The world of cryptocurrencies has exploded these past few years, thanks to the mindboggling returns the asset has produced. But their rise, led by Bitcoin, has led to a bunch of beliefs that may or may not be true.
Here are some common myths about cryptocurrencies.
Crypto is used to fund criminal, terror, drug activities
Like with cash and the banking system, it is true that cryptocurrencies can be used for nefarious purposes. But the myth pertains to the belief that cryptocurrencies are a den where illicit activity hides. In fact, according to a Chainalysis report, illicit activities amounted to $10 billion or 1 percent of all crypto transactions last year, down from over $20 billion or 2 percent in 2019.
It is also a myth that cryptocurrency
transactions are completely anonymous. Not only are all transactions visible on the blockchain network, government agencies usually have the sophistication to lift the veil of anonymity of identity afforded by cryptocurrency transactions.
Chainalysis and Coinfirm, for example, offer crypto forensics services to governments and private companies. Besides, strengthening KYC norms in all countries ushered in by tightening regulations is expected to reduce illicit activities in crypto further.
Government can ban and stop cryptocurrencies
While governments can ask financial institutions to stop dealing with cryptocurrencies or any entities dealing with them, it is nearly impossible to ban cryptocurrencies outright. Crypto transactions are nothing more than sending an email and anyone with access to the Internet can deal with it.
Governments have been wary of the risks associated with crypto, simply they would like to exercise greater control over anything that can be considered as a potential currency. But increasingly, a lot of governments have shown the willingness to look at cryptocurrencies with an open mind.
Cryptocurrencies are complicated to deal with
The underlying technology of digital currencies may be complex but an ordinary crypto user does not have to deal with it. Making a crypto transaction can be as easy as making a banking transaction with the banking app on your smartphone.
Blockchain has only one demonstrable use case: cryptocurrencies
A lot has been talked about the use cases of blockchain
, the technology that underpins cryptocurrencies such as bitcoin. A view shared by some experts is that blockchain has failed to demonstrate any use case, and bitcoin is probably the only instrument that has enjoyed a degree of success.
The truth is innovations in the blockchain sphere are taking place at a rapid pace. For example, smart contracts on blockchain can store the contract such as between a lender and a home loan beneficiary. It can make loan repayment completely automated from the beneficiary’s crypto account to the lender’s account.
There are immense possibilities and use cases of blockchain technology from DeFi to NFT.
Cryptocurrencies waste energy
This is partially true so we would qualify it as a half myth. The truth is mining cryptocurrencies can be an energy-intensive exercise. But the other half of the truth is cryptocurrency developers have worked hard, and achieved success, in bringing down energy costs associated with the settlement of transactions. Besides, with global governments’ thrust on pursuing renewables as a source of energy, cryptocurrency mining’s energy consumption may start to become less and less of a concern.
(Edited by : Kanishka Sarkar)