Most common myths and mistakes in the cryptocurrency world

There are many mistakes that the cryptocurrency users make, first of all, because, in their eagerness to start being part of the crypto ecosystem quickly, don’t read or investigate enough

Myths about cryptocurrencies

Is more than natural that, facing the unknown, humans develop theories to explain what they can’t understand, a natural and very human tendency, from there on the existence of innumerable myths and legends that the man has always used to try giving answers to what they can’t understand.

This situation isn’t alien to the world of cryptocurrencies, around it are many myths circulating, which are one of the reasons why many investors are reluctant to participate in the ecosystem. Among these myths we can highlight the following:

1. Cryptocurrencies aren’t real money

This is a myth that derives from the common belief that people have that money is a “product” from the State, which ends up wrongly determining that cryptocurrencies can’t be categorized as money because they have no governmental backup.

It’s been a long time since fiat money, represented in paper money, stopped being backed by a physical element like gold. Government federal reserves stopped being enough for the great number of issued bills, which is why there isn’t a backup for money more than the trust its citizens put in its value. Which is pretty similar to what happens with cryptocurrencies. 

Money is everything that’s assigned a value and purchasing power, which makes it a means of exchange, if any asset, physical or digital, has these characteristics, it’s considered money.

In this context, cryptocurrencies have all the features to be considered as money, digital, but money after all, and although one concern with these crypto-assets is the lack of a physical backup, we have to say, this isn’t a flaw exclusive of cryptocurrencies

2. Cryptocurrencies work like a multilevel or a pyramid.

With the arrival of Bitcoin, many criminals took advantage of the ignorance of the participants and their eagerness to get “easy money”, to generate fake business proposals where, through Ponzi systems, scammed a great number of naive people. This generated an environment of distrust regarding everything related to Bitcoin and cryptocurrencies.

But there’s nothing further to the nature of cryptocurrencies than business multilevel schemes, as to invest in cryptocurrencies it isn’t necessary to give money to anyone, it’s personal entrepreneurship where the user is its own boss and it doesn’t need much caution to make the best choice.
The feature that certifies this fact is the decentralized nature of cryptocurrencies, that is, the principle of not requiring intermediaries, something that goes against all the other common beliefs in the crypto ecosystem, focused to know who is behind every project or where its headquarters are located.

Cryptocurrencies are purchased and sold in platforms on the internet, on the well-known exchanges, through supply and demand, very similar to the activity of a Stock Exchange, without the need of going to an office or delivering money to anyone. 

3. Cryptocurrencies just work for money laundering and sell drugs

Ever since their arrival, cryptocurrencies have been attributed to be involved in many illegal activities, such as drug traffic, money laundering, financing terrorism, human trafficking, etc.

Although it can’t be ignored that those who first took advantage of the benefits of a decentralized network like cryptocurrencies, specially Bitcoin, where those interested in going unnoticed by authorities, currently, security agencies around the world assert that the percentage of illegal use of cryptocurrencies is quite lower than the legal use that most of the users give to it.

Besides, it would be absurd to attribute to cryptocurrencies the responsibility for all the problems that society presents today, as they are the same that have always existed way before the existence of these new technologies. 

4. Cryptocurrencies are just bubbles about to explode 

First of all, we need to be clear about what does the term ‘bubble’ means in the economy sector. An economic bubble, also called a speculative bubble, market bubble, or financial bubble, is a phenomenon that’s produced on the markets, mostly due to speculation, and it’s characterized by an abnormal, uncontrollable, and prolonged rise of the price of a crypto-asset or product.

A bubble is a result of the speculative mistakes about the future market value. It lasts while those mistakes lead to a rise and that rising provokes more mistakes. But the most transcendental in this case, cryptocurrencies, is that it’s a phenomenon that can occur with any financial asset.

The assets starring a bubble rarely disappear, as is the well-known case of the Tulip investment bubble, known as Tulip mania, the first documented case of an economic bubble in history, this was a period of speculative euphory that emerged in the Netherlands in the years prior to 1637. The subject of speculation was the tulip bulbs, whose price reached exorbitating levels, giving place to a great economic bubble and financial crisis.

The tulips, as the protagonist asset of this economic bubble, didn’t disappear, the speculative bubble did, and that’s exactly what happens with cryptocurrencies, especially Bitcoin, as this is the most popular and commercialized, its price goes up and down quite quickly, but in the long term it will always have an upward trend because it’s a limited-supply cryptocurrency.

5. Cryptocurrencies are volatile because Blockchain isn’t trustworthy

Many are wrong to relate the cryptocurrency’s volatility with the credibility of the blockchain technology, which is absurd as the Blockchain has many more appliances than just supporting cryptocurrencies, both for it to be the technology that will transform the economy as well as other aspects of society. 

Blockchain and cryptocurrencies are pretty related and, together, work perfectly, however, they can also work excellently by themselves. There isn’t just one use for blockchain, all businesses and the industry, can benefit from the contributions of the underlying technology of the distributed ledgers.

6. Cryptocurrencies will end up destroying the environment

The fact that cryptocurrency mining requires excessive energy consumption It’s indeed a reality, especially those that base their process in the PoW protocol. Many of the theories generated around this fact sound more like apocalyptic prophecies than a close reality.

