Bitcoin has been the subject of much debate since its inception, and while some see it as a financial revolution, others see it as a fad or even a threat to the current economic system. Over the years, bitcoin has also been declared “dead” by its critics, especially during market crashes or regulatory challenges. However, it has proven its resilience and reaffirmed its role as a leader in the world of digital cash.
In this article, we will debunk 23 of the most common myths associated with bitcoin to provide a more complete picture of what it really is, its legitimate uses, and its long-term potential as a decentralized, censorship-resistant financial tool.
Today, we invite you to put aside your preconceptions and learn firsthand the true value of this emerging technology that has captured the attention of millions of people, investors, and governments around the world.
Bitcoin is a Ponzi scheme
A Ponzi scheme is characterized by promising guaranteed returns and operating under a centralized structure where contributions from new participants are used to pay existing participants, such as the public pension system where contributions from new workers fund the pensions of existing retirees.
Bitcoin operates as a decentralized network that makes no promises of guaranteed returns because its value is determined solely by market supply and demand. This key distinction helps clarify common misconceptions about bitcoin and facilitates a more accurate understanding of its true potential and limitations. Therefore, by exhibiting none of the characteristics of a Ponzi scheme, Bitcoin is cemented as a legitimate and innovative financial technology.
Bitcoin has no intrinsic value
It is often argued that bitcoin has no intrinsic value, but the reality is that its true utility and value comes from its unique technological characteristics of being the world’s most powerful decentralized network supported by mining.
Every bitcoin transaction can contain short messages on its blockchain, a global, censorship-resistant and permanent data system. In addition, bitcoin offers secure transfers, is limited in quantity (with a maximum of 21 million units), decentralized, transparent, and divisible into small units, making it a highly flexible medium of exchange.
Unlike gold, which derives 90% of its value from its use as a store of value and only 10% from industrial applications, bitcoin’s value lies in its technological functionality and its role in a global network. According to Metcalfe’s Law, the value of bitcoin increases with the number of users, as the network becomes stronger and more valuable the more people use it. In addition, Bitcoin’s resistance to inflation and censorship, backed by the world’s most powerful decentralized network, reinforces its position as an innovative and valuable financial asset.
Bitcoin has no utility or purpose
Bitcoin has tens of millions of users worldwide and has established itself as a versatile financial tool in a variety of contexts. In countries where it is legal tender, Bitcoin is used both as a means of payment and as a store of value, and thanks to its decentralized network and the trust of millions of users, Bitcoin is used for a wide range of activities, from purchasing services and promoting business to active or passive investment and trade exchanges.
Notably, its growing acceptance as a medium of exchange and “store of value” is largely driven by the endemic inflation of the fiat system. For this reason, large companies have invested billions of dollars in Bitcoin to manage their assets, and it has also been used to back donations and charitable funds.
In short, Bitcoin, because it is not controlled by any central entity, offers its users the possibility of protecting themselves from inflation and gaining access to greater financial freedom.
Bitcoin is anonymous
Although bitcoin is often thought to be completely anonymous, it is actually pseudo-anonymous. This means that while real identities are not directly linked to bitcoin addresses, transfers are not completely private. Each bitcoin is associated with a specific address, making it possible to track its ownership history since its creation.
The Bitcoin blockchain is public and accessible to all users of the network, making all transactions, addresses and the total supply of bitcoin visible, which facilitates auditing of the entire system. All of this is possible thanks to block explorers, which allow the audit of transfer data on the blockchain, confirming that the amount of bitcoin in an address on a given date matches the transaction specifications, thus ensuring the transparency and traceability of the system.
Bitcoin is used by criminals
While it is true that criminals can use Bitcoin, as with any form of money, its use for illicit purposes is significantly lower compared to the US dollar, as according to a report by Chainalysis, only 0.34% of cryptocurrency transfer volume in 2023 was related to illicit activities and account thefts.
