These are a few of the questionable words that frequently end the sentence, ‘Bitcoin is’. Around the globe, Bitcoin is no stranger to headlines or gossip and because of this it has naturally attracted a fanbase full of myths.
CoinCorner is an Isle of Man based bitcoin exchange, and they’re here to dispel confusion by debunking a few of the key BS myths lingering around the Bitcoin industry:
#1 Bitcoin is dead.
Whenever there’s a downward movement to bitcoin prices, you’ll undoubtedly hear people exclaim, ‘Bitcoin is dead!’.
Let us be clear, Bitcoin is far from dead and this myth is certainly one of the most common misconceptions. Here are 2 reasons why it’s not dead in the water:
- Bitcoin is founded on ‘cryptographic proof’, or people transacting together without involvement from the likes of a bank. This is a unique and compelling idea when compared to using traditional trade methods built on trust in a third party. Now that Bitcoin has hit the mainstream, it’s ‘reinvented the concept of money’ and created new possibilities in how we trade.
- The number of bitcoin transactions isn’t slowing down and this shows growth in the market, not stagnation. As transactions increase, so do the numbers of people buying and selling. These people then spread the word to friends, family and colleagues that they should get involved too. Bitcoin is appealing because it makes payments of any value easy and cost-effective to make. This strengthens its position as a currency.
The number of transactions per day showing growth over a 2-year period.
Takeaway: Bitcoin has revolutionised our relationship with money and, bonus, it’s bloody simple to use.
#2 Bitcoin is worthless.
Another myth associated with bitcoins is that they are worthless because, supposedly, they’re not backed up by anything like the £ or $ are… oh wait a second.
Way back in the day, the likes of the GBP was actually backed up by real, shiny gold.
This meant that there had to be enough gold in reserve to support the coins and notes in circulation. Did you know our pound coins haven’t been backed by gold reserves since the ‘30s and USD since the ‘70s? Fiat money (the coppers in your back pocket) isn’t backed by anything physical. Our money is pretty much magicked into existence by those up high. Mind blown.
In contrast, Bitcoin is backed up by math and mining power. You may or may not know that computers mine or create bitcoins every 10 mins. Some seriously legit algorithms control the supply of bitcoins, meaning that there’s no interference from third parties under pressure to generate more money. The actual value of a bitcoin is then determined by all of the people who use it and the demand that is created. It’s subjective and we collectively give the currency its value.
Takeaway: Bitcoin is backed up by something physical unlike many traditional currencies out there and is based on typical supply and demand economics.
#3 Bitcoin enables criminal activity.
Okay, so we’ve all done things in the past that we’d rather not remember (thanks for the reminders, Facebook Memories). Bitcoin is no exception and everyone in the industry accepts that it has a few bad times to forget too.
One of the most infamous crimes associated with Bitcoin is the website, the Silk Road. Unfortunately, the Silk Road gave Bitcoin a bad rep. as a means to support criminal activities. Although it’s true that people have taken advantage of Bitcoin, it’s important to remember that criminals will use any form of payment available to them to commit crime, as well as take advantage of other people.
An example of this is credit card fraud. It happens frequently (£618.0m fraud losses were recorded in 2016), but it hasn’t stopped any of us from using credit cards, right?
Also, you know how the Internet totally changed our lives and made them infinitely better? Well, it had dark days too and at the beginning was known for being exploited by criminals.
There were even typically law-abiding citizens in 2000 who didn’t believe that ‘saving music files to their computer hard drives’ was actually theft. The Internet we know today is still a target of criminals, but thanks to improvements in technology, it’s far safer than in the past and its use has been adopted across the globe. This is how the industry sees Bitcoin technology progressing.
Takeaway: Just like the Internet, digital currency isn’t criminal in nature.
Some of the earliest adopters of bitcoin may be techies, but in recent years, Bitcoin has earnt the respect of some major celebs and companies.
In January the BBC reported that 50 Cent, aka Curtis James Jackson III, ‘forgot he had a stash of Bitcoin now worth $8m’. Ayo Technology, indeed.
Ashton Kutcher of That ‘70s Show has been involved in bitcoin for a few years after investing in bitcoin company, BitPay.
Singer Mel B, formerly of the soon-to-reunite girl-band Spice Girls, announced in 2013 that she would take bitcoin payment for one of her singles.
Microsoft’s online stores have been taking payment for a number of years. They recently had a brief hiatus, but have since reinstated bitcoin as a payment method.