The scientist Randi Rollins of the University of Hawaiʻi published a report about the effects of the climatic change and the increase in the global temperature, which assures that, if the Bitcoin technology is adopted at the same pace than other technologies, in 2043 mining will have raised the temperature 2º C. This seems very alarming but, if the problem if the energy consumption, why attributing it to cryptocurrencies, which have existed for only 11 years?

The Blockchain and cryptocurrency expert Andreas Antonopoulos has mentioned regarding this: “Christmas lights are a waste of energy”. There are many activities performed by humans that generate remarkable energetic waste, emails, internet searches, or seeing videos online, also require great energetic consumption, and, thus, are also contaminating. By using a tablet or smartphone to see an hour of videos per week, within a year we will have consumed more electricity than two new refrigerators.

According to a study performed by the Electric Power Research Institute in 2012, an iPad consumed 9 kWh per year, and, by then, Apple had already sold 170 million iPads, which together will use 1,53 TWh per year. During the first trimester of 2012 more than 43 million LCD TVs, whose combined annual consumption was 8,8 TWh. It’s estimated that, just in the U.S., there are more than 65 million washing machines that consume approximately 300 kWh per year. The combined consumption of all of them would be 19,5TWh per year, practically that of bitcoin’s platform, only referring to the washing machines in the U.S. Perspective, as it’s usual, can change everything.

 In this context, we can assume that the effects of the climatic change attributed to cryptocurrency mining can be exaggerated, even more if we consider that the temperature has increased 1.13 degrees C in the last 118 years, which means that claiming that it will increase 2 degrees just because of mining in the next 25 years seems to be a quite exaggerated figure.

Most common mistakes in the cryptocurrency world

There are many mistakes that the cryptocurrency users make, first of all, because, in their eagerness to start being part of the crypto ecosystem quickly, don’t read or investigate enough, especially when relating to the terms and conditions, and following the instructions correctly.

Additionally, these are the mistakes that must be avoided as far as cryptocurrencies are concerned:

1. Passwords

When creating your passwords in a cryptocurrency wallet, you must keep in mind that the access to your assets, and, most importantly, the security of your capital, depends on it.

You must create a password that’s easy to remember, but no one else can decipher it, so, your birthday, your house’s address, your mom’s birthplace, can be information known for many, which deprives you of privacy. Generally, a secure password has random letters and numbers, and must have a backup, typically external, so, in case of losing or forgetting it, it will be easy to recover.  If it’s written in paper, you must keep it in a place where only you can access it.

You must always keep in mind that, if you lose it, your crypto-coins will be lost, as only you can access them, and in your cryptocurrency’s blockchain, there isn’t an access copy saved, which means that nobody can help you restore it. 

2. Security of the device

Keeping the computer or device from where you access a wallet or perform mining updated is absolutely necessary, if you don’t do so, you run the risk of exposing your software’s security and the information you have stored. 

It’s important to count with an updated antivirus, especially when you’re used to downloading lots of content and going through many websites that could be contaminated with malware, which would seriously harm your device. It would be best if you used a single device to perform your cryptocurrency activities, trading, wallet accesses, etc.

3. Using just one exchange

Exchanges aren’t 100% secure, there’s always the possibility that these may be attacked, and if they aren’t very solvent, then you can say goodbye to your cryptocurrencies, so, if you don’t mobilize your assets constantly, it’s preferable to not keep them in an exchange for a long time, if you do it then use some.

The best place for your cryptocurrencies to be secure is in your wallet, mostly if you’re not a trading expert and are just profiting from the value of your digital assets.

4. Not verifying the address before sending

Copying and pasting don’t work, as there are viruses that can take control over the content of your computer’s clipboard, so it’s very risky if you don’t verify that is the same address that was sent to you.

It’s not about putting character by character, but paying attention and verifying that at least the three first characters, the three in the middle, and the last three match, so you can be completely sure that you’re sending the right address.

5. Trading through social media

It’s useless to take all the previous security measures if you’re going to sell cryptocurrencies in a Facebook group. Social media don’t have platforms that can assure you that your money is protected, don’t ever make transactions with third parties through the Internet, and avoid scheduling meetings with strangers indoors.

There are several channels to exchange cryptocurrencies in a secure and instantaneous way, they can help you to exchange your money easily, without problems or risks, si, if these exist, you can be certain that taking unnecessary risks isn’t worth it. 

6. Investing everything in a single cryptocurrency

The cryptocurrency market is very volatile, some are more than others, so, if you have enough money to invest in cryptocurrencies, it’s good to remember to diversify the investment, thus, you won’t be submitted to the behavior of a single asset, or putting your investment in risk of losing value when there’s a downward trend of the cryptocurrency you invested your capital in.

7. Very little research 

To us, this is the greatest mistake that an investor in the crypto ecosystem can make, as many investment opportunities can end up being real scams.

It’s best to delve in a subject than to let yourself be carried for what some other, with an unknown interest, may say to you. The web is filled with information about it, regarding new projects, you can access the information published in the Whitepapers of each one, verifying their forums, social media, and drawing your own conclusions, to take a right desition.

We would like to know your comments regarding this subject, so leave us your opinions. Don’t forget to subscribe to our Newsletter to stay updated about the digital ecosystem.

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