In addition, many people involved in illegal activities have been arrested thanks to the tracking of Bitcoin addresses, as all transfers take place on a public blockchain, making it easier for authorities to detect illegal activity in this environment than in the traditional financial system.
Finally, it is important to remember that banks have also been used as vaults by criminals around the world, with notorious cases of corruption and money laundering, such as those involving HSBC and Credit Suisse, proving that the problems of abuse are not unique to Bitcoin.
Bitcoin isn’t secure
The Bitcoin blockchain has operated successfully without significant disruptions or incidents since its launch in 2009 thanks to its open source code, which is constantly analyzed by security and development experts.
Although the network itself is very secure, personal wallets can be vulnerable to attacks by hackers trying to access private keys, which would be similar to hackers trying to steal online banking information. However, this does not mean that Bitcoin itself is insecure; as with bank accounts, applying basic security measures can protect funds from these risks.
In addition, bitcoin transfers are irreversible, reinforcing its value as a reliable and secure digital medium of exchange.
Bitcoin can be used to evade tax
Contrary to the belief that Bitcoin is being used to evade taxes, in many jurisdictions cryptocurrencies, including bitcoin, are taxable and must be reported for tax purposes. Tax authorities typically require the reporting of all transactions involving cryptocurrencies, and since all activity associated with a bitcoin address can be publicly verified on the blockchain, transparency is inherent in the system.
In addition, exchanges and other cryptocurrency service providers must comply with local tax regulations and, in many cases, provide information on individual transactions when requested by tax authorities. Transaction tracking tools, such as Chainalysis and Elliptic, facilitate detailed monitoring of activity on the blockchain, which enhances traceability and cooperation with tax regulations. Therefore, due to its transparent and regulated nature, Bitcoin is not a good tool for tax evasion.
Bitcoin is a bubble
Although bitcoin has gone through periods of great euphoria and price corrections, its long-term trajectory is clearly bullish, similar to the evolution of other emerging technologies. Unlike traditional bubbles, bitcoin has intrinsic value derived from its utility as a decentralized digital currency and store of value.
Price fluctuations are common in emerging markets, and despite corrections, bitcoin has shown remarkable resilience, reaching new all-time highs, reflecting its resilience and growing acceptance.
Bitcoin’s market capitalization and liquidity have increased significantly, signaling a more mature market and a broader investor base, so labeling bitcoin as a bubble oversimplifies its dynamics and fails to recognize its true utility, growing adoption and the robustness of its underlying technology.
Bitcoin will replace the financial system
The idea that Bitcoin will replace the current financial system is somewhat idealized, as the traditional financial system is a powerful cartel that cannot be easily replaced and will use all the tools at its disposal, including manipulating bitcoin like other assets, to maintain its position.
Bitcoin is not seen as a direct replacement for fiat currencies, but rather as a store of value and a complementary tool that provides a decentralized, inflation-resistant, and censorship-resistant alternative. In this way, bitcoin provides an additional option for those seeking to diversify their assets and protect themselves from the volatility and limitations of traditional currencies.
Bitcoin es too technical for the average Joe
Today’s platforms and applications have greatly simplified the use of bitcoin, making it accessible to people with little technological know-how. Today, anyone who uses a smartphone, browses the Internet, or banks online can handle cryptocurrencies just as easily.
Although many still mistakenly believe that the dollar is backed by gold, this lack of understanding does not prevent them from using it seamlessly; similarly, with the right resources and willingness, anyone can learn how to use Bitcoin.
There are plenty of tools and information available to learn about this and other technologies, and it is up to each individual to take advantage of these opportunities. For example, on the Block&Capital blog, we provide resources to better understand this technology.
Bitcoin is harmful to the environment
Energy consumption is an inherent aspect of all sectors of the digital economy, including the global banking system, which also consumes a significant amount of energy resources. However, a recent study by Ark Investment Management concludes that Bitcoin is much more energy efficient than the traditional banking system and gold mining on a global scale.
