Five of the Most Common Cryptocurrency Myths Busted

Blockchain, Crypto 101, Digital Finance, Foundations

The world of digital currencies is filled with myths, half-truths, exaggerations, and downright misinformation. So, it’s important to look below the surface to see what’s true and what isn’t. Here are five of the most common cryptocurrency myths and the reasons they don’t stand up to scrutiny. 

Myth #1: Cryptocurrencies are Mostly Used for Illegal Transactions 

Cryptocurrencies have gotten a bad reputation over the years for being connected to illegal activities. High-profile ransomware incidents and the black market website Silk Road played a large role in creating this myth. As you might expect, these cases are the grain of truth at the heart of this myth. The reality, though, is much more complicated. 

The truth is that only a small portion of digital currency transactions are related to illicit activity. Estimates suggest that just 3% of Bitcoin transactions are illegal. The other 97% is legitimate buying or investing activity. Contrary to what cryptocurrency myths would have you believe, there’s no evidence that criminal activity supports or drives blockchain networks. 

Illegal activity is also growing less common as Bitcoin and other digital currencies become subject to stricter regulations. Although the total value of illegal transactions is increasing, the share of total transactions connected to crime is trending steadily downward. The traceability of digital currencies has also made it easier for law enforcement agencies to seize wallets associated with criminals. 

Myth # 2: Digital Currencies are Just a Fad 

Another of the most common cryptocurrency myths is that decentralized money is nothing more than a fad. Those who believe this myth often cite overly high prices, lack of oversight, and irrational investor exuberance as evidence that cryptocurrencies are just a flash in the pan. While there may be some truth in these arguments, they fall short of predicting the downfall of the crypto ecosystem. 

The reality is that digital currencies are rapidly becoming a more important part of the global financial system. Blockchain technology could fundamentally change the traditional banking system. Meanwhile, DeFi (decentralized finance), may soon make access to financial services possible entirely without banks or other institutions. 

Myth # 3: Cryptocurrencies Aren’t Valuable 

Among criticisms of digital currencies, few are as common as the idea that these currencies lack real value. Indeed, Bitcoin and other digital currencies don’t have intrinsic value. In other words, there’s no fixed or absolute value for these assets. 

The problem with this criticism is that it’s also true of almost all other currencies today. Money that isn’t backed by a commodity such as gold is only as valuable as the public believes it to be. Since almost every country in the world today reliably uses fiat currency, there’s no good reason to believe the cryptocurrency myths suggesting that a lack of intrinsic value is somehow a critical flaw. 

You could argue that some digital currencies have slightly more intrinsic value than modern fiat currencies. Bitcoin, for example, has a degree of scarcity built into its very structure. The use of the Bitcoin blockchain also gives it a type of functional value. So, while they may not be as intrinsically valuable as gold or silver, it’s hard to argue that digital currencies are any less valuable than the money people use every day. 

Myth #4: Bitcoin Will Eventually Replace the Dollar 

Not all cryptocurrency myths come from the bearish side of the debate. Sometimes, crypto bulls also embrace beliefs that don’t match up with reality. One such case is the idea that Bitcoin or some other major digital currency will eventually replace the U.S. dollar. 

The volatility of digital currencies likely makes them poor replacements for the historically stable U.S. dollar. In addition, the bulls who argue for replacing the dollar tend to lack a compelling argument for why it needs to be replaced. Digital coins are also still extremely new and don’t have a proven history as a store of value. 

Myth #5: Cryptocurrencies are Bad for the Environment  

Last on this list is one of the cryptocurrency myths that actually has a decent amount of truth behind it. Blockchain networks really do consume large amounts of electricity, giving them a considerable carbon footprint. 

This myth falls down, though, because it doesn’t take into account the environmental impacts of the alternatives to digital currencies. Traditional banking and mining of gold, for example, both have very large impacts on the environment. Digital currency mining activity also makes heavy use of renewable energy sources. In some cases, the profits to be made from digital currency mining have even caused companies to invest in new green energy infrastructure. So, while it’s true that there are ecological impacts, the effects of cryptocurrency on the environment are likely overstated. 

As you can see, most of these cryptocurrency myths begin with at least a bit of truth. When you start to dig deeper, though, they start to fall apart. By learning more about digital currencies, you can dismiss the myths.  

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