2017 has been a transformative year for blockchain and digital currency. As stated by coindesk – The combined market cap rocketed from $15 billion in January to over $600 billion by year’s end. While such exponential growth has acted as a barrier to fresh entrants in crypto domains, with a dip in the market, the newbies are trying to explore the opportunity and get some exposure to cryptosphere. While the hype is all around, the fresh investors might fall for misleading information easily accessible to them.
Our post would talk about some of the myths floating around and the TRUTH behind them. So let’s dive in –
Cryptocurrency is a Ponzi Scheme
When you see your news channel/subscription flashing news like –
“Alleged India Bitconnect head, Divyesh Darji, was arrested this week at an airport in Delhi as he arrived from Dubai. He and conspirators are accused of bilking millions of dollars (Rs 88,000 crore) from Indian investors seeking to find financial refuge during the government’s demonetization campaign.” Read more at news.bitcoin.com
Chinese Police Arrest Hackers Behind $87 Million Cryptocurrency Theft. Read more at ccn.com.”
It might push you to think cryptocurrency is a Ponzi scheme, but its not the fault of the technology but the people who try to misuse and con you and that could happen with any technology.
Cryptocurrency, a use case of blockchain technology has been in the market and used by various verticals across the globe. Firms like Ripple are making seamless payments around the world via digital assets. So while you make up your mind to start investing, make sure to check the reliability and credibility of the firm.
Coins and Tokens are Same
Honestly, Tokens and Coins are the categories of cryptocurrency.
Coins/ Alternative cryptocurrency coins/ Altcoins
In laymen terms, they are the coins that are alternatives to Bitcoin, Ether, etc. The way an altcoin is synthesized is as follows – First, an open source blockchain, with original protocol [ may be a variant of Bitcoin or created their own blockchain like Ethereum, Ripple with new protocol]is picked up and then the underlying code is changed, resulting in a new coin or cryptocoin. Some examples of cryptocoins are – Litecoin, Peercoin, Auroracoin, etc.
Tokens could be defined as a representation of a particular utility or asset, which need to reside on top of another blockchain. They are a representation of an asset that is tradeable and fungible, maybe commodities or loyalty points or even other cryptocurrencies.
Tokens need another platform like Omni or Ethereum to operate and exist. Tokens are created over ICO’s or initial Coin Offerings, and is necessary to fund the operating expenses to host it as a service.
Cryptocurrency is only for criminals/tax evaders
Cryptocurrency because of its nature of decentralization and anonymity may have attracted tax evaders and criminals for money laundering and drug trafficking. But they are also used by law-abiding citizens around the world. While one of the use cases of cryptocurrency is for people in underdeveloped and developing countries to enable financial inclusion, it is also helping citizens of countries where there are political and economic instability.
Crypto transactions are anonymous
The essential feature of Bitcoin and other cryptocurrency is that it is private. However, the government in the US has implemented regulations wherein exchanges have to comply with Anti Money Laundering and Know Your Customer Regulations. In the European Union, the exchange platform needs to follow guidelines issued by Financial Action Task Force (FATF), then complemented by national rules. The framework bars the subjected entities, from keeping anonymous accounts or accounts in fictitious names. In Asia as well, the Financial Action Task Force (FATF) is applied. In South Korea that is considered to be one of the biggest hubs of cryptocurrency has banned anonymous trading of cryptocurrencies and requires the entities to verify their customers appropriately.
Bitcoin is the only Cryptocurrency available
Amongst all the cryptocurrency available, Bitcoin is the most popular, backed up by strong community base, is the talk of the town and trending, hence at times mistaken as the only cryptocurrency available.
Cryptocurrency is Not Legal
Cryptocurrency is NOT ILLEGAL. However, the discussion is whether a country accepts it as an alternative to physical currency. Also, government across the globe are trying to lay down regulations to help people from misusing it.