Debunking Crypto Myths

Cryptocurrencies can seem difficult to understand at first. Some people, who resist understanding the technology, can not comprehend the concept of a digital currency or have a bias because they heard how their neighbour's son got scammed. Today, we are clearing out all the myths and rumours you may have about cryptocurrencies!

I have missed the opportunity to buy crypto

Bitcoin and Ethereum have changed the world forever by laying a foundation for a new financial system. Thanks to 4,600+% and 25,000+% returns in the last 5 years, everyone you know probably wishes that they had invested in these early gems. But it’s okay, the beauty of the crypto market is that you can start anytime! Many new projects may be the next Bitcoin! The market is volatile, and there is always a good opportunity to buy cryptocurrencies.

Crypto mining is harmful to the environment

This is a commonly known sentiment, however, it is partially true. “Proof of work”, which is the algorithm that mines - creates - new Bitcoins, is the one that uses a high amount of energy. Ethereum also used proof of work in the past but is now using “proof of stake”- a less energy-consuming type of cryptocurrency minting- and is now called Ethereum 2.0. Not all cryptocurrencies are harmful to the environment, only Bitcoin in this sense.

Solely looking at the Bitcoin ecosystem, it is headed towards setting up mining operations in countries with abundant renewable energy. According to a study conducted in 2018, 77.6% of Bitcoin mining came from renewable energy sources.

Cryptocurrencies and blockchain technology are here to revolutionise the traditional financial system. If the energy consumption of the whole traditional financial system is considered; buildings, employees, banking hardware, maintenance… the number would be significantly higher than minting Bitcoin. Global banking hardware alone consumes twice as much energy as global Bitcoin mining.

Cryptocurrencies Aren't Secure

The increased number of cyber attacks is quite concerning. However, cryptocurrencies create a safe and secure environment thanks to blockchain technology. Blockchain technology makes it possible to record every transaction on the chain that is visible to everyone! It creates a distributed ledger that breaks actions into blocks. These blocks are spread across different computational systems and rely on consensus to validate transactions.

The weakness of cryptocurrencies is how they are stored, which is in their owner’s hands. Cryptocurrency holders should be careful about the scams, hacks and attacks that may cause the loss of their assets. Luckily, the steps that they can take are quite easy, such as securing their private keys, looking out for scams, and holding a hardware wallet.

Cryptocurrencies Are a Scam

Cryptocurrencies are becoming more mainstream day by day. They are being accepted by many merchants and retailers, governments are employing crypto officers and coming up with initiatives to utilise its technology, and people are using it for personal transactions. Cryptocurrency itself is not a scam. However, just like fiat money, some people try to scam victims into sending out their digital assets, as mentioned above. Watch out for crypto scams!

Cryptocurrencies Will Replace Fiat Currency

Cryptocurrencies are becoming mainstream, but it does not seem like they will replace Fiat currencies any time soon. Fiat money has existed for centuries, while crypto was introduced in 2008 with Bitcoin. It is a fairly new type of currency and people tend to resist the change, even if it’s for good. The possibilities that cryptocurrency technology offers are numerous, and there could be new ways of utilising it in the future. Governments will not possibly let go of fiat currencies, but they can rather find new solutions or initiatives to use the technology, such as Digital Yuan or Digital Dollar initiatives.

Investing in cryptocurrencies is gambling

The Cambridge Dictionary defines gambling as "the activity of risking money on the result of something". In this sense, all the investment decisions, from real estate to stocks, could be categorised as gambling. However, if we look at the definition of investment: “the act of putting money or effort into something to make a profit or achieve a result”. These two definitions are quite similar, but they should not be confused with each other.

This is where the line between gambling and investment is drawn. It's not about the end goal, it is about how these individuals achieve this goal. Doing the opposite of what gamblers do is one way to be an intelligent investor. Gamblers do not think before they act, and they are in it because of the excitement. Cryptocurrency investors and traders are cautious. They research and analyse the projects before investing, practice risk management and keep detailed records. Successful cryptocurrency traders know that emotional control is crucial for profit generation, and they understand and accept that there is a probability that they could lose money in the end.

Summary

Although there are obstacles in the way of making cryptocurrencies mainstream, such as the myths we have just debunked, they are here to stay. We at Scallop believe that the best way to tackle bias is through education, and this is the reason that we have launched the Scallop Learn platform that you are reading this article. Share it with your friends and family to reduce the bias!