Common Myths and Misconceptions About Bitcoin

In this article, we will consider the most popular and common misconceptions about Bitcoin, and also try to dispel them.

Myth # 1. It’s just something like other virtual currencies, nothing new

All other virtual currencies are controlled by their regulatory center. It means that:

they can be printed on the subjective whims of the currency regulator;
they can also be destroyed by an attack on this certain regulatory center;
arbitrary rules may be imposed by the currency regulator.

Bitcoins, being initially a decentralized currency, solve all these problems.

Myth # 2. Bitcoins do not solve any problems that gold and / or fiat money cannot solve.

Unlike gold bitcoins: * easy to carry and store; * easy to verify for authenticity.

Unlike fiat money, bitcoins: * have predictable and decreasing emissions; * not controlled by any regulatory center.

Unlike fiat electronic money, bitcoins: * may be anonymous (like cash); * Accounts cannot be frozen in any way.

Myth # 3. Bitcoins are provided by processor time.

It is incorrect to say that bitcoins are provided with processor time. When they say that a currency is “provided” with something, it is understood that it is centrally tied to something at the exchange rate. You cannot exchange bitcoins for the computational power spent on their generation (it is too high). In this sense, bitcoins are not provided with anything. This is a valuable product. Think, is gold provided with something? No, it’s just gold. Same thing with bitcoins.

Bitcoin currency was created using processor power: the integrity of the block chain is protected from all sorts of attacks by the existence of a large computer network. And it’s all.

Myth # 4. Bitcoins cost nothing because they are not provided with anything

Gold is not provided with anything, but is used and appreciated everywhere. See the previous myth.

Myth # 5. The value of bitcoins is based on how much electricity and processing power is required to generate them.

This myth is an attempt to apply the labor theory of value to bitcoins, which is not applicable to them and is probably false. Just that something requires X resources to create, does not mean that the final the product will cost X. That something can cost more or less X, in depending on the utility for users.

Actually here a causal relationship is broken (this applies to the aforementioned theory in general). The cost of bitcoins is based on how much they are valuable. If bitcoins rise in price, more people will try generate them (because bitcoin generation is getting more profitable), this will lead to an increase in the complexity of generation, which is only in turn, leads to difficulties in their production. If bitcoins fall in price, then the reverse process occurs. Thanks to these processes a balance is maintained between the cost of generation and the cost of generated bitcoins.

Myth # 6. Bitcoins do not have their own value (unlike some other things)

Many things have their own value, but it is usually significantly lower than the market value of this thing. Consider gold: if it weren’t used as inflation-resistant values, and used only for industrial purposes, it would not have today’s value, so as the industrial demand for gold is much lower than it is in availability.

Historical value has helped establish some things in as a medium of exchange, but it is certainly not necessary condition. Perhaps bitcoins will not be used as raw materials for industrial goals, but they have many other useful qualities, which are necessary for the means of exchange.

The value of bitcoins is determined solely by the desire of people to trade them – supply and demand.

Myth # 7. Bitcoins are illegal because they are not legal tender

Short answer: chickens are not legal tender, but bartering with chickens is not illegal.

There are many currencies which are not legal tender. Currency at the end after all, it’s just a convenient unit of account. Although national laws may vary from country to country (you should definitely check the laws of your state), in general – trade with any exchange product, including digital goods (for example: bitcoins, game currencies of the virtual worlds of Second Life or WoW), is not illegal.

Myth #8. Bitcoins are a form of domestic terrorism because they only harm the economic stability of the state and state currency

Read the related article on Wikipedia. Action will not be considered terrorism if it does not carry violent nature. Bitcoins are not imposed on anyone using violence, so that they are not terrorism.

In addition, bitcoins are not “internal”. This is a worldwide product. Take a look at the automatically generated node map.

Myth # 9. Bitcoins will only facilitate tax evasion, which will lead to a possible fall in civilization.

it it depends only on you: whether you will follow the current in the country legislation or face the consequences of breaking the law.

Myth # 10. Everyone can print / mint bitcoins, therefore – they are useless

Generating coins requires significant processing power, and besides, over time, all coins will be generated.

Myth # 11. Bitcoins are useless because they are based on untested / unproven cryptography

The SHA-256 and ECDSA algorithms used in the Bitcoin program are well-known industry standards for encryption.

