The Top 10 Myths About Bitcoin

June 21st, 2013 → 8:04 am @

With more and more news sources reporting on Bitcoin, there have been many misconceptions and rumors flying around.  Here are the top 10 myths about Bitcoin.

PhysicalBitcoin1. There is an infinite amount of Bitcoins

A clear misconception.  Bitcoin was created so that only 21 million Bitcoins will ever be produced.  Over time, the individual value of each Bitcoin is supposed to increase as demand increases and supply stays constant (or even decreases) over time.

2. Bitcoin is insured

Another myth… Because Bitcoin is not regulated by any government, no insurance has been offered to Bitcoin holders.  If you lose your Bitcoins (maybe you lose your wallet or send them to a scammer), there is no way to get them back!  It is important to be careful with your Bitcoins!

3. You can only trade Bitcoin for other Currencies

False!  More and more businesses are starting to accept Bitcoin!  There are tons of benfits to accepting Bitcoin (see myth 10 for more on that) and even cars and real estate have been sold for Bitcoin.  In fact, my eBook can be purchased using Bitcoin!

4. Mining is an easy way to get rich quick

Although early miners may be very happy right now, it is an incredibly competitive business to get into.  The initial investment is thousands of dollars and Bitcoin Mining gear is getting faster and faster meaning your computers will become less effective over time.

5. All Bitcoin “Wallets” are the same

There are tons of different wallets.  Some big things to note are that some are online, some are offline and the differences between offline wallets.  Online wallets are very easy to set up, but everything is stored in their server.  This is a possible target for hackers.  Offline wallets can vary in what they download.  One might download the block-chain (currently 8GB of data) and others won’t.  Both are more secure than online wallets.

6. The creator of Bitcoin is an absolute mystery

Although we don’t know for certain, we have some ideas about who created Bitcoin.  Neal King, Vladimir Oksman and Charles Bry registered a patent application on August 15, 2008 and, three days later, was created.  Also, some words were used in the patent application as well as the initial document released online describing Bitcoin.

7. Bitcoin is a Ponzi Scheme

Well, this is a funny one.  In a ponzi scheme, investors are guaranteed huge returns.  Looking at the history of Bitcoin and its volatility , how could Bitcoin be an effective scheme? Think about it, there is no way for a person selling Bitcoins to convince you Bitcoin can only go higher.  Looking at the charts, Bitcoin has risen over time, but recently has experienced dramatic swings that you wouldn’t see in a Ponzi Scheme.

8. Computer Processing Power Backs Bitcoin

Although this is commonly said by people describing the currency, it is not technically correct.  Computing power creates the currency, but computing power has nothing to do with backing the value of Bitcoin.  The value is determined by other factors such as how people feel about the prospects of Bitcoin.

9. If I lose my Bitcoin, it will damage the currency

Actually, it will increase the value of the currency! When a Bitcoin is lost for whatever reason, it is gone FOREVER!  With a limited amount of Bitcoins, this will reduce the amount of Bitcoins available and, therefore, drive the price up.

10. Bitcoin has no benefits for business owners

If you own a business (online or physical), you constantly have fees… Credit card fees, Paypal fees, you name it.  Bitcoin has no fees involved when it is transacted from one owner to another.  Personally, I have been able to offer people paying in Bitcoin a discount because it helps me save on the fees I experience when processing payments through Paypal!

photo credit: zcopley

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