Bitcoin Myth

 

When re-imagining something as integral to our society as money, there are sure to be widely held misconceptions along the way.  Let’s take a look at a few of these and set the record straight.

Myth #1: Bitcoin is anonymous

Many people think that Bitcoin provides completely anonymous transactions. While it is true that people can use Bitcoin wallets to send, receive, and store bitcoins without submitting personal details, all wallets have a unique address assigned to them by the Bitcoin network.   While these addresses aren't by default tied to a human identity, in many cases it is possible to make that connection. That's because exchanges that facilitate trades between the legacy banking system and cryptocurrencies are legally required to collect identity verification documents for their users. Furthermore, since every Bitcoin transaction is recorded in perpetuity on a public ledger, once an address is tied to a human identity, its anonymity is lost forever.   So is Bitcoin anonymous? Not exactly. Pseudonymous is a better word to describe it.

Myth #2: Bitcoin is a bubble

When bubbles burst, they die forever. The classic example is Tulip Mania, a short-lived speculative bubble that drove price of a single tulip as high as 10,000 guilders, enough to buy a mansion. Never again have tulips been valued anywhere near as high.   While it's true that Bitcoin has experienced massive volatility, including several crashes of 70% or more, when you expand the timeline you’ll see that the baseline value of Bitcoin is rising steadily. This is not the behavior of an economic bubble.    Bitcoin is a deflationary asset by its design. With a fixed supply of 21 million coins, more than 90% of which are already in circulation, even a modest rise in demand for Bitcoin can have a dramatic influence on its price.    There are many factors that drive speculation in Bitcoin, but at the end of the day it is an asset that has inherent value. That value is based on its utility as a global means of payment that is open to anyone in the world and can settle transactions, big and small, in minutes.   This is why we are passionate about Bitcoin as a great investment tool and long-term store-of-value. However, the volatility means that if you're treating Bitcoin as an investment, you need to consider it over a sufficiently long time frame.

Myth #3: You can't spend Bitcoin in 'real life'

In the early days, cryptocurrencies were derided and dismissed by mainstream financial institutions as ‘magic internet money’.  Since then, Bitcoin and other cryptocurrencies have become an economic force with a market capitalization measured in the hundreds of billions.    Cryptocurrency is increasingly proving itself to be not just a tool for financial speculators, but also as a valuable medium of exchange. Today, you can spend cryptocurrency at thousands of physical retail locations around the world, and in even more e-commerce shops online.

Myth #4: Satoshi Nakamoto controls Bitcoin

On October 31, 2008, a white paper titled "Bitcoin: A Peer-to-Peer Electronic Cash System" was posted to a cryptography mailing list at metzdowd.com. The listed author was Satoshi Nakamoto, a person or group who has never been identified.   During the early stages of Bitcoin, Satoshi Nakamoto was actively collaborating in the development of the Bitcoin software, however he soon bid farewell to the project and was never heard from again.   Furthermore, control of the Bitcoin protocol has never been in the hands of a single person. That's because it is open-source software that is run voluntarily by anyone. You can read more about how this works and who's in control of Bitcoin here.