Debunking the Popular Myths of Cryptocurrencies: Myth-2: Cryptocurrencies have no real value:
This is the second post in a series of posts correlating to the myths of cryptocurrencies.
Let’s look into another cryptocurrency myth:
Myth-2: Cryptocurrencies have no real value.
Truth: Cryptocurrencies tend to be the new global and border less currency that fluctuates based on supply and demand.
As per Wikipedia, a cryptocurrency (or crypto currency) is a digital asset designed to work as a medium of exchange that uses strong cryptography to secure financial transactions, control the creation of additional units, and verify the transfer of assets. Cryptocurrencies are a kind of alternative currency that uses decentralised control as opposed to centralised digital currency and central banking systems.
When the idea of a virtual currency first surfaced in the 1990's, there were two major questions:
- First was to stop the attempts to duplicate the digital tokens.
- Second was the challenge of keeping an accurate record of the movement of money.
Bitcoin creator Satoshi Nakamoto invented the peer-to-peer technology as an answer to these problems. The main advantage of the peer-to-peer technology was that there would be no need for a centralised authority, but rather a network of the currency owners as the ledger keepers. This group ledger came to be known as the block chain. The block chain uses an open source technology that serves as a public financial transaction database. With block chain, people can have unbanked access to the financial services, allowing them to send and receive money quickly and without large fees for international transfers. Sending digital money through phones and computers is easily possible with the new technology. The new technology has given rise to alternative cryptocurrencies that are designed with more security features. With no central authority, opportunities for innovation with cryptocurrencies are endless.
As cryptocurrencies are virtual and intangible assets, one may question the value of cryptocurrency and term it as speculative and unregulated assets. Cryptocurrency exists on the computers, and not in one’s purse or wallet, unlike paper currencies. Cryptocurrencies are only digital in its existence. The fact is cryptocurrencies are global and border less currencies, but, fluctuate based on supply and demand.
Cryptocurrencies can be used to pay for real goods:
- For example, Expedia allows holiday makers to pay with Bitcoin for hotel bookings.
- Ethereum facilitates smart contracts across the globe, managing agreements between different parties, and transferring asset ownership only when the agreed conditions are met.
Because cryptocurrency is cashless, numerous supporters believe that it is the future of finance:
- Siam Kidd, founder of TheRealisticTrader.com believes that cryptocurrencies and block chain are going to revolutionise the world destroying established business models, eventually replacing fiat currencies.
- In the US, the IRS has spent years determining how to classify digital currencies for tax purposes. When it comes to taxes or everyday transactions, it is not easy to interpret and calculate the taxes. It has contributed to the idea that cryptocurrencies are a fad or that they will simply disappear with time. In reality, not only have cryptocurrencies only been gaining in prominence and popularity, but they are generally set up in such a way as to minimise the risks of the financial tradings.
As blockchain technology keeps evolving and becomes more native in its understanding capacity, practical applications and solutions are becoming popular in our day-to-day lives. For example, Bitcoin vending machines are becoming quite popular these days that allow a variety of industries to test out whether cryptocurrency can be used as a payment method in day-to-day transactions.
Cryptocurrency vending machines are quickly being made available into the mainstream society and the trend is emerging with more key players into place as a noticeable positive change, that contradicts the notion of the myth.
As with other types of currencies, cryptocurrencies can be exchanged for goods and services, and they have real value in accordance with the belief of the holders of the currency.
Here is the link to Myth-1 (for easy references):