Myth # 12. The first Bitcoin users are unfairly rewarded

The first users were awarded for taking a higher risk of losing their time and money.

FROM a more pragmatic point of view, the term “justice” is conditional concept, which makes it unlikely that its agreement is large number of people. Establishing “justice” is not the goal Bitcoin project, as that would be simply impossible.

Overwhelming most of the 21 million bitcoins have still not been distributed among people. If you start to generate or acquire bitcoins today, you yourself can become one of the “first users”.

Myth # 13. 21 million coins are not enough, this is incommensurable with the needs of mankind

In fact, 2099999997690000 (just over two quadrillion) of the maximum possible indivisible units will exist on the Bitcoin project.

One Bitcoin represents 100,000,000 (one hundred million) of them. Other in words, each bitcoin can be divided into 10 ^ 8 parts.

If the cost of bitcoins grows too much, then for convenience people can start working with smaller parts, such as milli-bitcoins (mBTC) and micro-bitcoins (μBTC). However, denomination with coefficients of 1:10, 1: 100 and so on is also possible.

Myth # 14. Bitcoins are stored in wallet files, just copy the wallet and get more coins!

No, your wallet file contains secret private keys giving you the right to manage your bitcoins. Imagine that you have a key issued by your bank to manage your account. If you transfer it to someone else, it will not increase the funds in your bank account. The funds will be spent either by you or by this third party.

Myth # 15. Lost coins cannot be replaced, which is bad

The minimum The Bitcoin unit is 0.00000001, so this is not a problem. If you lose coins, all other coins will rise in price a little. Count it is a donation to all other bitcoin users.

There is a related question (and the answer to it). – Why is there no mechanism for replacing lost coins? – It is impossible to distinguish between a lost coin and one that is simply not used in at the moment and waiting in someone’s wallet of his time to be useful.

Myth # 16. This is a giant financial pyramid.

In the financial pyramids (see diagram of Ponzi and MMM) the founders convince investors that they will be in profit. Bitcoins are not give such guarantees. There is no regulatory center, just a group people who are building a new economy.

However, it should not be confuse bitcoins on their own with various projects on the Internet, which can accept bitcoins as a contribution and be financial pyramids.

Myth # 17. Limited emissions and lost coins create a deflationary spiral

how deflationary forces can manifest themselves as well as economic factors like hoarding counteracts the human factor, which can reduce the chances of a deflationary spiral.

Myth # 18. The idea of bitcoins cannot work because there is no way to control inflation

Inflation is simply a rise in prices over time, which, as a rule, is the result of the depreciation of the currency. This is a function of supply and demand. Given the fact that the supply of bitcoins is fixed (due to the peculiarities of their issue), unlike fiat money, the only way to get out of inflation control is to eliminate the demand for bitcoins.

Should also consider that bitcoins are a predictable currency decentralized issue. If demand drops to almost zero, then Bitcoins will be doomed anyway. However, it is unlikely that this can happen in reality.

Key point here is that bitcoins cannot be discounted by a sharp increase inflation by any person, organization or government, since there is no opportunities to increase the offer too much due to features emissions.

In reality, the increase scenario is more likely demand for bitcoins due to increasing popularity, which should lead to constant exchange rate appreciation and deflation.

Myth # 19. The Bitcoin community is anarchists, conspiracy theorists, proponents of the gold standard and geeks.

We confirm. However, it must be borne in mind that this is only part of the community’s flavor.

Myth # 20. Anyone with sufficient computing power can take over network management

We confirm. However, the incredible cost required to attack does not justify the benefits.

FROM the growth in the number of generating nodes is becoming more and more difficult any organization to do this. Currently computing the power of all honest generating units exceeds the power of the largest in the world of supercomputers and distributed computing networks.

Even if an attacker can one day take control of a network, this will give him very limited possibilities. Under no circumstances does he will be able to use other people’s bitcoins. Only cancellation is available to the attacker their own recent translations, as well as slowing down strangers translations. This very expensive attack is not worth such a small advantages, so there are no rational economic reasons carry her out.

Myth # 21. Bitcoins violate some government regulations

Call them if you can.

Myth # 22. Partial bank reservation is not possible

Maybe! (This is a comic answer.)

