10 Cryptocurrency Myths About Security, Legitimacy, Viability, and Scalability

10 Cryptocurrency Myths About Security, Legitimacy, Viability, and Scalability

From the Terra LUNA crash to the FTX crash, 2022 was a hectic year for cryptocurrencies. Although the shocks caused chaos, the crypto ecosystem proved resilient. But bad news always leads the way, and when “crypto-scandals” come to light, so do ingrained myths about cryptocurrency.

MYTH 1: “Crypto is only used by criminals”

In the early days of cryptocurrencies, a much larger share of total transaction volume was associated with crime. Over the past decade, increased police pressure and cryptocurrency regulation have helped reduce cryptocurrency-related crime, while blockchain analytics tools have also made it easier to investigate and prevent illicit activity.

“Progress has been impressive, as we estimate that illicit activity accounted for less than 1% of total cryptocurrency transaction volume in 2022”they said from Chainalysis.

MYTH 2: “Cryptocurrencies are completely unregulated.”

Especially in the last four years, countries have made progress in the introduction of regulations that cover cryptocurrency, on topics as diverse as the fight against money laundering, consumer protection, conduct in the market and prudential requirements.

MYTH 3 “There is no way to protect yourself against hackers”

In the early days of the Internet, conventional wisdom was that you should never enter credit card details on a website. When SSL encryption technology appeared and reliable payment gateways were established, electronic commerce began to proliferate.

We are seeing a similar dynamic in cryptocurrencies, where hacking is a problem that is being resolved over time. In the early days of cryptocurrency, centralized exchanges emerged as a popular solution for exchanging and storing cryptocurrency with a custodian, but security gaps led to major hacks. However, in the years since, centralized exchanges have become a more established sector of the industryimproved their security capabilities and face fewer hacking incidents.

New technologies, especially those born from the Internet, often face security problems at their inception. As adoption grows, industry players learn from each incident and security improves.

MYTH 4 “Cryptocurrency companies are too risky for banks to interact with”

Too many institutions view the cryptocurrency industry as a high-risk monolith when it comes to compliance. In reality, the ecosystem is incredibly diverse. There are direct market entrants, infrastructure and data providers, gaming and AI platforms, payment processors, and greenfield organizations that are building novel ways to create, socialize, and transact. And because of the inherent transparency of the blockchain, banks can see all of these companies’ crypto transactions in real time.

MYTH 5 “All cryptocurrencies are Bitcoin”

Although Bitcoin was the first form of cryptocurrency and is the largest by market capitalization, thousands of other cryptocurrencies have since entered the ecosystem on hundreds of different blockchains. According to CoinMarketCap, There are more than 24,000 cryptocurrencies, listed on more than 600 exchanges, and the cryptocurrency market capitalization exceeds $1 trillion.

MYTH 6 “Cryptocurrencies are all scams”

People with minimal knowledge of the ecosystem would believe that cryptocurrencies cannot be trusted. However, data shows that scams account for a small fraction of all cryptocurrency activity. Major services received $8.1 trillion worth of cryptocurrency inflows in 2022, while the collective on-chain revenue of cryptocurrency scammers was just $6 billion for the year.

MYTH 7 “Crypto is anonymous and untraceable”

Cryptocurrency transactions are not anonymous as many believe. Far from being anonymous, The blockchain has made the financial system more transparent and democratized than the world has ever seen, with all transactions recorded in a public ledger. However, in order to effectively monitor activity or track down criminals, it is important to have the right tools in place, and that is where blockchain analytics platforms come into play. Cryptocurrency companies, financial institutions, and law enforcement have been using these tools to maintain compliance, mitigate risk, and track criminal activity in order to recover stolen or illicit funds.

MYTH 8 “Cryptocurrencies are not used in real life, they are a passing fad.”

Cryptocurrency has several real-world use cases, especially in emerging markets, many of which are leading the way in popular adoption of cryptocurrency. International payments by individuals and small businesses are increasingly being made in cryptocurrency due to its faster and lower cost. Remittances also allow you to make charitable donations.

Fifteen years after Satoshi Nakamoto’s Bitcoin white paper, digital currencies have grown from a single digital asset to a thriving ecosystem with a global market capitalization of $1.18 trillion. Besides, governments are implementing or investigating the feasibility of blockchain-based central bank digital currencies (CBDCs)as well as providing regulatory clarity to existing cryptocurrencies.

MYTH 9 “The principles of cryptocurrencies are too complicated for consumers to understand.”

First of all, Buying and trading cryptocurrencies does not require an understanding of the technology behind it. After all, most people probably don’t know exactly how SWIFT works, but no one would object to them doing international bank transfers. Additionally, using a trusted service made it easier than ever for novice investors to buy and sell crypto through secure, guided and seamless user experiences.

MYTH 10 “Cryptocurrencies allow you to evade taxes”

There are no tax breaks per se for virtual currency transactions. In the US, for example, the IRS treats digital assets as property for income tax purposes – which includes (but is not limited to) cryptocurrency and convertible virtual currency, stablecoins, and non-fungible tokens (NFTs). ). Investors must report crypto transactions on an income tax return, and various types of transactions can result in taxable gains or losses. Besides, The transparency and immutability of the blockchain make it difficult to hide transaction activity that can trigger tax events.

Source: Ambito

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