In addition, a significant portion of the energy used in bitcoin mining comes from renewable sources, and the industry continues to work on implementing more sustainable and energy-efficient methods. Bitcoin mining facilities are often located in remote areas with abundant low-cost energy, such as hydroelectric power, which helps reduce their environmental footprint.
21 millions coins is not enough
Although bitcoin’s total supply is limited to 21 million units, this does not affect its scalability, since as the value of 1 BTC has increased, users have adopted smaller units for daily transfers, such as deci-bitcoin (dBTC – 0.1 BTC), centi-bitcoin (cBTC – 0.01 BTC), milli-bitcoin (mBTC – 0.001 BTC), micro-bitcoin (μBTC – 0.000001 BTC) and satoshis (sat – 0.00000001 BTC).
If necessary in the future, Bitcoin could be split into even smaller units by simply modifying its code, provided the community so decides. This splitting capability allows Bitcoin to scale and adapt to the needs of transfers, ensuring its usefulness and accessibility over time.
Quantum computers will break Bitcoin’s security
This is another common myth about Bitcoin, driven by FUD (fear, uncertainty and doubt). While quantum computing could theoretically compromise cryptographic systems such as ECDSA signature algorithms, we are currently far from this becoming a reality, as quantum technology is not yet advanced enough to pose an immediate threat.
Moreover, there are already cryptographic protocols resistant to quantum computing that could be implemented in the Bitcoin network before such a threat materializes. Should quantum computing ever pose a risk to Bitcoin, the developer community would be prepared to develop and implement new post-quantum protocols to ensure the continued security of the network.
Governments will ban Bitcoin
Although some governments have implemented restrictive measures, many countries are choosing to develop regulatory frameworks rather than ban Bitcoin outright.
Banning Bitcoin would be difficult to implement due to its decentralized and agnostic nature, which allows users and operators to move their activities to more favorable jurisdictions. To use a metaphor, Bitcoin behaves like a “benevolent virus” that spreads globally, and although governments may try to influence its mining, the distributed and decentralized nature of the network ensures the continued presence of miners and nodes in different regions of the world.
This resilience and adaptability ensures that even in the face of restrictions in some countries, the Bitcoin network will continue to operate and grow globally, maintaining its integrity and security.
Bitcoin will be hacked or shut down
Bitcoin stands as an impenetrable fortress in the digital realm, representing the most robust computational network on the planet thanks to the security provided by its underlying blockchain technology and the immense computational power behind it.
In addition, its decentralized nature provides an extra layer of security, as the distributed consensus makes it extremely resistant to hacking attempts. This means that any malicious activity would require controlling the majority of the network’s computational power, which is virtually impossible today.
On the other hand, this decentralization eliminates the possibility of a shutdown, since there is no central authority or single point of failure that could compromise the network. Each node maintains a complete copy of the blockchain, ensuring redundancy and fault tolerance, which further enhances its security and robustness.
Bitcoin is just a temporary trend
Bitcoin has been around for more than a decade and its adoption continues to grow, indicating that it is not a passing fad. Institutional investment and the continued development of its infrastructure have led major corporations and investment funds to integrate Bitcoin into their strategies, consolidating its use as both a store of value and a medium of exchange.
Its acceptance in numerous countries reinforces its stability and longevity in the global financial market. These factors demonstrate that Bitcoin is a lasting and relevant innovation with a significant and ongoing impact on the financial world.
Bitcoin is useless because it is not widely accepted
Bitcoin acceptance continues to grow, with many large and small businesses already accepting it as a form of payment.
In addition, several countries have adopted bitcoin as legal tender, increasing its recognition and use around the world. In this way, bitcoin offers the advantage of making international transfers quickly and with low commissions, which is highly beneficial for both individuals and companies that operate globally, further strengthening their position in the global economy.
Bitcoin is a scam
Bitcoin was created to provide a decentralized alternative to the traditional financial system. Its transfers are fully verifiable, and its open source code is constantly revised by an international community of developers, ensuring its transparency and security.