1. Open a bank. 2. Accept contributions. 3. Give loans using part of the deposits. 4. Demand a refund of your funds with interest. 5. PROFIT!

There is a related question (and the answer to it). – But how can we guarantee that investors can withdraw 100% of their funds? – Just like ordinary banks do it – nothing. They are hoping for federal deposit insurance.

Myth # 23. Point of sale accepting bitcoins is not possible, as it takes 10 minutes to confirm the transfer

Confirmation of transfers may take tens of minutes, and that won’t change in the foreseeable future. Even the total computing power will be several orders of magnitude larger generation complexity is automatically adjusted to maintain stable release of 6 blocks per hour.

There are two solutions to this problem.

1. For small transfers, just assume that the client is not cheating, and give him the goods as soon as the transfer is sent to the network. Translation should spread over the network almost instantly, allowing see the seller for a few seconds (albeit without confirmations). If a client wants to spend the same bitcoins on something still, he will require significant costs for such an attack, which makes petty fraud is pointless.

2. Use a prepaid system. The client can replenish the account, and then spend bitcoins from his account.

Myth # 24. After mining 21 million coins, no one will generate blocks confirming transfers

When generation costs cannot be covered by the block reward, what can happen even some time before reaching the maximum volume of bitcoins, generators will be able to profit from a commission for translations. Also, holders will be interested in generating new blocks bitcoins, since in the event of the termination of generation their bitcoins will useless.

Myth # 25. There is no built-in cancellation mechanism, which is bad

Cancellation is convenient to limit fraud. Organizations like PayPal are responsible for preventing fraud. If you buy something on eBay, and the seller does not send you the goods, PayPal withdraws money from the seller’s account and returns it to you. This strengthens the eBay economy, as buyers are aware of their limited risk and even make risky purchases.

If you have bitcoins, then they are yours and only yours. So they are arranged. If you allow the cancellation mechanism, then it will give another person the opportunity to withdraw your funds. Or you You have full control over your funds, or protection from fraud, but not both at the same time.

With bitcoins you become yourself the one who should be responsible for preventing fraud. All power over funds is in your hands. Fraud always exists. It is in your interest to send bitcoins only to authorized persons.

Myth # 26. Quantum computers will violate the security of bitcoins

Yes, this is theoretically possible, but quantum computers capable of competing with at least ordinary computers do not currently exist. If, however, something still threatens the security of bitcoins, then it will be possible to switch to post-quantum cryptography.

Quantum computers are just as dangerous for ordinary banks as they rely on the reliability of cryptography for making transfers.

Myth # 27. The generation of bitcoins is energy-consuming and harmful to the environment.

No more than wasteful gold mining from underground, smelting and shaping. Not to mention the construction of large bizarre buildings, the waste of energy on printing and minting various fiat money, their transportation in armored vehicles with at least two security guards who could do something more useful.

In fact, bitcoins are a more economical resource when compared with others.

Myth # 28. Store owners cannot seriously set product prices in bitcoins due to an unstable exchange rate

The the myth led to the suggestion that bitcoins should be sold immediately, to cover the costs. In some cases, this is not necessary, first make sure you need it. You can sell bitcoins at any time. moment at a better rate.

It is true that due to small trading volumes, the exchange rate has a relatively large volatility. In the future, exchange rate volatility is expected to decrease, so as volumes increase all the time.

At the same time, many merchants simply regularly update prices on their sites to match the current rate. In addition, you can conclude an option to sell at a fixed price for a certain time. This will protect you from depreciation and simplify your calculations for this period of time.

Myth # 29. Like Flooz and E-gold, bitcoins are great for criminals, so they will be eliminated.

we we hope that bitcoins will develop sufficiently that not one the organization will not be able to eliminate them. In place of these organizations, we would joined the progress.
Terrorists direct planes at buildings, but governments still haven’t canceled flights. It’s obvious that the public good outweighs the consequences.
Criminal law differs between jurisdictions.

Myth # 30. Bitcoins will be liquidated by the government, as happened with Liberty Dollar (not to be confused with Liberty Reserve)

Liberty Dollar is a risky commercial attempt to establish an alternative currency in the United States, including physical notes and coins backed by precious metals. Of course, these “free dollars” were officially banned on charges of making fake money and attempted fraud. Bitcoins are neither commercial, physical, nor well-off (other than offering goods and services on the market)

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