Debunking 6 Most Common Crypto Myths
It is a well-known fact that people tend to fear and mythologize what they don’t understand. Being a rather complex topic for comprehension, crypto did not miss this fate either.
As cryptocurrencies become more and more popular every year, the number of adverse crypto myths rises exponentially. Most of these misconceptions are false, stemming from a lack of knowledge and understanding of how cryptocurrencies work. Sometimes, common crypto myths and facts could be difficult to differentiate from one another, which can have a detrimental effect on the reputation of cryptocurrencies, causing individuals with no in-depth knowledge to view them in a much more negative light than they should.
Let’s discuss some of the most common crypto myths and assess if there’s any sound reasoning behind them.
Common crypto misconceptions and myths
Myth #1: Crypto is mostly used for illegal activities.
When dispelling crypto myths, the one about digital coins being mainly used for illicit practices should be put on the list first. This is one of the most widespread and harmful cryptocurrency myths out there. Enhanced privacy and lack of comprehensive regulations often associated with cryptocurrencies only perpetuate this myth, leading most people with no comprehensive understanding of the crypto market to believe that digital currencies are mostly used for illicit and ambiguous purposes, like money laundering, financing terrorism, etc.
The reality, however, could not be more different than this harmful stereotype, and there are solid facts to prove it. Thus, according to the 2023 report by Chainalysis, a US-based organization involved in collecting and interpreting global crypto-related data, in 2022, only 0.24% of all crypto-related activities were linked to illicit or criminal purposes. While larger than 0.12% we could have observed in 2021, this number is still insignificant and completely comparable to the percentage of illegal activities associated with other payment means. In the meantime, every year, cryptocurrency adoption by governments and world-famous businesses worldwide gets higher, which would doubtfully be the case if the crypto myth under discussion were true.
Myth #2: Investing in crypto is no different from gambling
This is another one of those common crypto misconceptions that are especially annoying to cryptocurrency investors. It implies that investing in cryptocurrency is essentially just a sophisticated form of gambling since crypto prices are very difficult to predict, so one’s ability to profit from such an investment largely depends on luck and nothing else.
Needless to say, this claim is not only outrageous but blatantly misleading. Of course, no one denies that crypto could be risky and unpredictable. Sometimes events take surprising turns, and unexpected facts impact crypto prices, causing off-the-charts volatility. However, to a certain extent, this could be said about any investment asset. For example, the stock market can also experience sudden shifts in value based on unexpected news or events.
Meanwhile, in many cases, people with an in-depth understanding of the market have every chance to realize how a particular coin is most likely to behave in the near future. By studying market trends and evaluating a coin's fundamentals, investors can make informed decisions about which coins to buy and when to sell. This is definitely not the case with gambling, which is usually based on pure luck and involves little to no fact-based forecasting.
Myth #3: Due to decentralization and lack of regulations, crypto is not secure
This crypto myth originates in people’s tendency to associate security with government regulations and public bodies’ active involvement in citizens’ private matters. Since the realm of crypto usually lacks these attributes, people tend to believe that it’s more prone to fraud, hacks, data theft, and other cybercrimes.
In reality, crypto ecosystems emerged and developed as rather self-sustainable networks that don’t require any government involvement to ensure the protection of their users. As for the decentralized nature of cryptos, it can actually make them more secure by removing the need for intermediaries and central authorities that can be vulnerable to hacks and data breaches.
Of course, these factors don’t automatically make all the crypto platforms out there safe and trustworthy. However, if you do your research and pick a reliable exchange that takes care of its client's needs, it will be no less secure than any reputable non-crypto-related financial platform. So, no, decentralization and lack of regulations do not make crypto unsafe, and this misconception could be thrown into the bin to join the other two crypto myths discussed above.
Myth #4: Cryptocurrency is just one global pyramid scheme
Of all the common crypto myths, this one could easily be the most harmful due to how many people with absolutely no understanding of crypto automatically consider it true. Basically, the proponents of this idea believe that the cryptocurrency industry is based on a pyramid scheme, in terms of which early adopters and investors profit at the expense of later investors. It implies that cryptocurrency is simply a scheme to enrich a select few at the top of the pyramid.
