Like all technological innovations, there are a number of points that uninformed
players do not understand. As such, misinformation spreads which causes fear,
uncertainty and doubt – which only hurts the technology going forward.
1. Bitcoin is illegal
Let’s deal with the big one off the bat shall we? Just because a currency is not
backed by a government, does not make it illegal. For you, the user, by operating
as a virtual currency, Bitcoin is legal, so long as you are using it for legal means.
2. Miners or developers can change the amount of Bitcoins available to benefit
The way the Bitcoin algorithm works ensures there are no shortcuts in obtaining
one. If a counterfeit Bitcoin does not satisfy all the conditions required, any
transactions made using it will be rejected. This is similar to how banks reject
counterfeit bank notes.
3. Bitcoin isn’t worth anything because it isn’t backed by a central government
With all currencies, they are only worth what someone is willing to exchange for
them. In the same way that gold or US dollars have no inherent value, Bitcoin is
just a means of exchange.
4. Bitcoin’s main use is for criminals and the government will shut it down
Yes, at one time a significant % of Bitcoin usage was used for illegal activity.
Much of this activity was facilitated on the underground black market website
Silk Road. However, this is no longer the case. Bitcoin is now accepted by over
160,000 merchants worldwide and adoption continues to grow. The
technological uses like minimized transactions fees have far more use for large
financial institutions than they do for some basement dwelling 20 year trying to
buy LSD from a guy in another country. It’s worth noting that fiat currencies are
also used for criminal activity.
This one also relies on the myth that Bitcoin is completely anonymous. Yes,
there are no named Bitcoin accounts, but each Bitcoin address is unique and
every transaction is recorded on a public ledger (the blockchain). Therefore with
a little legwork, it is possible to determine who is behind a Bitcoin transaction.
As far as a potential government shutdown does, that’s a little trickier.
Governments do have the power to make life difficult for citizens dealing strictly
in Bitcoin, but this difficulty only goes as far as taxation on Bitcoin.
5. 21 Million Bitcoins is too small of a total number for effective daily use
Where this one falls short is that it fails to compute that Bitcoin is divisible to
eight decimal places. 0.00000001 BTC is actually the smallest unit available,
this is also known as 1 Satoshi. There are really 2,099,999,997,690,000 (just
over 2 quadrillion) maximum possible units or Satoshi in the Bitcoin system.
When 1 Bitcoin becomes too large for day-to-day transactions, we will simply
move on to smaller units for convenience, similar to how we use pennies now
for small transactions.
6. Hackers can simply steal all the Bitcoins
It’s important to differentiate between exchanges or websites being hacked, and
the blockchain itself being hacked. Exchange hacks exploit security weaknesses
of private companies, whereas the blockchain is not centralized so there is no
single weakness for hackers to exploit. The same argument can be applied to the
US dollar, just because a store is robbed does not mean the US dollar as a
currency has been stolen from the source. That said, you should take appropriate
security precautions when storing your Bitcoin such as creating a safe, offline
7. Bitcoin is a pyramid scheme/Ponzi scheme
My personal favorite. Pyramid schemes are a zero sum game. The founders and
early adopters profit from the money put into the scheme by late adopters. With
Bitcoin everyone can profit, no matter when they first made their initial
investment. The other illusion here is that there is one central founder of Bitcoin.
Bitcoin is decentralized and there is no “CEO” or person at the top of the
8. Bitcoin is dead/There is no point investing in Bitcoin now
I have witnessed at least 20 “Bitcoin deaths” in the past 5 years alone. From
hacking incidents to Silk Road Founder Ross William Albricht’s arrest,
detractors have used these as fuel for Bitcoin’s obtituary. The numbers don’t lie
though, and Bitcoin is in a stronger position than ever both in terms of market
capitalization and real world adoption.
As early as 2012, you can find commentators saying it was “too late” to invest in
Bitcoin. Yet, real world adoption continues to grow, and the price keeps on
rising. Is that to say there won’t be issues in the future? I’m sure there will be.
However, if Bitcoin transactions keep increasing, the currency shows no signs of
slowing down any time soon.