Since they were initially introduced in 2009, cryptocurrencies have seen a huge increase in popularity. Due to their obscurity and complexity, there are many misconceptions and rumors surrounding these digital currencies.
Here are some of the most widespread cryptocurrency fallacies, in no particular order, along with an analysis of the facts to help you determine if they are true or not.
1. Cryptocurrencies are solely used for illegal activities
While it is true that some cryptocurrencies, such as Bitcoin, have been used in illegal transactions, it is a small fraction of its overall use. Most cryptocurrencies are used for legitimate purposes such as online purchases, peer-to-peer payments, and investment.
Fraud and crime happen in all industries, including cryptocurrencies, but that doesn't mean they're only used for those purposes. Before you start investing in any cryptocurrency, it is necessary to research and check the platform through which you will trade, whether it is registered and how reliable it is.
2. Cryptocurrencies are not backed by anything
Many cryptocurrencies, including Bitcoin, are decentralized and operate on a blockchain network, which provides a transparent and secure ledger of transactions. This decentralized system can be considered a form of backing for the currency.
3. Cryptocurrencies are not regulated
While the exact level of regulation for cryptocurrencies varies by country, many governments have started to implement regulations to monitor and control their use. This helps to prevent illegal activities and increase consumer protection.
As far as the RS is concerned, cryptocurrencies are regulated by the Law on Amendments to the Law on the Securities Market, and from January 17 of this year, the Securities Commission published the Rulebook on the Registration of Service Providers Related to Virtual Currencies, which should record all legal entities that do business with these currencies. The BCX platform is the first, and for now the only, platform that has been registered in this record, which you can read more about here.
4. Cryptocurrencies are not safe to use
The security of cryptocurrencies is dependent on how they are stored and protected. If proper security measures, such as strong passwords and two-factor authentication, are used, cryptocurrencies can be as safe as traditional forms of currency.
For example, when registering on any crypto platform, you need to set a strong password, which includes symbols, numbers, as well as upper and lower case letters. Of course, although this applies to any login, it is especially emphasized for cryptocurrencies in order to better protect your digital money.
5. Cryptocurrencies have no intrinsic value
Cryptocurrencies derive their value from the trust and confidence users have in them as a medium of exchange, store of value, and unit of account, just like traditional currencies. Additionally, the underlying technology of some cryptocurrencies, such as blockchain, has numerous potential use cases and is considered to have value.
In order to better understand the value of cryptocurrencies, some basic knowledge of the history of money, more precisely traditional currency, is necessary. Money was first printed in broom, and later in paper form, but it gained value when people agreed to do so because they realized that it was a much simpler form of payment than barter or payment in gold.
It's the same thing with cryptocurrencies. For example, Bitcoin was worth almost nothing in the beginning, and at some point it reached a value of $65,000.
Conclusion
Myths will probably always be present in the crypto world. However, this will certainly not affect his enormous popularity, which is growing bigger and bigger every day.
The future of the crypto industry looks good as governments continue to develop regulatory frameworks to further regulate this area.