There are many myths and misconceptions about Bitcoin. As a relatively new currency with a unique design a lot of people are not familiar with it and have many questions that they ask themselves. We will try answering some of these questions on this page.
- 1 "Bitcoin is illegal in most countries."
- 2 "Bitcoin is used only by criminals."
- 3 "Bitcoin is not accepted by anyone, which makes it worthless."
- 4 "Bitcoin is a pyramid scheme"
- 5 "BItcoin is anonymous"
- 6 "Bitcoin is bad for the environment, since it uses a lot of electricity to mine."
- 7 "Bitcoin can be hacked."
- 8 "Bitcoin has or will have insufficient amount of coins."
- 9 "Developers of Bitcoin have too much power over the network."
"Bitcoin is illegal in most countries."
Bitcoin is legal in most countries, however there are some that prohibit or restrict it's use. Bitcoin is illegal in 8 countries and restricted to some extent in 3. To our knowledge Bitcoin is illegal in the following countries:
Bitcoin is restricted to some extent in the following countries:
"Bitcoin is used only by criminals."
Bitcoin is used by traders, investors, companies and regular people. Some criminals use Bitcoin for payment, but then again they use cash as well. What makes Bitcoin so attractive to some criminals is that it is easy to use it without ever giving any personal information or even ever meeting a person you are having transactions with. It is possible to do so with cash or precious metal as well, but it is easier with Bitcoin.
"Bitcoin is not accepted by anyone, which makes it worthless."
Bitcoin is still pretty new (created in 2009), but it has significant popularity so far. An estimated 5 to 15 million people use bitcoin.
An estimated 200K companies accept Bitcoin payments. Typically companies use a payment processor like BitPay, Coinbase, or GoCoin to accept Bitcoin. Overstock, Expedia, Microsoft, Newegg, and Shopify all use payment processors.
There are also companies that enable bitcoin users to use bitcoin for products from companies (like Amazon and Starbucks) that don't accept bitcoin directly.
"Bitcoin is a pyramid scheme"
Bitcoin does not have an owner and no one is promising profit if you invest in Bitcoin.
It is a currency not a stock.
The first people to use Bitcoin have profited because of the low value bitcoins had at the beginning. There were no lies or promises concerning it's value.
Bitcoin is a transparent trading system and profit of it's early investors is not of the selling of something that was promised to rise in value.
"BItcoin is anonymous"
Bitcoin is pseudonymous not anonymous.
A simplified way to think of it is like writing under an alias. If anyone ever discovers the identity of the alias every transaction performed will be linked to that identity.
For more a more in-depth understanding of how this works see identification.
"Bitcoin is bad for the environment, since it uses a lot of electricity to mine."
Yes bitcoin has an impact on the environment. No it is not an exorbitant impact like some suggest.
First so does the existing financial system. The existing financial system requires data centers, printing presses, buildings, armored cars, computers, telephones, etc. to operate.
Second how energy efficient were cars when they were introduced in the 1890s vs. now?
Finally what about green energy?
Today bitcoin does not have a substantial negative impact on the environment. As adoption continues to increase bitcoin technology will become more efficient and the relative impact on the environment will remain inconsequential.
"Bitcoin can be hacked."
There are billions of dollars in the current bitcoin economy. It is highly unlikely there is a serious flaw in the system which hasn't been uncovered yet.
There are no indications that there are current vulnerabilities being exploited. If there were a flaw in the system (which everyone has access to all the code for) someone most likely would have exploited it by now.
Bitcoin protocol and most popular of Bitcoin clients are considered "safe" by today's standard.
Bitcoin thefts are always the consequence of badly secured computers or bugs in third party code which results in theft of Bitcoin wallets on those machines, not the entire Bitcoin network.
If there where a compromise of the Bitcoin network it could be patched and even restored to the previous state if so agreed between the users.
Bitcoin is not considered less safe then the electronic banking.
"Bitcoin has or will have insufficient amount of coins."
It is possible to trade in values less than the value of one bitcoin, therefore there is no need for more coins.
Currently bitcoin is divisible to 8 decimal places or at today's prices around $0.00004604.
Limited amount of coins means that this currency might suffer deflation by the pace that people lose cryptographic keys to their Bitcoin addresses.
There is no way to have a shortage of coins.
"Developers of Bitcoin have too much power over the network."
Development of most popular Bitcoin clients is open source. This means that there is no way that developers can sneak in any malicious code.
Ultimately it is up to users of the system to choose who to trust and they all have the liberty to check the code.
There is also no constriction in making your own Bitcoin client.
Developers of Bitcoin clients have less power over your wallet then banks holding your money.