There have been a number of ongoing points made by the media and naysayers over the years that have made people very sceptical about Bitcoin. Upon first glance many of these points can seem plausible. But looking into them more, you start to see a different perspective. In this piece, we walk through some of the often repeated Bitcoin myths and why, when looked at in more detail, they don’t stand up to scrutiny.
Bitcoin is for criminals
In the same way that fiat currencies ($£€) have been and can be used for money laundering and various other criminal activities, so can Bitcoin. In Bitcoins early days, its pseudonymous and uncensorable properties helped it gain traction through Dark Net Markets such as the Silk Road. As of 2019, only 0.5% of Bitcoin transactions were Dark Net Market related. On the flip side statistics show fiat currencies are used 800 times more for money laundering purposes than cryptocurrencies.
Physical cash is still king for criminal activity, particularly the US Dollar, with 90% of notes having traces of Cocaine on them as well. The banking system is used for money laundering, notably Dankse Bank laundering €200 billion, which was until very recently more than the value of all bitcoin in existence. HSBC also laundered almost $1 billion for drug cartels, and there are hundreds more examples like these. Don’t forget credit card fraud that the banks are constantly fighting as well.
So no, Bitcoin doesn’t have a particular problem with criminal activity when compared to the existing money system, Bitcoin has a public ledger that anyone can hold to account. As such it has often proven to aid law enforcement.
If these are the reasons why you won’t use bitcoin, then you need to stop using all forms of money.
Bitcoin is destroying the planet
Yes bitcoin mining (securing the network) is energy intensive but whether it is a waste of energy is dependent on whether you see value in a form of digital money that can work without middlemen, and anyone, including governments, cannot tamper with it.
The existing system is also energy intensive when you account for the energy required for mining and refining metals for coinage, minting them, printing notes, repeated transportation and security. Digital fiat also has energy costs through energy consumed at power hungry bank data centres all over the world.
It is often said that Bitcoin consumes more energy each year than some small countries do. However, it is worth noting that so do Christmas lights on homes in the USA each festive season. Christmas lights bring joy but Bitcoin can bring much larger benefits to the entire globe. As humans evolve, our demand for energy has only ever increased, we shouldn’t limit the demand, but invest in and create sources of cheaper, greener energy.
Bitcoin mining incentivises use of the cheapest energy, as the cheaper the energy used to mine bitcoin, the higher the profit for the miner. Inefficient energy production is bad for the environment but bitcoin mining attached to renewable sources means the energy producer can mine bitcoin during off-peak times of curtailment.
Which would you rather, global sound money or Christmas Lights?
Bitcoin can be controlled by China
A large portion of the hash power provided by miners to make the Bitcoin network work is located in China. The specialised computer chips used to mine are predominantly made in the region and China has access to large amounts of hydro power and cheap electricity; it is also the 2nd largest economy in the world and has become a bitcoin mining hub.
The additional fear here is that Bitcoin could be manipulated or attacked by the Chinese Communist Party. There is no evidence that the businesses in China mining bitcoin are controlled by the CCP and could be corralled into attacking the network by reversing transactions if they controlled 50%+ of the hash power. Many businesses are actually mining pools with users around the globe. The game theory baked into Bitcoin would make an attack like this phenomenally expensive, most likely business ending.
An upgrade to the Bitcoin mining protocol in the future will also allow miners who provide their hash power to a mining pool to have the option of selecting transactions themselves, removing even more control from the mining pool operator in case it’s needed. And recent news suggests the biggest mining farm to ever be built will be located in the USA. Places with an abundance of renewable power such as Iceland and Nordic countries are also becoming popular Bitcoin mining hubs and the further decentralising of hash power is expected to continue.
Bitcoin is too slow and cannot scale
Bitcoin is slow and fast, and there are benefits to both. It just depends on how you look at it. New blocks filled with confirmed transactions are created on average every 10 minutes, so for in-person retail payments it cannot compete with other digital payments such as debit/credit cards for speed. With the limited blocksize, the network can become congested with transactions during peak times meaning it takes longer for a transaction confirmation.
These problems are alleviated through layer two scaling solutions that sit on top of the main Bitcoin blockchain. These allow for instant and almost fee-less use of Bitcoin with exponential scalability whilst being 100% verifiably backed by bitcoin. One of these layer two solutions is called the Lightning Network. It is ideal for retail and micropayments and you can learn more about it on our recent blog here. Another layer, Liquid which is a sidechain is aimed at transferring large amounts of bitcoin (Read Liquid blog).
It’s important to limit the block size as this stops the historical ledger from growing so large as to be incompatible for individual users to run their own Bitcoin full node to verify their transactions and not rely on a third party.
In recent history, savings haven’t maintained their purchasing power if kept in fiat so complicated and risky financial products and investments are made to counter that. An example would be property, classic cars or art as investments with the main problem being the time it will take you to liquidate said assets if you needed the money. Bitcoin is a store of value and not inherently designed to be debased as fiat currencies have proven to be. However, it comes with the added benefit of being able to be liquidated 24/7 365 days a year within minutes. Bitcoin shares more similarities with gold than fiat currencies. In fact it’s often called digital gold and second layer solutions allow us to send this digital gold to anyone instantly at almost no cost.
Bitcoins are too expensive now
Often people buy a cryptocurrency other than bitcoin as they are cheaper and you get more ‘coins’. Buy half a bitcoin for $9,000 or buy 25,000 of an altcoin priced at 25 cents each. The unit bias and ‘expense’ of bitcoin makes some people feel there is more upside potential to holding altcoins. A similar example would be gold, silver and copper. Yes you get more copper or silver for your money but the properties of each are very different and have to be taken into account based on what you are trying to achieve, storing value.
There are 100 million satoshis in a bitcoin so a better way of looking at it is that for 25 cents you can buy 1,350 satoshis and $9,000 would get you over 50 million satoshis. Going forward it is expected as the value of bitcoins increase, prices will be given in satoshis and as there will only ever be 21 million bitcoins there are not enough bitcoins in the world for everyone to own a whole one so most people will only ever own satoshis. This is why on fastbitcoins.com ‘Sats Mode’ is the default setting showing you how many satoshis £1 (or your local currency) will buy you.
If you had to convert your wealth into gold, silver or copper, which would you choose?