Takeaway: Remember when email was first introduced and people said ‘no way will this take off’… yeah. Bitcoin is already accessible to all with an internet connection.
#5 Bitcoin is anonymous.
Privacy and Bitcoin do go together, but it’s false to say the process is entirely anonymous. Personal information (like your name) is hidden and all transactions are sent via unique electronic addresses. Bitcoin transaction data is permanently recorded on the public ledger known as the Blockchain and these records can’t be edited or deleted either.
It is possible that people can be linked to their unique addresses though. For example, if you either publicly or in private message share your name and bitcoin address, it’s clear who the address belongs to. All can also be revealed if you tattoo your address on your arm, like a guy from the US is reported to have done.
Lots of people in the industry liken anonymity to publishing a novel under a pseudonym. Your identity as the author is compromisable if someone connects you to the pseudonym, or in this case, the electronic address.
Takeaway: Bitcoin doesn’t give foolproof anonymity.
#6 Bitcoin is a pyramid scheme.
The basis of a pyramid scheme is that one main company or organisation promises its investors a guaranteed profit. As Bitcoin has no authoritative body to make such promises and is, after all, a peer-to-peer based cryptocurrency, there is no factual basis to the claim that it’s ‘just some pyramid scheme’.
Takeaway: Bitcoin is a legitimate digital currency and not a pyramid scheme.
#7 Bitcoin is in a bubble.
In a financial context, people use the word bubble to describe when the price of something inflates to a high point that can’t be sustained long-term. At this peak, the bubble of excitement surrounding the price bursts and the price goes down. Let’s be clear though, Bitcoin (as an industry) isn’t in a bubble. Bitcoin prices, however, have experienced bubble-like crashes, with the most recent whipping up a frenzy in late 2017.
This is far, far less scary than it sounds and as CCN explain, ‘a price crash in Bitcoin […] is nothing new’. Over the course of Bitcoin’s history, the price has fluctuated a lot and there have been numerous bubble moments (-51% in 2012, -61% in 2013 and +1289% between 2015-2017). Each time the price has more than recovered.
Bubbles have hit the likes of Facebook and Snapchat in the past too, and despite investor concern, both recovered. Snapchat is the most recent of the two to have experienced heavy doubt and criticism, especially after it suffered a 12% drop in stock market value only 3 days after its initial public offering in March 2017. By the end of the year, Snapchat was in a better financial position than expected.
Takeaway: The industry isn’t in a bubble, but the price of bitcoin does experience regular highs and lows.
#8 Bitcoins cannot be used.
False! Bitcoins can be used to purchase different types of products. From flights and hotel stays to theatre shows and gift vouchers, there are plenty of retailers accepting bitcoin. Check out our blog post for purchase inspiration.
As a payment network, Bitcoin has experienced struggle. However, as new advancements improve the scalability of Bitcoin, it’s thought that society’s relationship with money and the uses of Bitcoin will change.
Takeaway: Bitcoin isn’t only being used for investment.
It’s not too late get involved!
Bitcoin goes far beyond its classification as a commodity. The decentralised peer-to-peer payment network made possible by bitcoin is only one example of how bitcoin is breaking down doors. Theoretically, if the price of bitcoin stayed the same forever, it would still have utility in many areas other than as a speculative investment.
CoinCorner is an Isle of Man based bitcoin exchange which provides trustworthy buying, selling and wallet storage services. They make the process of transacting with bitcoin easy. You can find out more about CoinCorner and bitcoin here.
Here’s a quick crash course in Bitcoin vocab…
Bitcoin – Bitcoin with an uppercase ‘B’ typically refers to the entire ecosystem that exists (e.g. the Bitcoin industry, community, network etc).
bitcoin – bitcoin with a lowercase ‘b’ is used when it’s talked about as a currency.
Blockchain – A piece of tech. that permanently records all bitcoin transactions.
Correction – When bitcoin prices fluctuate, it’s called a correction (meaning that the price corrects itself according to its current perceived value).
Decentralised – No governing authority controls bitcoin. Yay!
Electronic address – Anyone that signs up to buy or sell bitcoin will be assigned with an address code made up of a unique combination of numbers. Bitcoins are sent between addresses.
Mining – The process by which bitcoins are created. It involves solving complicated math sums.
Peer-to-peer – Bitcoin transactions can be sent between two people without third-party processing from the likes of a bank.
So there you have it…