Every time a radically new technology comes out – there are many speculations that surround it. Sometimes, because of the lack of awareness and technical know-how, this leads to creation of myths around these technologies. This happens with every new technology in the markets and cryptocurrencies are no exception.
There are many half-baked stories which cause a mass hysteria in the markets. Moreover, these false stories get a lot of traction these days, thanks to social media. However, not everything that you read on social media is true. There are a number of myths which surround the world of cryptocurrencies. Let us take a closer look at these myths and try and demystify them.
1. Cryptocurrencies are completely Anonymous
There is a common misconception – even with some users who are actively using cryptocurrencies – who believe that transactions are completely anonymous and untraceable. This is absolutely not the case. A majority of cryptocurrency exchanges around the world require KYC processes to allow consumers to register. These KYC (Know Your Customer) processes involve submission of identity proofs.
Moreover, every transaction that takes place over the blockchain network can be traced back to the source – as it is basically an open and public ledger. Sometimes the government can even force cryptocurrency exchanges to divulge certain details about the users – incidents of governments summoning citizens investing in cryptocurrencies in the US and India are recent examples of this.
2. There is no Regulating Body
Another common misconception when it comes to cryptocurrencies is that they are basically deregulated and that there is no governing authority. While cryptocurrencies are decentralized, they are not deregulated. Cryptocurrency exchanges in most nations need to be regulated and have to comply to certain rules and regulations of the government.
This is primarily done to ensure that the exchanges are following some basic standards of consumer safety as well as security. This does not allow exchanges to come out with a drastic change of policy that can result in the customers losing out on their money. Moreover, government-set security standards ensure that the funds remain safe. Bodies such as the SEC in the US and the FSA in Japan regulate cryptocurrencies in their nation.
3. Cryptocurrencies Are Tax Free
One of the most ridiculous assumptions in the early days of cryptocurrencies was that cryptocurrency earnings are tax free. However, taxation laws across the world are now getting stricter in regards to crypto earnings and are urging the citizens to pay their taxes duly or face consequences.
Germany, the US, and Japan are among some nations which have set up a proper taxation system for filing taxes on cryptocurrencies. There are some websites which will help users of certain nations easily file their cryptocurrency taxations. Tax on cryptocurrencies depends on how different countries treat it. While it is considered as a property in some nation, some nations treat it as digital asset. However, cryptocurrencies are certainly taxable and not paying taxes on crypto-profits would most likely be a violation of local laws.
4. Cryptocurrencies can’t be used for day to day transactions
While this is a claim which can be backed to some extent – but it is soon going to become a complete myth. Recent incidents have shown that there are people who spending a significant portion of their cryptocurrencies on regular purchases. While only a select number of retail and online stores accept cryptocurrencies as of now – this number has been on a constant increase over the past year.
Today, many major online merchants accept cryptocurrency payments in some form. In countries such as Japan, Singapore and South Korea – this is even more common. Adoption of cryptocurrencies is bound to rise over the years as prices get more stable.
5. Bitcoin and Blockchain are the same
Perhaps the biggest myth that surrounds cryptocurrencies, it arises due to half-baked understanding of the technology that powers cryptocurrencies. A number of people believe that blockchain and bitcoin are practically the same. For those who understand the tech, this almost sounds like a joke. Sites like CryptoGround can really help out these people by providing detailed guide around cryptocurrency, bitcoin and blockchain.
Blockchain is the technology that powers cryptocurrencies such as Bitcoin. Blockchain systems have various, diverse usages. They can be used to run a set of codes in the form a smart contract, or act as content distribution platforms, or as a platform for polling – or even as a platform to execute applications upon. Bitcoins are just one application of the blockchain technology!