The first cryptocurrency transaction occurred in 2010 when Laszlo Hanyecz ordered two pizzas from a pizzeria in Jacksonville, Florida. Shortly after that, the value of the cryptocurrency increased substantially from .008 cents per bitcoin to .08 cents per bitcoin. As of the time of writing one bitcoin is worth 6,215.15 USD. The explosion of bitcoin, and other cryptocurrencies, quickly garnered the attention of the financial world, and, eventually, mainstream society. Today cryptocurrency is a hot button topic. Everyone from Bill Gates to Warren Buffet to Jordan Belfort has weighed in on cryptocurrency and whether or not the world has room for yet another currency.
With so much mainstream attention on a concept that is in its infancy, many myths have been passed off as proven fact; however, and many of the myths that are touted around as absolute truths aren’t.
Myth: Cryptocurrency is only hype
The Truth: Jordan Belfort, the former stockbroker whose shenanigans were the main plot for The Wolf of Wall Street, argues that cryptocurrencies popularity is based only on a theory known as “the greater fool theory.” In this theory, the price of an object is inflated not by its intrinsic value, but rather by unfounded belief that another person is willing to pay more for the item. Belfort’s statement about Bitcoin and other cryptocurrencies can be attached to pretty much any commodity. After all, the basis of every investment is that another person will pay more for it at a later date. That is the entire concept surrounding the real estate market.
Cryptocurrency is new. Yes, it is a volatile investment, but blockchain technology is here to stay, and with it, cryptocurrency is likely to have a more significant role in financial society as the time marches forward. Whether or not you are willing to take a risk on such an investment is a personal decision, but the risks associated with cryptocurrencies are similar to the risks associated with more mainstream investments.
Myth: Cryptocurrency is only for criminals
The Truth: Cryptocurrency has a variety of different applications. Sure, the believed anonymity has led to its use by criminals initially, but the majority of transactions are for relatively mundane purposes. Studies have suggested that about one-quarter of cryptocurrency transactions may be for illegal activities. However, cryptocurrency has not increased the number of black-market sales; it merely serves as a different payment method. The use of cryptocurrency by criminals does not mean that cryptocurrency is only for criminals. Traditional cash exchange hands for illegal goods and services, too, but that doesn’t suggest the United States dollar is just for criminals.
Myth: You can’t use cryptocurrency to purchase mainstream goods
The Truth: Cryptocurrencies, while not accepted everywhere, are beginning to be recognized by more and more mainstream retailers. REED Jewelers accepts bitcoin in all 65 of its brick-and-mortar locations, as well as online. Overstock (O.co) allows shoppers to pay using a variety of different alternative currencies. Even major chains, like Subway, have given Bitcoin and other cryptocurrencies a shot, although these promotions are usually limited to specific locations and franchises.
On top of some companies offering shoppers the option of using cryptocurrency for purchases, some companies allow users to transfer cryptocurrency into traditional currencies or gift cards. Cryptocurrencies are still in their infancy, but financial experts admit that the concept is here to stay. It is likely that as cryptocurrencies become more established, more retailers will begin accepting them as payment.
Myth: Cryptocurrency is a flash in the pan, it won’t be around in a few years
The Truth: Cryptocurrency was invented, somewhat by accident, in 2008. Pseudonymous inventor or inventors, Satoshi Nakamoto first developed the concept as a peer-to-peer electronic payment system. Since then, Bitcoin has grown much more significant and has seen its applications continue to grow. New cryptocurrencies continue to pop up. It doesn’t appear to be an end in sight, not as long as people are interested in utilizing decentralized currency. When considering the current social and political climate, it looks like cryptocurrencies are in no danger of becoming extinct, especially not as larger companies are beginning to acknowledge the payment method.
Myth: 1,000 people currently own 40% of all Bitcoin
The Truth: Naysayers will argue that bitcoin is just as bad, if not worse, at creating a disparity between the rich and the poor as traditional currency. Those same naysayers point to this statistic to point out the gap, but the general public doesn’t know how bitcoin wealth gets dispersed, and the anonymity of cryptocurrencies ensures the public will not. You can look at the breakdown of bitcoin wallets and attempt to draw a parrel between the size of the wallet and the way cryptocurrency wealth is split up, but one wallet may hold thousands of different users details, while one person can have 100 different wallets (if they want). It is impossible to figure out who wallet holders are, and how the wealth within them is divided. As cryptocurrency grows, and the spotlight on the concept continues to shine, everyone will learn more about how Bitcoin and other cryptocurrencies fit into the current financial landscape. Cryptocurrency isn’t much different than other, more established investments, in many ways. As an investor, you hope that the value of the object continues to increase so your investment pays off.
There is nothing strange or sinister, or even new, about that concept. Over time everyone will learn more about cryptocurrency, and its price will likely become more stable in the coming years. As it stands, however, cryptocurrency and the blockchain technology it employs are an exciting innovation, and several sectors are keeping their eyes glued to developments. If you can stomach the idea of a volatile investment, it may be worthwhile to learn more about cryptocurrencies and how the technology behind it works.