysts, Bitcoin has a massive coverage and is, quite literally, everywhere. It is an undeniable fact that its network has grown and multiplied exponentially. However, the total worth of Bitcoin is a meagre of $10.8 billion, which currently values at 0.3% of the cash reserves of the world. Therefore, it might not be a decade or so, till Bitcoin literally becomes huge.
Myth # 8: Bitcoins are Illegal
In a thriving economy, bills, notes and coins are usually backed up by the government. In other words, their use is validated and authenticated by the ruling power, which leaves little or no doubt about them being a legal tender. However, the same cannot be said about Bitcoin, since they are neither printed nor issued by the government.
Having said that, many governments are still not accepting and validating the use of Bitcoins. Needless to say, Bitcoins lack the general level of acceptability, but this hardly makes them illegal. Thus, do not believe all of what you hear about Bitcoins. Understand the dynamics behind the entire system and then question its usefulness.