Destroying the legends about bitcoins

Instead of introduction

Cryptocurrencies and the earning potential they provide are a popular subject of conversation today. The authors of second-rate articles are trying to speculate on the subject particularly actively.  That should be normal. People are inclined to make up stories and think up what is missing. In order to form our own opinion about the benefits and disadvantages of cryptocurrencies and the prospects of their use, we are going to investigate the most popular myths about cryptocurrencies and Bitcoins, in particular. So, true or false?

№1: In no way is Bitcoin different from e-currencies.

That's false. Unlike bitcoins, e-currencies depend on national currencies.  They can be blocked or frozen. Bitcoins can't be blocked. They are fully decentralized and they can be neither faked nor destroyed. The total number of bitcoins amounts to 21 million. New bitcoins appear according to a pre-set algorithm. 

№2: The cost of bitcoins is defined by calculation and electricity costs. 

That's false. Bitcoins remain inherently valuable as long as people value them. For instance, no investors doubt the value of gold since its quality is indisputable. It's material. However, it's not that easy when we are dealing with national currencies. Theoretically, money should be backed by gold and foreign currency reserves, but defaults aren't rare.  Moreover, investors like no one else know that the price of a currency is directly proportional to the demand.

№3: Whether or not bitcoins are legal is questionable

That's false. "Everything which is not forbidden is allowed". Cryptocurrencies have not been regarded as money surrogates so far, which means they are legal. In some countries, bitcoins are considered to be "private money". They can be used for settlements because they are equivalent to the value of goods and services just like any other currency.     

№4: Bitcoins damage national currencies and economies 

That's false. As an alternative to a national currency (with all the inherent disadvantages), bitcoins allow for more secure transactions.  The use of bitcoins may contribute to business and economic development in the country provided that their essence is duly understood.

№5: Anyone can create bitcoins, therefore they are useless 

That's false. First, the process of obtaining bitcoins is called "mining" and it requires a lot of effort. There even exists special equipment to mine bitcoins, and mining becomes harder each year. A standard computer wouldn't be enough nowadays.  Unlike real currencies, bitcoins can't be printed when needed. The useless currency is the currency which no one uses, and it's not the case, certainly.  Only 2/3 of 21 million coins have been mined so far. Their value is constantly growing, along with their benefits.

№6: 21 million bitcoins is too little for a real currency

That's false. Just like a dollar is subdivided into cents, bitcoins may be soon subdivided into micro-bitcoins. What's more, 1 bitcoin includes 100 million indivisible units. When all the bitcoins have been mined, the cryptocurrency may be subdivided into as many units as required. 

№7: Bitcoins are easy to misappropriate

That's false. Nobody can use someone else's bitcoins. They are stored in a global distribution network, not in a wallet. A special key is needed to get them. If a person has lost the key, those bitcoins will be forever lost. That's how this system works. "Lost coins only make everyone else’s coins worth slightly more.  Think of it as a donation to everyone" (c) Satoshi Nakamoto, the developer of BTC.

№8: Bitcoins are a fraud like any other pyramid scheme

That's false. First and foremost, bitcoins should be treated as a safe and reliable way to conduct financial operations.  This technology excludes any frauds or deceptions. Any pyramid has a top (a person or a group of people) that owns the whole of money in the end. The BTC system has neither a top nor an interested party.

№9: In order to earn BTC, a special PC program would be enough   

That's false. Installing a client is not enough. Mining bitcoins requires great computation capacities and impressive power costs. When bitcoins just appeared, they could be mined by use of a PC or a laptop. More professional equipment is required now.

№10: Bitcoins mining damages the ecology of our planet

That's false. The whole BTC network consumes as much power as a small town with a population of 100.000 people. And if we compare the ecological consequences of bitcoins mining with minerals mining or with the operation of large banks' servers, we'll see that bitcoins are much less harmful.

Is it worth investing in bitcoins? 

The question of whether or not investing in bitcoins may yield high profits is quite complicated and demands a detailed answer. No doubt, the price of this cryptocurrency is ever growing and attracting more investors. After its powerful growth in 2013, the Bitcoin system drew mass attention and got people to take it seriously. But it was mostly due to the low base effect, as the value of bitcoins was extremely low against the backdrop of the world economy. The cryptocurrency will hardly soar in the nearest future.  Bitcoins may be recommended as a "just in case" investment if the rate is attractive. The thing is bitcoins have every opportunity to surprise us, but don't rush to invest your last money since these profit prospects are really distant, and the risks involved should be considered as well.  However, it's definitely worth buying a few coins from time to time. 

Happy trading, everyone!  

The content of this article reflects the author’s opinion and does not necessarily reflect the official position of LiteForex. The material published on this page is provided for informational purposes only and should not be considered as the provision of investment advice for the purposes of Directive 2004/39/EC.

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