5 bitcoin myths and how to answer them

Wednesday 15 April 2015

Bitcoin isn’t exactly the easiest thing to wrap your head around, but some people seem to go out of their way to get it wrong. Here are five common myths about bitcoin you might hear, and how you might go about answering them.

1. Bitcoin keeps getting hacked! It’s not secure.
Yes. And, more importantly, no. Bitcoin’s protocol is rock solid. It uses cryptography standards endorsed by government and industry, and has never been hacked. If it had, we’d have a lot bigger problems to worry about than bitcoins being stolen - like the overnight failure of the banking system and plenty else besides.

Read more about: keeping your bitcoins secure

The ‘hacks’ that happen to bitcoin are due to poor security practice - a little like leaving the key to Fort Knox under a rock by the back door. Or like people reusing passwords, posting personal information on social media, then getting upset because their nude photos have been hacked from the cloud...

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Incidentally, if quantum computing ever develops to the point where it can crack bitcoin’s encryption, you can bet that most smart people are going to be too busy buying tinned food and shotgun shells to worry about their wallets getting hacked.

2. Bitcoin relies on expensive and environmentally-unfriendly mining
Fair cop. Bitcoin mining - the process used to secure the network - does require a lot of power and produces a lot waste heat. But then, so does digging metal up out of the ground, melting it, stamping patterns on it and distributing it around the country. We should probably stop using coins too if you're worried about that.

Incidentally, there are other approaches to securing transactions, such as proof of stake, which don't use mining at all.

3. Bitcoins are not backed by anything. This means they are worthless!
Hmm, you may have a point. It’s a good job regular money is backed by gold and therefore can’t lose its value. Or rather, it was until the last century, at some point during which every major currency left the gold standard. They’re now free-floating and inflation has eroded the value of the dollar by over 80% since the early 70s - and 98% since the turn of the 20th century.

‘Fiat’ currencies are backed only by confidence in the government that issues them. Some might claim that the laws of maths are more reliable than the average politician. So long as the economy remains stable and they don’t start printing money there shouldn’t be too much of a problem. At this point you probably won't want to look too closely at things like national debt, deficits, what's going on in Europe right now, or the near total collapse of the global financial system a few years back. 

4. Bitcoin is a ponzi scam. Early adopters got rich at the expense of newcomers!
Quite so: early adopters have done rather well out of it, but more recent buyers haven’t seen those crazy, 10,000% returns. How unfair.

A similar argument could be made for just about any commodity or stock, of course. For example, there’s a rather popular company you may have heard of called Apple. Back in the early 80s that stock was trading for 20 or 30 cents. Now it’s over $100, and it’s all because new people kept buying it and driving up the price. Someone should alert the authorities.

5. Bitcoin is used by criminals, terrorists and money launderers. We should ban it!
You’re absolutely right! Banning bitcoin will stop the degenerates who use it, forcing them to leave their lives of crime and instantly rehabilitating them into productive members of society.

Whilst we’re at it, we should ban cash, because a lot of people use it to buy drugs. Particularly the American dollar, that’s inordinately popular as a currency for all kinds of nefarious things.

Thinking about it, have you any idea how much money the Mafia launders through Italian restaurants? The only sensible option is to ban Italian food. Come to that, why not just criminalise being Italian. Especially if they use dollars.


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