For starters, this misconception can be debunked by simply looking into the essence of how crypto transactions occur. Namely, they are based on blockchain technology, which provides a secure and transparent way to record transactions and manage digital assets. In turn, pyramid schemes are usually opaque, secretive, and deliberately tangled to prevent people participating in them from understanding where their money goes.
Another thing that speaks against crypto being in any way viewed as a pyramid scheme is its decentralized character. Pyramid schemes are highly centralized in favor of a chosen few who stand at their roots. These fraudulent schemes need a central authority and hierarchical structure. Meanwhile, cryptos, decentralized and lacking any single controlling entities, could not be further away from these attributes. So, the notion of crypto being a pyramid scheme can be added to the list of popular crypto myths debunked in their entirety.
Myth #5: The cryptocurrency industry as a whole is bad for the environment
This is one of the newer common crypto misconceptions and the one that, unlike many others, actually has some rational seed behind it. According to it, crypto mining and transaction processing requires significant amounts of energy, leading to high emissions and contributing to climate change. Based on this idea, the adepts of this view consider all cryptocurrencies and the crypto industry as a whole to be inherently harmful to the environment.
As we already mentioned, this myth is not entirely unfounded. Indeed, some cryptocurrencies, including Bitcoin, use a consensus algorithm called Proof-of-Work (PoW). This algorithm requires miners to solve complex mathematical puzzles to validate transactions and add new blocks to the blockchain. Such a process utilizes a vast amount of computational power, leading to increased energy consumption.
That being said, this problem mostly applies to those cryptos that rely on the PoW protocol. Meanwhile, many of them are gradually being transferred to a much more environmentally friendly Proof-of-Stake (PoS) algorithm. The world’s second-largest crypto, Ethereum, switched to PoS relatively recently, making a great example for other cryptos to follow. Meanwhile, BTC and other renowned PoW cryptos are looking for solutions to make their operations greener. So, while some cryptos, indeed, have a questionable ecological impact, it is not enough to generalize and brand the whole crypto industry as anti-environmental.
Myth #6: You can only get into crypto if you’re a tech-savvy individual
This misconception belongs to a specific category of crypto myths that are only common among people who have zero to no knowledge of the subject matter. They believe that cryptocurrencies are too complex and require specialized technical knowledge to understand and use, so they refuse to even try looking into this asset. This way, they are gatekeeping themselves from entering the crypto world and seizing the opportunities it presents.
Separating crypto fact from fiction, it should be said that cryptocurrencies, indeed, can be complex and technically nuanced. However, the same can be said about most things we surround ourselves with in our day-to-day lives. Not so many people know how computers or smartphones work, yet we use them daily. You don’t need to understand the internal mechanisms behind banking systems to make a deposit. You can watch TV while not having an electronics engineering degree. So why would you assume you need to possess deep insights of the technology behind crypto to use it?
Like with every other thing mentioned above, one’s crypto experience only depends on one thing: the user-friendliness of the medium helping you deal with your chosen cryptocurrencies. In other words, as long as the crypto exchange platform you use is understandable to you, you shouldn’t worry about the technical peculiarities behind how crypto works. Today, there are many user-friendly platforms that make it easy for anyone to exchange, sell, and buy crypto. Most of them have intuitive interfaces and walk users through the process step by step. And those who still believe they need more in-depth knowledge can always resort to one of the countless educational resources available online.
Like any other misconceptions, common crypto myths are numerous and various. Some of them are utterly nonsensical, like the one about crypto being a pyramid scheme. Others, like the one about some cryptos’ adverse impact on the environment, aren’t lacking sound reasoning (while still being vastly exaggerated by crypto adversaries and their involuntary allies).
Be as it may, the main thing that we can learn from debunking crypto misconceptions above is that in a modern day and age when false or distorted information can easily spread throughout the internet, it is crucial to examine any new knowledge and not take everything you hear on faith. It is especially important when it comes to such a complex and multifaceted matter as crypto. After all, it’s one thing to refuse to get into crypto because you’re simply uninterested and completely other – to do so because you sincerely believe that it’s some kind of a worldwide conspirative pyramid scheme.
So, do your own research and make your own decisions to determine if crypto suits you. And if you decide that it does, you can always buy the most promising handpicked coins on XBO.com!
Disclaimer: Our content does not constitute financial advice. It is only intended for informational and educational purposes.