The 9 Biggest Bitcoin’s Myths That Need To Be Debunked
Created by Satoshi Nakamoto on January 3, 2009, Bitcoin has just celebrated its 11 years of existence. Whether you are a Bitcoiner or an opponent of Bitcoin, you will at least agree that Bitcoin is a phenomenal success. Starting from scratch in 2009, Bitcoin has achieved the feat of reaching over $130 billion in market capitalization in just a decade.
This success of Bitcoin, and even more so its disruptive side, has earned it many attacks and criticisms in the 2010s. Many of these attacks were unfounded in my opinion and have become myths that have surrounded Bitcoin ever since.
Unfortunately, these great myths, that have no reason to exist, tarnish the image of Bitcoin with the general public. In this story, I will demystify 9 great myths surrounding Bitcoin by showing you that they are not based on any tangible facts.
Myth #1: Bitcoin Is A Ponzi Scheme
Since its inception, Bitcoin has very often been accused of being a Ponzi Scheme by its critics. On the last day of the year 2019, Tendayi Kapfidze, the chief economist at America’s largest online lending marketplace LendingTree, wanted to make a name for himself by declaring:
“I am convinced that Bitcoin is nothing more than a pyramid scheme. You only make money based on people who enter after you.”
This attack is nothing new, as it frequently occurs when economists or politicians wish to criticize Bitcoin and find no real argument against it.
In order to put an end to this myth now, I suggest you refer to the detailed report on Ponzi Schemes published in 2014 by the World Bank.
This report was written by the highly respected Kaushik Basu, former Chief Economist of the World Bank but also Professor of Economics at Cornell University.
In his report, Kaushik Basu says in particular:
“Contrary to a widely-held opinion, Bitcoin is not a deliberate Ponzi. And there is little to learn by treating it as such. The main value of Bitcoin may, in retrospect, turn out to be the lessons it offers to central banks on the prospects of electronic currency, and on how to enhance efficiency and cut transactions cost.” — Kaushik Basu
I think there’s nothing more to add. Just read what Kaushik Basu says in his report, and even more so what he demonstrates.
The people who continue to think that Bitcoin is a Ponzi Scheme in 2020 are clearly misinformed people with whom you should not waste your time.
Myth #2: Bitcoin Is A Speculative Bubble
In the early days of Bitcoin, very few people were interested. Little by little, Bitcoin convinced more and more people by showing that it was not just a technological gadget reserved for a few geeks.
The revolution that Bitcoin is building is much deeper and will have a huge impact on the world in the years to come.
As soon as Bitcoin saw its price rise above $1,000, more and more people who felt threatened by what Bitcoin represents began attacking it by claiming that Bitcoin was just a speculative bubble.
Bitcoin was then compared to tulipomania, which wreaked havoc in the Netherlands between 1636 and 1637, or to the Dot-com bubble of the early 2000s.
It is true that some people only see Bitcoin as a new speculative tool to make big profits.
This profound misunderstanding of Bitcoin’s real potential does not mean that Bitcoin is a bubble.
Indeed, we live in a world where more and more people, starting with financial traders, are driven by greed.
This has nothing to do with Bitcoin, which is not a bubble in itself.
The speculative bubble that had formed because of these greedy people at the end of 2017 burst in 2018 leaving out those who have no business being in the Bitcoin market.
The bursting of this bubble allowed Bitcoin to be purged of non-believers. Since then, Bitcoin has resumed its forward march and has emerged, once again, stronger than ever.
Myth #3: Bitcoin Is Not Secure And Has Been Hacked Several Times
Critics of Bitcoin, starting with economists, central bankers and politicians, keep saying that its Blockchain is not really secure. To justify this accusation, they point to the fact that Bitcoin has been hacked several times in its history.
This is completely untrue because Bitcoin has never been hacked in its history.
Bitcoin is a particularly secure open source software that is constantly being improved by the developer community.
Critics of Bitcoin equate the security of Bitcoin with the security of cryptocurrency trading platforms. They are two different things.
But it is these platforms that have already been hacked many times in the course of 2010s. Among the most famous hackings is the one of Mt. Gox, which became a scandal beyond the small world of Bitcoin in 2014.
Bitcoin has never been hacked. However, it is true that Bitcoin has known some software bugs in its history. The most famous of them is the “Value overflow incident” that took place on August 15th 2010.
This incident highlighted the strength of the Bitcoin developer community as it took only a few hours for a fixed version of the Blockchain to be deployed.
In the end, Bitcoin was only unavailable for 8 hours and 27 minutes during this incident. The correct version of the Bitcoin Blockchain took over from block 74,691.
Another myth that has no place since Bitcoin Blockchain is particularly secure.
Myth #4: Bitcoin Is Complicated To Use
Bitcoin is “A Peer-to-Peer Electronic Cash System” implementing the Blockchain concept. In order to function without a leader, while being permissionless and trustless, Bitcoin is based on a public/private cryptographic key system that is rather complex for the uninitiated.
This complexity of the technology at the heart of Bitcoin is used by its critics to argue that Bitcoin is too complicated for the general public.
However, in order to use Bitcoin on a daily basis, you absolutely do not need to master all of these concepts.
There are many tools that make it easy to use, starting with intuitive wallets, web and mobile applications.
In 2020, making transactions with Bitcoin is as easy as sending an email. The complexity of Bitcoin for the general public is a myth since they don’t have to directly manipulate the concepts at the heart of its technology.
