Bitcoins and other cryptocurrencies have long been shrouded in mystery and technobabble. To those new to the blockchain technology, the learning journey has been tough and it feels like the more you learn, the less you know.
While this new currency wave is certainly difficult to take in, let us first help you debunk the top three myths surrounding Bitcoins today!
Myth 1: Bitcoins are not backed by anything!
As Bitcoins are not physical coins, it might seem hard to attach a value to. However, when it comes to digital currencies, things become just a mite more complicated. The idea of traditional, or fiat currencies themselves attach an invisible value to the issued pieces of paper or coins. Transfer this to a digitized version, and that is essentially the same as government issued currencies.
Of course, this brings to mind the question of whether or not the currency can continue despite not being issued by a centralized government. The counterargument, is that instead of being backed by the government, it is instead backed by every single person who utilizes Bitcoin.
Just as how any country currency can be used in its own country, so too is Bitcoin useable in any place around the globe that accepts its value. And with the list of Bitcoin-approved stores increasing day by day, digital currency looks to be growing stronger and more trustworthy.
As long as Bitcoin is perceived as valuable by any other party, it will have the potential to retain its value.
Myth 2: Bitcoins are not infinite and will eventually run out!
This myth is actually true! Bitcoins, unlike fiat currency which can be printed, are finite. There will only ever be 21 million Bitcoins in circulation.
So, what does this mean?
Just as prices fluctuate according to supply and demand, so too will the “price” or value of Bitcoins increase or decrease according to the same concept. For example, if half of the 21 million Bitcoins are lost, the rest of the Bitcoins will become twice as valuable. This can continue to happen as half becomes quarters, becomes eighths, becomes sixteenths and so on and so forth.
In addition, as Bitcoin is currently being bought and sold in the decimal numbers (being valued at approximately $11,000/Bitcoin as of 12th February 2018), there is little chance of there being a lack of Bitcoin.
Myth 3: Bitcoin is a Ponzi scheme
The concept of a Ponzi scheme is very different to what is happening with Bitcoin. Not all digital currencies are safe to invest in, however we have considerable confidence in Bitcoin.
A Ponzi scheme is a form of fraud that entices investors with the concept of quick returns by paying “dividends” from the investments of later investors. This is different from Bitcoin as Bitcoin is not an investment scheme where people receive regular returns. Instead, it is a straightforward currency exchange, albeit one between a fiat currency and a digital currency.
The three top myths about Bitcoins have been explained, but we’re barely scratching the surface. Learn more about how the Blockchain works and the underlying mechanics that support all cryptocurrencies with us!