6 Most Common Bitcoin Myths

2024 Author: Malcolm Clapton | [email protected]. Last modified: 2023-12-17 03:44

Is Bitcoin really another pyramid, is mining harmful to the environment and is cryptocurrency illegal in Russia - Lifehacker understands what is true and what is false.

Myth 1: Bitcoins are a bubble that can burst

In the traditional sense, Bitcoin really isn't backed by anything. You cannot exchange cryptocurrency for the computing power that was used to create it.

Bitcoin is its own currency. Its value depends on how much it is appreciated by the people themselves, on their belief in it.

An important indicator is the willingness and desire to use cryptocurrency as an analogue of traditional currencies, an exchange equivalent. Thus, the bitcoin rate is determined solely by the demand for it. An example is gold, which is also not backed by anything, but for many centuries it has a certain value.

The higher the price of cryptocurrencies, the more opportunities for their use, the more actively they are mined. This, in turn, increases the complexity of the mining process.

Myth 2. Bitcoins can be mined by anyone

It is extremely difficult to get bitcoins today. Gone are the days when individual users - miners - did it. This is now happening on huge, expensive mining farms.

For profitable Bitcoin mining, you need to invest millions of rubles in equipment.

One bitcoin, as of September 6, is worth more than 4.5 thousand dollars. The reward for each mined block (a file recorded on the Network that contains information about the transactions that have taken place) is 12, 5 bitcoins.

In 2020, the cost of a block will be halved. The reward is halved after every 210 thousand blocks mined.

Most other cryptocurrencies are easier and cheaper to mine, but their rate is an order of magnitude lower.

Myth 3: The governance of the bitcoin network can be easily intercepted

The more nodes that generate bitcoins, the more difficult it is for one person or group to take control of the network. Such an attack would require equipment worth hundreds of millions of dollars. Plus energy costs comparable to the consumption of a large enterprise.

There is simply no economic sense to control the network. Hackers will not be able to use bitcoins in other people's wallets.

You can lose bitcoins, but only together with the loss of access to your wallet. Each owner has their own private keys. And if he lost them, there will be no access to the accumulated or mined cryptocurrency.

Myth 4: Bitcoins are illegal and can be problematic

Cryptocurrencies are officially recognized in many countries. Bitcoin is considered legal tender in Japan. It is also recognized as a currency of account in Germany, China (for individuals), Switzerland.

Russia does not yet have legislation regulating the circulation of cryptocurrencies. However, what is not prohibited is permitted.

The intention to switch to calculations in cryptocurrency when selling SUVs was announced at the Ulyanovsk Automobile Plant. Representatives of Sberbank have publicly voiced the opinion that "nothing prevents small businesses from using bitcoin today." They decided to introduce their own cryptocurrency (whoppercoin) in the Russian division of the Burger King network.

The Association of Cryptocurrencies and Blockchain has been established in Russia. Its goal is to unite participants in the blockchain technology market, cryptocurrency owners, miners, investors who invest in ICO projects.

So far, the turnover of cryptocurrencies in Russia remains officially not legalized. Recently, the Central Bank of the Russian Federation issued a warning about increased risks when using and investing in cryptocurrencies. Due to the "anonymous nature of issuing cryptocurrencies," people may be involved in illegal activities, including money laundering and terrorist financing, the statement said.

However, the Central Bank itself has already issued state accreditation to the Far Eastern trading platform "Voskhod" for working with cryptocurrencies. It is possible that the surplus of energy in the Far East and Siberia will be used for mining. Officials are talking about this in all seriousness.

In any case, the State Duma of the Russian Federation will consider a draft law on the regulation of cryptocurrencies, where bans on their use are not provided.

Myth 5. Bitcoins and other cryptocurrencies are like a pyramid scheme

A pyramid scheme can be created in any currency. Therefore, bitcoins may well be used as a means of payment for financial fraud. But no one blames the ruble for the creation of the famous MMM.

The financial pyramid works according to a different scheme. The income of the participants in such a structure is ensured by the constant attraction of new funds. The first depositors receive funds from the deposits of those who came later. The flow of money stops - the pyramid falls apart.

In the case of bitcoin, there is also a risk: its rate can plummet. As well as grow just as sharply.

It is difficult to predict unambiguously whether it is worth investing in cryptocurrency. It is unlikely that Bitcoin will bring fabulous profits: those days are over.

Myth 6. Bitcoin mining is bad for the environment

This myth is based on the fact that it takes a lot of electricity to generate cryptocurrency and maintain computing power. In fact, in terms of energy consumption, the Bitcoin network is similar to a city where 100 thousand people live.

But not everyone believes that the harm from mining cryptocurrencies is exaggerated. In Russia, they proposed introducing a ban on the installation of mining farms in residential apartments and houses.

Mining farms increase electricity consumption by several times and contribute to a noticeable increase in indoor temperature. This can be unsafe for other residents, especially if the house is old.

Opponents of the ban are sure that the rise in temperature during the operation of farms can be used for good, for example, for space heating. In addition, it is not clear how such a ban can be controlled. After all, mining equipment is often a personal computer, albeit an improved one.

At the same time, the Institute for Internet Development (IRI) has already announced that one of the Russian regions (which has not yet been named) will provide the owners of farms for mining with benefits for electricity. This decision is explained by the desire to bring Russia to the fore in the extraction of cryptocurrencies.