Myth #5: Bitcoin Is Opaque And Anonymous
The rulers of countries do not like Bitcoin because it would be opaque and anonymous. According to them, what you do on the Bitcoin Blockchain would not be visible to everyone.
Nothing could be further from the truth than to say that. In fact, Bitcoin is a public Blockchain and as such, all transactions made since the creation of Bitcoin in 2009 can be read by everyone.
No other currency has shown such a high level of transparency in history as Bitcoin.
If Bitcoin is opaque, it’s only for people who are as ignorant of how it works as its fiercest detractors.
On the other hand, users can make transactions that remain anonymous as long as they do not disclose the addresses they use for transactions.
Finally, it should be noted that the Bitcoin source code is freely available to everyone, which ensures transparency of everything the Bitcoin Blockchain does when it is running.
Myth #6: Bitcoin Promotes Money Laundering
As the price of Bitcoin skyrocketed in late 2017, many banks became increasingly critical of Bitcoin.
According to the world’s major banks, Bitcoin promotes the laundering of dirty money.
Logically, politicians quickly followed suit. Once again, this is a myth that deserves to be debunked.
Bitcoin is not specifically used to launder dirty money. Various studies conducted during the year 2018 have ensured that the risk of money laundering with Bitcoin is more than minimal.
I would also like to point out that, for several years now, money laundering scandals have tended to involve banks.
You must all remember the Danish Danske Bank, which was accused recently of having laundered more than $300 billion in the 2000s.
When you hear people accusing Bitcoin of facilitating dirty money laundering, I invite you to ask yourself why they would make such criticisms.
In most cases, you will understand that these people are primarily trying to point the finger at a competitor in order to divert attention from their activities, which are not always very clear.
Myth #7: Bitcoin Is Nothing More Than A Store Of Value
In the camp of those who criticize Bitcoin, some more moderate people recognize its value but consider Bitcoin to be nothing more than a store of value.
Bitcoin has already proven itself as a store of value for several years.
It is no coincidence that Bitcoin is called digital gold.
This myth will fade as Bitcoin becomes more and more supported as a means of payment by merchants around the world.
In my opinion, 2020 will see an acceleration in the adoption of Bitcoin as a means of payment by merchants.
The proof is that in France, which remains one of the largest economic powers in the world, Bitcoin should be supported by 40 major retailers in more than 25,000 point of sales by the end of the year.
Little by little, the adoption of Bitcoin will grow and its use as a means of payment will also increase.
In addition, the rise of the Lightning Network protocol in the coming years will facilitate its use as a means of exchange as it will speed up transactions with ultra-low transaction fees.
The first step for Bitcoin was to prove itself as a store of value.
This has been done and now the next step is to move to mass adoption as a means of exchange and as a means of payment.
Myth #8: Bitcoin Is An Enemy Of Ecology
Never short of ideas to attack Bitcoin, its opponents have also pointed to its high energy consumption. Indeed, securing the Bitcoin Blockchain requires an enormous amount of electrical energy.
The Proof-of-Work at the heart of Bitcoin mining is a very computationally intensive algorithm.
For some, Bitcoin’s power consumption would therefore be its Achilles heel.
Bitcoin’s Power Consumption Is Not Its Achilles Heel
Bitcoin is even compatible with the fight against global warming.
First of all, I must tell you that the power consumption required to produce new Bitcoins is what makes Bitcoins so valuable.
Secondly, a recent study by Susanne Köhler and Massimo Pizzol at the University of Aalborg in Denmark showed that previous calculations of Bitcoin’s environmental impacts were based on false assumptions.
The more accurate calculations they made as part of their study showed that Bitcoin’s CO2 emissions were much lower than previously thought.
In fact, Bitcoin would not be as catastrophic for the ecology as its opponents claim.
Better yet, the majority of the electrical energy consumed by the Bitcoin Blockchain would in fact come from renewable energy sources.
Bitcoin could eventually even be considered compatible with the fight against global warming.
Myth #9: Bitcoin’s Price Has Not Increased Since 2017
The latter myth is more recent, being only a little over two years old. Many investors entered the world of Bitcoin in late 2017 when the price of Bitcoin reached an all-time high of $20,000.
The majority of these last-minute investors capitulated in the year 2018 when the price of Bitcoin fell below $4,000.
These same investors are now extremely critical of Bitcoin and keep repeating that the price of Bitcoin is stagnating. Bitcoin would have even become boring to listen to them.
This myth is totally false and to debunk it, I invite you to take a look at the evolution of the lowest annual price of Bitcoin:
From $0.01 in 2010, Bitcoin’s lowest annual price rose to $3,350 in 2019.
At the beginning of this year, Bitcoin saw its price drop to $6,850. An annual low price above $6,000 is still quite possible for Bitcoin.
The price of Bitcoin is therefore rising steadily from year to year. Nevertheless, this progression is done at Bitcoin’s own pace since it is not correlated to any other asset.
Bitcoin has been announced as dead nearly 380 times since its inception in 2009. In addition to these repeated obituaries, people who benefit from the current monetary and financial system have been constantly falsely criticizing it, creating many myths surrounding Bitcoin.
Like all myths, they are false, but they give a bad image of Bitcoin to the general public. In this story, I have given you the elements to debunk these myths. You can use them to help democratize Bitcoin around you.
This is essential because the adoption of Bitcoin by the general public requires a greater understanding of its technology and its disruptive nature.