Why does technology exist? Is it to reinforce the status quo? To find simpler solution to age old problems? To enable us to do the same things just more quickly and easily? Or does it really exist to shake this up, to revolutionize, to transform the way in which we think and debunk assumed truths we’ve spent decades believing in? Of course, it’s arguable that all of the above are true. Technology exists to facilitate both evolution and revolution. Yet, whenever a potentially revolutionary technology is released upon the world people tend to react with scepticism, cynicism and a naysaying attitude.

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Many technologies that were ahead of their time or particularly challenging to schools of popular thought have been met with smirks of derision by those who either do not understand them or have a vested interest in their failure. Prototype electric cars, for example, have existed ever since the 19th century. Indeed by 1900 almost 30% of all cars on the road in Boston, Chicago and New York were electric. But Ford’s more affordable gas guzzling model T put paid to the electric car’s fate for over a century. Likewise virtual reality, upon its inception, was only really properly explored by science fiction writers. In terms of commercial viability, nobody really saw much potential in the technology except in the nascent but booming video games market. Today. However, virtual reality has exploded both in its ubiquity and its scope of use. With a whole host of applications from education and training to cognitive therapy, VR’s second renaissance looks primed to potentially revolutionize a range of industries. Even the internet itself was largely misunderstood by general consumers in its infancy and few could have considered how this nascent form of communication would one day completely revolutionize the way in which we communicate, consume media, make purchases and do business.  

All of this brings us to cryptocurrency. There have been few technologies in our time as misunderstood, largely reviled or outright smeared in our lifetime than cryptocurrency and its parent technology blockchain. If you’re unfamiliar with the concept of cryptocurrency, check out our introduction right here. In this post, we’ll look at just why so many people are so deeply distrustful of it before taking a closer look at some of those assumed truths which are, in reality, simply persistent myths.

The cryptocurrency smear campaign

Earlier this year, Poland’s central bank Narodowy Bank Polski admitted to sponsoring a smear campaign against cryptocurrencies on social media. The video in question, which showed a young man investing in cryptocurrency and losing his money, enduring humiliation when he is unable to pay for a date, raised eyebrows not just for its content but for the fact that it did not disclose its status as a paid promotion.

Of course, this is not the first time the financial services industry not a centralized government has demonstrated hostility towards cryptocurrencies. There are many countries, including China, where cryptocurrency is illegal to trade. Moreover, the financial services industry has always been particularly sniffy when it comes to cryptocurrencies. In many ways they represent a threat to a status quo that has seen them profit enormously. As the value in Bitcoin, arguably the most successful, popular and widely traded cryptocurrency has fluctuated over the past year or so, many in the banking sector have rubbed their hands together and started saying their “I told you sos”. Yet, despite the prognostications of doom and gloom and active smear campaigns against them, cryptocurrencies continue to be widely traded throughout the world.

It’s easy to see why for some, cryptocurrencies may be more appealing than trading in fiat currencies. Unlike fiat currencies, its value is not tied to the economic success or failure of any one country or state and unlike stocks and shares, their value cannot be decimated as a result of corporate negligence, scandal or incompetence. As long as people trade it it will continue to have value. And as long as it has value, people will continue to trade in it. Yet, there are still a plethora of persistent myths which have deterred many from trading in cryptocurrency, or at least incorporating it into a diverse investment portfolio. Here we’ll attempt to bust them wide open.

There’s no point investing in Bitcoin because the government will make it illegal soon

While China, India and a number of other world economies have clamped down upon the trading of Cryptocurrencies, there are no plans for cryptocurrencies to be outlawed in countries like the US, Canada, the UK and mainland Europe. Indeed, the US Financial Crimes Enforcement Network has had established guidelines for decentralized currency in place since since 2013. If you live in any of these countries it’s perfectly legal (and likely to remain so) to trade and invest in cryptocurrencies. Not being state backed is not the same thing as being illegal.

Cryptocurrencies aren’t backed by real assets, therefore they have no value

The same oversimplified accusation that’s levelled at cryptocurrency can also be attributed to virtually any fiat currency. Certainly the US dollar. The US dollar hadn’t been backed by the gold standard since 1971, and is instead backed by the “full faith and credit” of the US government. Given the amount of financial crises we’ve endured in the neoliberal economies of the past few decades, that may not have the same sense of reassurance for many today as it did for their forebears. Let’s not forget that governments and banks create money out of thin air every day through quantitative easing. With this in mind, does cryptocurrency really differ all that profoundly from cryptocurrency? The value of cryptocurrencies is determined in the same way as any other commodity, by those old staples of economics; scarcity, utility, supply and demand.

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All cryptocurrencies are the same

Since all cryptocurrencies are built upon blockchain technology and their value is driven by the same economic forces, it’s easy for the uninitiated to lump them all together or perhaps to default to Bitcoin, but different cryptocurrencies, as well as having their own discrete values, also have their own sets of benefits. This piece on Filthy Lucre about the Stellar network, for example, outlines how Stellar transactions are far faster than Bitcoin transactions as they do not need to be verified by the whole network. If you are thinking of investing in a cryptocurrency it behoves you to do your homework on which best suits your needs.

Cryptocurrencies can be mined by anyone, so that undermines their value

This is another common misconception that withers under the lights of common sense. Sure, in theory anyone could start mining for Bitcoin, but in theory anyone could also start mining for gold. In both cases, one would have to invest heavily in the technological infrastructure necessary to mine the commodity and one would also need to carry out significant research in how to do so successfully. Mining for cryptocurrencies is far more complicated than running a computer program and leaving your laptop on overnight, just as mining for precious metals is far more complicated than digging a big hole in your back garden. If you’re seriously interested in Bitcoin mining, however, this article can help you to get started.

You don’t want to tarnish your reputation by using cryptocurrency because criminals use it for illicit transactions

Because cryptocurrency transactions are encrypted by blockchain technology and traded with a degree of anonymously, this has led some to associate it with criminal activities. While it’s certainly true that there are nefarious purchases made for illegal materials and services on the dark web, the fact that criminals also use balaclavas for armed robberies shouldn’t put you off buying one next time you go skiing.

The truth is that lots of people use cryptocurrencies for a variety of perfectly legal and wholesome activities. Some use it to save for their retirement, others see it as a viable alternative to a conventional savings account in an era where most savings accounts have frustratingly anemic interest rates. In some countries with limited banking infrastructure it’s not unknown for cryptocurrencies to supplement their economies. You shouldn’t be averse to the benefits of using cryptocurrencies merely because they happen to be used by a few bad apples for shady activities.

What if I invest in a cryptocurrency and its network is shut down?

For the less digitally literate, the undermining of the technologies upon which cryptocurrencies are based may seem vulnerable to attack. When individual wallets are attacked by cyber criminals it can lead some to believe that the entire system could be placed in danger of shutting down or somehow being corrupted. But the beauty of cryptocurrencies is in their decentralized nature. Blockchains cannot be attacked because there is no central point at which they can be attacked. If you get mugged and 50 US dollars are taken from your wallet, this does not mean that the dollar itself has been hacked.

As with any investment, it’s important to make rational and well informed decisions when it comes to cryptocurrencies, and that means separating the myths, rumors and fear mongering from the facts!