Let’s dive right in!
Bitcoin Myth #1: Bitcoin is a Ponzi Scheme
This is probably the most common bitcoin myth out there.
A Ponzi scheme is an illegal “investment” operation where “investors” (i.e., victims) are promised high monetary rewards and encouraged to recruit more participants to boost their rewards. In reality, however, “investors” are paid returns with money from later investors and not actual investment profits. Because there is no actual investment income, Ponzi schemes collapse when participants fail to recruit more members. At this point, the scheme’s operators cash out with their victims’ deposits.
While Ponzi schemes involving the promise of high returns paid in bitcoin have been plenty (such as OneCoin and Bitconnect), Bitcoin is not a Ponzi scheme.
Bitcoin is an open monetary network underpinned by a decentralized protocol that enables peer-to-peer payments over the Internet without a central entity to oversee transactions.
Bitcoin Myth #2: Bitcoin is Illegal
Another common myth that is still making the rounds is that Bitcoin is illegal. In the majority of countries, that is not true.
A handful of countries have placed outright bans on the use of Bitcoin within their borders. Examples include Algeria, Bangladesh, China, Egypt, Iraq, and Morocco.
However, in the majority of nations, Bitcoin is either legal or unregulated, allowing anyone to buy, sell, and use the digital currency at their own discretion.
In El Salvador, for example, bitcoin was made legal tender in September 2021, highlighting the growing acceptance of bitcoin as a viable currency.
Bitcoin Myth #3: Bitcoin Has No Intrinsic Value
Bitcoin critics love to spread the myth that bitcoin’s price tag can be purely attributed to investor speculation and that the digital currency has no intrinsic value. However, nothing could be further from the truth.
Bitcoin is the world’s first open monetary network that enables anyone across the globe to securely store, send, and receive money over the Internet.
Anyone with a smartphone and an internet connection can use bitcoin to save money, make and accept payments, and send and receive remittances. All that without the need for a bank, payment processor, or paperwork.
In addition to being open and inclusive (as anyone can access bitcoin), it is also a censorship-resistant form of money. While banks and payment processors can freeze your money without notice, only you have access to your bitcoin held in your personal bitcoin wallet.
While the likes of PayPal and your local bank may freeze your account for making a payment to someone in an emerging markets country under the assumption that fraud has been committed, your bitcoin wallet will never lock you out of your funds (as long as you have securely stored your private keys).
What’s more, Bitcoin has a hard-coded monetary policy that includes a total fixed supply of coins combined with a decreasing rate at which new coins are introduced into circulation. As a result, increasing demand is met with a limited supply, thus creating a scenario where the price of bitcoin is expected to increase over time as bitcoin adoption continues to grow.
Finally, some Bitcoin advocates argue that the digital currency’s intrinsic value comes from the energy input required to mine bitcoin and secure the network. This argument acts as a counterpoint to the claim that bitcoin isn’t backed by anything and thus has no intrinsic value. Bitcoin is backed by a community of miners deploying computing power to ensure the integrity of the Bitcoin network.
Click here to learn more about what determines the value of Bitcoin.
Bitcoin Myth #4: Bitcoin Is Primarily Used for Illicit Transactions
When you read about the early history of Bitcoin, you will learn about the infamous Silk Road story, where bitcoin was used for transactions on the illegal marketplace. Bitcoin critics use this example to argue that bitcoin facilitates money laundering and criminal activities.
In reality, the amount of bitcoin used in criminal activity is a minuscule percentage. According to research conducted by Chainalysis, only 0.15% of all cryptocurrency transitions were related to criminal activity in 2021.
Conversely, the traditional banking sector has been a conduit for global money laundering for decades.
Despite strict AML regulations in the banking industry, there have been countless scandals involving some of the world’s leading banks laundering money for criminals. From ING and Danske Bank to HSBC, Wachovia, and Westpac, there’s seemingly no part in the world where banks have not been involved in money laundering.
Bitcoin Myth #5: Investing in Bitcoin is Like Gambling
While buying altcoins, like Dogecoin, Shiba Inu, or Dogelin Mars, is definitely a gamble, buying bitcoin is not.
Investing in bitcoin by regularly purchasing small amounts (for example, via a bitcoin savings plan) is widely considered a sound investment approach.
The idea behind buying bitcoin is not to get rich quickly (which may be the case with meme coins and other alternative cryptocurrencies) but instead to put money into the best savings technology in the world.
That’s a world away from putting all your money on black at the roulette table.
Bitcoin Myth #6: Bitcoin is Bad for the Environment
Bitcoin critics love to claim that bitcoin is bad for the environment because bitcoin mining consumes a high amount of energy.
While it’s true that bitcoin mining requires a high energy input, the claims of how much impact it has on the environment may be overstated.
According to a report titled ’The Carbon Emissions of Bitcoin From an Investor Perspective’ by the Frankfurt School of Finance, Bitcoin’s carbon footprint is actually much lower than the figures that have been spread in mainstream media.
The study says: “[…] the most recent estimate of the total yearly carbon footprint of the world is 45,873.85 MtCO2eq. This leaves Bitcoin with a total footprint of 0.08% of worldwide CO2eq.”
Additionally, it’s important to highlight that the majority of bitcoin mining uses renewable energy.
56% of the energy used in bitcoin mining is derived from green energy sources, according to estimates from the Bitcoin Mining Council.
What’s more, there is a strong push in the Bitcoin community to push for more renewable energy usage in mining. For example, Block CEO, Jack Dorsey announced the Bitcoin Clean Energy Investment Initiative to support organizations that are helping bitcoin mining to become carbon neutral.
While the Bitcoin network isn’t running on 100% green energy yet, there’s a high likelihood that it will in the future.
And enabling anyone in the world to save money and make payments regardless of race, gender, age, or location may be worth Bitcoin’s energy consumption. Especially, when you realize that the Bitcoin network consumes less energy than the Christmas lights of American households each year.
Bitcoin Myth #7: You Can’t Buy Anything with Bitcoin
In the early years of Bitcoin, only a handful of online merchants accepted the digital currency as a payment method. Today, the picture looks a lot different.
Bitcoin adoption among businesses is on the rise. And with more countries considering adopting bitcoin as legal tender, we can expect this trend to continue.
Moreover, there are plenty of bitcoin debit cards to choose from that allow you to spend your satoshis anywhere card payments are accepted.
- There are a lot of myths surrounding Bitcoin, but most are either inaccurate or deliberately misleading.
- Bitcoin is not a Ponzi, it’s not illegal, and its value simply is derived from the supply and demand of an open, borderless, censorship-resistant monetary network.
- The share of illicit Bitcoin transactions is constantly declining, and the share of renewable energy in Bitcoin mining is increasing.