Cryptocurrencies have taken the world by storm in recent years. The massive increases in value of everything from established cryptocurrencies like Bitcoin and Ethereum to meme-coins like DogeCoin has put this new digital technology on many individuals’ radars. As with any new technology that gains rapid popularity, myths and misconceptions come out in droves. Cryptocurrencies can be a complex and technical topic, so to clear up some misconceptions, here are four myths about cryptocurrencies explained.
Cryptocurrencies Are Hackable
The idea that cryptocurrencies are “hackable” seems to come from the mere fact that they exist digitally. The logic being that if something is digital, it can be hacked. Cryptocurrencies themselves are digital assets with unique codes and perfect records of every transaction that occurs using them. The accounts of wallets which contain cryptocurrencies can be stolen by hacking or phishing. Cryptocurrencies can be the payment method of choice for certain scammers or malicious individuals, but cryptocurrencies themselves cannot be hacked. There is no such thing as stealing Bitcoin out of cyberspace, nor can Ethereum fall prey to a spoofing attack. Accounts related to cryptocurrencies can become compromised, but the currency itself cannot.
Cryptocurrencies Can Be Counterfeit
The idea that cryptocurrencies can be counterfeited likely stems from the fact that there are no physical cryptocurrencies in existence. People think that a clever computer wizard might be able to pass off some code as a cryptocurrency and have it accepted for payments. This is also a myth. Most cryptocurrencies, including major coins like Bitcoin and Ethereum, come into existence via mining. Mining is when a computer solves some complex mathematical problem. Upon completion of the problem, the computer that solves the problem is rewarded with a small amount of cryptocurrency. These currencies are created with unique identifying codes which makes it simple for the underlying tracking technology, known as blockchain, to spot and subsequently eliminate fake transactions. With this system, the risk of counterfeiting is basically impossible.
Cryptocurrencies Are Untraceable
The myth that cryptocurrencies are untraceable likely comes from the early days of cryptocurrencies during which anyone could make cryptocurrency wallets with no identifying information. These wallets with no data on the owner could be used to send currency virtually anonymously. This is very different than transactions being untraceable. In fact, the blockchain technology upon which cryptocurrencies are built records literally every transaction that has ever happened and will continue to record every transaction that will happen in the future. Lists of these transactions are publicly available for anyone to browse. Given the decentralized nature of cryptocurrencies, it is extremely unlikely that these records will ever go away. In the modern day, most cryptocurrency wallets require the owner to identify themselves and verify their identity. Couple this with that fact that every transaction is recorded in perpetuity and you get a very, very traceable payment system.
Bitcoin Is the Only Truly Valuable Cryptocurrency
Bitcoin was the first cryptocurrency to truly popularize and revolutionize this new form of digital payments, but it is far from the only coin in the game anymore. Different coins work in different ways, provide different functions, and are valued at different rates. For example, Ethereum, the second most popular cryptocurrency, was created to operate as a security protocol for digital applications. Storj, a relatively new cryptocurrency available for trading, was created to provide a decentralized cloud storage solution open to everyone. Instead of mining to earn Storj, people essentially rent out storage space on their own computers to create the decentralized network. People who rent their space are rewarded with Storj coins. In this vast landscape of ideas and innovative technology, there are many coins that hold value in a very real sense of the word.
Cryptocurrencies are a new and exciting technology. They are also complex, which leads to many misconceptions about their security, privacy, and value. Hopefully, debunking a few of the most common misconceptions about cryptocurrencies has helped increase your understanding of this intriguing topic!