Don’t believe all you read!
Everything related with Bitcoins and other cryptocurrencies is now in the public eye of many people, governments and institutions. Its growing popularity also involves the creation of myths about bitcoins and information that is not verified, with the purpose of distancing or attracting more investors to this subject.
This time, we will present you the most popular rumors developed around the world of Bitcoins. If you are thinking about investing in this type of cryptocurrency, is always recommendable to have trustable information about it, which will help us to avoid disappointments or false expectations on this type of investment.
1. Governments will eventually take down Bitcoin:
We are talking about probably one of the biggest myths about bitcoins that make some investors very insecure of disposing great amounts of money in this type of investment. However there are many reasons more to think that governments won’t be able to do it and that there is a before and after the Bitcoin in the world’s financial history. As some of them, we have:
- The amount of data that devices have to exchange to keep operational the Bitcoin’s web is very low. If the communication between devices is encrypted, the telecommunications’ operators will have the hardest work trying to block the Bitcoin’s traffic. It will be like looking for a needle in a haystack!
- The blocking of Bitcoins will be useless if only one country legalizes the protocol. As japan already did it in the last April, people only would have to change their VPN for the one of the country where is legalized.
- Governments have fought against mp3, PGP and BitTorrent, but nothing can actually shut down the bits, not even the laws that block the access to information. The closure of the website “Megaupload” proves how a government can intervene a digital company, but remember that Bitcoins are decentralized; which means that there is no “place” where governments can eliminate or control all Bitcoins existing.
- Bitcoins can work in any part of the world, regardless the efforts of a State to censor and control the flow of information. There is necessary a single user that can work as a “bridge” with the rest of the world to see annulated all the censorship’s effort.
- Nowadays, we are experiencing a worldwide communication, for which it would be an economic disaster if governments decided to suspend telecommunications only to impede the growth of Bitcoins.
- More than a half of the worldwide population lives in the cities, and with a short investment, citizens can create private wireless web that can support Bitcoin without counting with the telecommunications’ operators.
2. The person who buys the majority of Bitcoins, will be able to manipulate the market:
Unlike state money, bitcoins can’t be arbitrarily distributed, whomever that wanted to buy a great amount of them, will have to buy each at market price. If someone decided to buy all the bitcoins possible, this is what could happen:
- Knowing that the amount of bitcoins is limited, its price will increase abruptly, and this means that the first bitcoin this person buys won’t have the same price as the last one. By conditioning the offer, each bitcoin extra will cost it much more than the previous one.
- As the prices will increase, for this person will be more difficult to find someone will to sell its bitcoins. Everyone will have the same expectation that the price will keep increasing so they won’t be selling them immediately.
- Even with millions of dollars, a person could buy many bitcoins but not a big proportion of its total amount that could give it real power to manipulate the market. The majority of Bitcoins aren’t even for sale; those who are negotiated in the market represent a minimum fraction of the total existing.
3. As more efficient be the Bitcoin mining, lower will be its price:
As some technologies have assured to take mining to another level, this has increased the fear in many investors. However, to calm all the nerves and explain one of this myths about bitcoins, is necessary to remind these aspects:
- What influences on the price of bitcoins is not how easy or hard is to obtain them though mining, but its demand. This means that mining doesn’t play an important role to determinate the price of this cryptocurrency.
- The motivation that people is feeling about the mining process is caused by the price of bitcoins. This means that is price who determines mining, not the opposite, that’s why people tend to get confused and think there is a causal relationship in both senses.
4. Anyone could make a copy version of Bitcoin that ends up surpassing it:
Whomever who created this rumor, tend to perceive the open code where is based the Bitcoin’s technology, as a weakness more than a strength. As this code can be copied, some people think that anybody could use it as its own benefit. However, the functionality of bitcoins doesn’t depend on secrecy, but total the opposite. What makes it so powerful is the transparency and opening with which it works.
These are some reasons why regardless the creation of different Bitcoin’s versions, the original will remain strong:
- First mover advantage: It doesn’t matter if there are thousands of cryptocurrencies in the market, Bitcoin is the first one and this involves unique advantages over the rest. As Bitcoin’s project keep being very dynamic, it will be difficult for its competitors to overcome it.
- Computational Power: Even if a new coin had a very similar code than Bitcoin, it’s security system will depend on the computational power that miners provide to the web. Which means that without the support of a huge amount of motivated miners, any project similar to bitcoin will have low possibilities to prosper.
- Ecosystem: Between all types of currency out there in the market, people will always prefer the most liquid; this means the one that can be easily exchanged every moment for any asset.That’s the reason why a multiple number of technical advantages in front of Bitcoin won’t overcome the weight of its wide acceptation, including all the developments around it, where we can mention a wide ecosystem of programmers, merchants, consumers, entrepreneurs, miners, operators, savers, etc.
5. The safety of Bitcoin will be violated for new technologies in the future:
This is one of the most popular myths about bitcoins. If a new technology develops the possibility to violate encrypted messages, this won’t only make nervous the users of bitcoins, but all the financial economy because every bank and almost every financial institution depends on cryptography to guarantee the legitimacy of the transactions they process.
The Bitcoin has been designed to eventually be modified, because this protocol is capable to admit in the future the creation of addresses based in new primitive cryptographies. Finding cryptographic’s vulnerabilities and take advantage of them could take years, which would give enough time to develop and spread a new version of Bitcoin that lets users transfer its coins from their former vulnerable addresses to the new ones.
In the practice, it could never be possible to take advantage of a vulnerability found in the previous algorithm. We can see how wallets and exchangers are hacked. These are structures built over the bases of Bitcoin, but the currency itself and as a protocol has never been hacked. This idea becomes then in another one of the most heard myths about bitcoins.
It is very important that as investors, we know all the information managed around the world of cryptocurrencies, because there are common concerns and valid doubts that emerge from the new technologies involved in this field. That’s why we need to know all the possible myths about bitcoins. In this manner, we can develop our own critic position about Bitcoins, evaluating if it’s the right investment for our needs!