Since its launch, Bitcoin has proven to be an innovative and robust technology used by millions of people around the world for a variety of legitimate purposes. Its decentralized nature prevents any single entity from controlling or manipulating it, reinforcing its legitimacy as an innovative form of digital currency.
Bitcoin is useless without internet access
Although Internet access is required for real-time Bitcoin trading, Bitcoin can be stored securely in offline wallets.
In addition, offline transfer methods are available, allowing users to manage and trade Bitcoin in situations where Internet access is limited or unavailable. This ensures Bitcoin’s flexibility and accessibility in a variety of circumstances.
Bitcoin is not scalable
To improve Bitcoin’s scalability, second-layer (L2) solutions are being developed and implemented, such as the Lightning Network, which enables faster and cheaper transfers and significantly increases the network’s capacity to handle a large volume of transactions.
With the continued development and adoption of these solutions, Bitcoin is adapting to meet the demands of an ever-growing user base, demonstrating its ability to be both scalable and efficient.
Traditional banks hate Bitcoin
Although some traditional banks have been critical of Bitcoin, the reality offers some nuances. Bitcoin’s limited supply makes it resistant to inflation compared to fiat currencies, which has led some banks to reconsider their stance.
While Bitcoin’s market value may fluctuate, certain banks are beginning to recognize its value. For example, Swiss bank Julius Baer has recommended Bitcoin as a better option than gold for wealth protection. This growing acceptance indicates that not all traditional banks view Bitcoin negatively, and some even consider it a valuable alternative for asset preservation.
Bitcoin is just a tool for evading sanctions
Bitcoin is used around the world for a variety of legitimate purposes, such as asset protection and international transfers. This is especially valuable for people living in unstable economies, as it provides an alternative that is resistant to inflation and censorship.
Its legitimate and beneficial use around the world belies the notion that its sole purpose is to circumvent sanctions, and highlights its role as a legitimate and useful financial tool in a variety of contexts.
Bitcoin does not solve any current issues
Unlike gold and fiat currencies, bitcoin can be transferred quickly, securely and reliably to anyone, anywhere in the world. It is also easily fractionalized, allowing transactions of any size without hassle, and its transfers can be publicly verified through block explorers, adding transparency to the system.
In addition, funds in Bitcoin cannot be blocked by third parties, as users retain full control over their assets. Bitcoin transfers are also faster and have significantly lower fees than those offered by banks and other traditional payment systems, making it an efficient and affordable option for global transactions.
Conclusion
In this article, we have debunked the most common myths about Bitcoin, highlighting its true potential and its role as a decentralized and censorship-resistant financial tool. Despite being repeatedly declared “dead”, Bitcoin has demonstrated resilience and a resilience that reinforces its position in the world of digital money.
Contrary to myths of tax evasion or penalties, transparency and regulations reinforce its legitimate use, and although some banks and governments remain skeptical, Bitcoin adoption continues to grow, proving it to be an enduring and relevant innovation.
As we have seen, Bitcoin offers an alternative for those seeking greater financial freedom and resistance to inflation, beyond prejudices and misconceptions. Hopefully these arguments will help clear up certain misunderstandings about Bitcoin and provide a more accurate understanding of its true potential.
Y para terminar con una reflexión, ponemos punto y final a este artículo con las siguientes palabras de Adam Smith (1776):
The one may be called ‘value in use;’ the other, ‘value in exchange’. The things which have the greatest value in use have frequently little or no value in exchange; and, on the contrary, those which have the greatest value in exchange have frequently little or no value in use.
Resources:
[1] Bitcoin is dead. The #1 database of notable Bitcoin skeptics
[2] Bitcoin Obituaries – Tracking Bitcoin’s Declared “Deaths”
Want to learn more about blockchain technology? Don’t miss these resources
- The ultimate guide to the Bitcoin blockchain
- PGP and Bitcoin: Privacy using asymmetric cryptography
- Discovering the differences between Bitcoin and Ethereum
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