It’s not surprising to see so many misconceptions about cryptocurrency. The market is still very new, and the technology that powers it can be complicated at times. However, people are starting to learn more about digital currencies every day. This blog post will discuss eight common misconceptions about understanding cryptocurrency to help you get a better grasp on everything!
1) Cryptocurrency is not legitimate because it’s still unregulated.
Many people think that cryptocurrency has no real value. They believe the only reason companies accept Bitcoin, Ethereum, and other digital currencies as a form of payment is that they haven’t been regulated yet. However, there are many reasons why cryptocurrencies have become so popular despite this fact!
For one thing, even though these coins aren’t backed by governments or central banks like regular money in your bank account would be if you used an ATM card to withdraw cash from your checking balance – both traditional fiat currency AND cryptocurrency can easily be exchanged for services and products in today’s world.
2) There’s only one type of cryptocurrency.
One common misconception about understanding cryptocurrency is that there is only one kind! Many people think Bitcoin is the sole digital currency available to use globally, but this simply isn’t true. While it may be the most popular form of virtual money, over 700 new cryptocurrencies have been created since 2009. There are even more being launched as we speak! So yes – make sure you understand what kinds exist and try not to get stuck buying into just one early on. If possible, diversify your portfolio by investing in multiple currencies instead.
3) Cryptocurrency is not secure.
Many people also believe that because cryptocurrency has no central banking system, it must be unreliable and unsafe. However, the truth about digital currencies couldn’t be further from this notion. Extremely complex mathematical algorithms encrypt cryptocurrency transactions to ensure security using cryptography. This process makes them virtually impossible for anyone to alter or hack into your personal information! Digital coins like Bitcoin can never go out of circulation either – they have an infinite supply just like regular fiat money does!
4) The only way to make money through cryptocurrency is by investing.
One of the biggest myths about understanding cryptocurrency and Bitcoin, in particular, is that you need a huge sum of capital to get involved. While it’s true that some people have made big bucks trading currencies like Ethereum or Litecoin, there are many other ways for investors to earn virtual coins as well! You can do things like mining (running complex math problems) with your computer power – which helps verify transactions on the blockchain. Or, if the hardware isn’t your thing – try using an online marketplace such as OpenBazaar to sell goods across borders without worrying about transaction fees!
5) Cryptocurrency is completely anonymous.
While most cryptocurrencies like Bitcoin and Ethereum are designed to keep users’ identities as private as possible, some information must still be shared. For example, you’ll need an email address or a wallet number to buy into almost any form of virtual currency – so it’s not 100% untraceable. Another downside of using digital coins for everyday purchases is that cryptocurrency volatility can cause prices between currencies to shift drastically from one minute to the next!
The good news, though? Many new apps have been developed recently which let you pay with crypto instantly through your smartphone at cafes, restaurants, or even street vendors!
6) There are no transaction fees.
While the lack of central banking authorities may make it feel like cryptocurrencies have zero oversight or regulation – this isn’t true either. Cryptocurrency transactions usually do cost something to send between users, but they’re nowhere near what you’d pay for using a credit card! And since there’s virtually no risk involved in making these transfers (unlike when buying things online through your bank account), sending currencies across borders is much cheaper than ever before too!
7) It’s impossible to tax cryptocurrency.
Many people also believe that since there is no centralized banking system for cryptocurrencies, governments can’t track the transactions taking place. While this may be true – this doesn’t mean they don’t have other ways of taxing their citizens! Every time you purchase with Bitcoin or Ethereum, your wallet address will likely appear on the blockchain as part of what’s called an altcoin transaction. And though these coins are technically not taxable by themselves – how you choose to spend them may give away clues about where income is coming from.
8) Cryptocurrency is only used to fund illegal activities.
The final myth about cryptocurrencies that needs busting? That they’re just for buying drugs or laundering money. While it’s true many shady individuals use digital currencies like Bitcoin and Ethereum to cover up their tracks – this doesn’t mean the rest of us should be judged by our actions! Most people who trade cryptocurrency do so because they believe in its merit as an innovative form of currency, not because they want to break bad.