Since the Bitcoin launch back in 2009, good and bad things have happened in the crypto industry. And we reached a point where users often cannot distinguish good from bad and true from false. Many crypto myths have been made public, and they are confusing crypto enthusiasts all over the world.
And addressing them is increasingly relevant as cryptocurrencies have become so popular that not so many people have yet to hear of them. And if they didn’t, they probably don’t have access to any type of news.
In this article, we will debunk some of the most popular cryptocurrency myths so that no user will be misled ever again.
Crypto Myth 1: Cryptocurrency Is Only Used for Illegal Purposes
This myth is as false, just as many of us may think. If cryptocurrencies were only used for illicit activities, why would there be 97% confidence in them worldwide? Binance’s study has proven that crypto is safer than ever.
Just think that more and more companies are starting to accept payments in digital assets each day. Do you think so many teams would do that if they knew it might put their companies at risk?
On the other hand, the crypto myth says that crypto is only used for illegal purposes. And considering this, it is essential to mention that there still are shady projects users should always be aware of. For instance, initial offerings are one type of crypto project that, unfortunately, has seized surprisingly high funds through scams.
However, everyone is working on constantly improving cryptocurrencies’ safety; therefore, these matters will not be a big worry in the future.
Crypto Myth 2: Cryptocurrencies Are Unregulated
This cryptocurrency myth is only partially true. Usually, it depends on the project, as some are regulated while others are not.
For example, cryptocurrency exchanges are partly regulated, but it depends on each country and its sentiment regarding the crypto world.
On the other hand, Bitcoin started as a decentralized project, primarily focused on developing a safe yet unregulated payment system. And this came with lots of advantages for worldwide users. Cryptocurrencies have made it easier for users to complete purchases online, as crypto payments are not governed by any regulation, at least in some cryptocurrencies’ cases.
Crypto Myth 3: The Price of Cryptocurrencies Is Driven by Supply and Demand
As you probably may have noticed, when it comes to crypto myths, words such as “partially,” “in some cases,” or “half true/false” occur because most of the myths built around crypto can be true in some cases and false in others. And this happens due to the surprisingly developed industry. There is a tremendous number of crypto projects, and each works in its way, with its regulations or practices.
This also applies to the “supply vs. demand” story. Some cryptocurrencies’ prices can indeed be driven by supply and demand. However, not all of them work this way. It actually does depend on the max supply of a specific cryptocurrency.
For instance, Ethereum (ETH) does not have a max supply; thus, its price will not be related to its supply or demand as much as other coins. However, the ETH transaction fees are changing value based on supply and demand.
Crypto Myth 4: All Transactions Are Anonymous
The privacy that cryptocurrencies offer often leads users to think that everything happening during crypto transactions is anonymous. However, it depends.
When Bitcoin was launched, the project promoted the idea of anonymity, as the transactions could be conducted through peer–to–peer processes; thus, no third party is ever involved in the transaction.
Nevertheless, all transactions are still stored on the blockchain. And for each process, the wallet addresses of both parties will be recorded. Considering the fact that a blockchain is open to the public, it does mean that transactions are not entirely anonymous after all, instead being considered pseudo-anonymous.
Crypto Myth 5: Crypto Gains don’t Get Taxed
It may seem that crypto is not taxable, but this myth about cryptocurrencies could not be further from the truth.
In fact, crypto gains do get taxed, and each transaction on exchanges is usually reported to financial institutions, depending on the country. Every transaction or exchange based on crypto becomes a taxable process that needs to be reported as a capital gain. Moreso, any crypto payment someone has received or the crypto gained through staking is also taxable as ordinary income.
However, if a user has bought crypto by using fiat but did not complete any other transactions with the purchased amount, they are not required to report it.
Of course, the taxation differs from one country to another. Usually, only the realized capital is taxed, but check the local laws to be sure about it.
Crypto Myth 6: Bitcoin is Bad for The Environment
This crypto myth also depends on information about the energy source used for the cryptocurrency processes.
The concern regarding Bitcoin’s effect on the environment has occurred due to the computational power needed for completing transactions or mining. Tremendous amounts of energy are required in order to verify and validate Bitcoin transactions, the energy consumed sometimes equalling one of a small country’s.
As long as the energy comes from sustainable sources, there is no need to be concerned regarding how Bitcoin transactions will affect the environment. However, the worries come when the electricity comes from fossil–fuel–powered grids, then the carbon emitted will affect the environment in little to insignificant proportions.
Crypto Myth 7: Cryptocurrency Is Clean and Green
Here it is–a myth closer to being true than false.
Indeed, creating crypto coins does not require paper, silver, or gold as fiat currency does. The trees cut for banknotes or the mining processes for getting gold come with tremendous costs, all for manufacturing money. Furthermore, let’s not forget that some countries still use plastic for their bills.
However, mining cryptocurrency still requires some resources: energy. The computational power needed to mine crypto can sometimes reach the energy used by some small countries; thus, it is easy to realize that the energy consumed is enormous.
For instance, the Bitcoin annual energy consumption almost reaches UAE’s, with an average of 97,3 GWh per year.
Debunking Cryptocurrency Myths
With the growing popularity of cryptocurrencies, there is no wonder more information than ever regarding this industry. However, not all the things said about crypto are true.
Many cryptocurrency myths have spread over time, and it is essential to find out which are true and which are not. Moreover, some crypto myths are only half true; thus, additional information is always required to know which actions are the best when investing in crypto.
We hope these debunked crypto myths helped you to better understand cryptocurrencies and the ways they work and affect (or not) the environment.