6 myths about bitcoin
Bitcoin today has a huge number of its fans. However, the number of opponents is not less. One can hear all sorts of things about the most popular cryptocurrency. Some say that bitcoin is in the future and will become a mainstay of the global financial system. Others compare it to pyramid schemes and soap bubbles, promising adherents that they will cry and their fortune will turn into useless banknotes.
We have collected and debunked 6 most common myths about bitcoin.
Misconception #1. Bitcoin is a scam and a bubble that can burst at any time
Proponents of this claim rely on the fact that bitcoin is a useless piece of code whose value is not confirmed by anything tangible.
However, the value of any asset, such as gold, is determined only by how much people believe in and value it. Thus, the price of an asset is not taken from the ceiling; it is set by people themselves. In fact, the value of gold is also unsecured-the demand for it forms its value.
From this point of view, Bitcoin is a currency in its own right. The number of people willing to use it instead of traditional money is growing exponentially. Therefore, its rate depends solely on demand.
The rise in the price of bitcoin and other cryptocurrencies is expanding their uses. In turn, this increases mining activity, thereby complicating the process of mining.
Misconception #2. Anyone can make bitcoins if they want to
In the early days of bitcoin, miners used ordinary processors and video cards, the complexity of the calculations was relatively low, and the miners themselves could be figuratively counted on their own fingers. As a result, the first miners were able to mine large amounts of bitcoins, the value of which was very low at the time.
Unfortunately or fortunately, those times are over. The bitcoin system is designed in such a way that as the number of users grows, so does the complexity of calculations, and the reward for the mined blocks decreases.
At the moment, the reward for a found block in the Bitcoin system brings the miner 12.5 bitcoins. Every 210,000 blocks, the reward is halved. The closest reduction will occur in 2020 - miners will receive 6.25 bitcoins per block found.
Regarding miningThe days of using central processing units and graphics processors are gone - it is simply not economically viable. The costs of equipment and electricity make it unprofitable. In order to make such an "enterprise" profitable it is necessary to invest millions of roubles. That is why there is no question of any "private" bitcoin mining on the balcony of one's house in the current realities.
The main mining now takes place on the most powerful mining farms, which use expensive equipment.
Other cryptocurrencies are easier to mine. Video cards are used to mine them, and there are plenty of videos on the Internet describing the configuration, cost, and profitability of home mining farms for ether, Zcash, Litecoin, and other altcoins. However, the value of these cryptocurrencies is not comparable to that of bitcoin either.
Misconception #3. Hackers can hack the Bitcoin network
You probably already know that the Bitcoin system is a P2P network. This means that all users of the network have the same rights - there are no superadmins, admins or moderators.
In addition, the network itself is built on blockchain technology. This means that the more users in the network, the more stable the system is. The blockchain itself is designed in such a way that removing or changing blocks from the chain is simply impossible.
Of course, there are no perfect systems, it is possible to hack everything in the world, but the price of the issue becomes the main focus here. It is quite possible that it is theoretically possible to hack the Bitcoin network, but it will require computing power, the cost of which will exceed all reasonable amounts.
But even if conditional hackers can still gain control of the network, they will not be able to use bitcoins from other people's wallets, because it requires private keys that are known only to their owners.
Bottom line, hacking the Bitcoin network makes no sense. The funds invested in such a venture will many times exceed the benefits received. Simply put, it makes no sense to use banknotes instead of firewood for a fire. There will be fire from such a fire, but its cost will be completely inadequate.
Misconception #4. The use of bitcoin is against the law
To begin with, many countries have officially recognized cryptocurrencies. In Japan, for example, bitcoin is legal tender. In Switzerland and Germany, it is also recognized as a means of payment.
There is no law in the Russian Federation prohibiting the use of cryptocurrencies.
In September 2017, the press service of the Bank of Russia released a document entitled "On the use of private "virtual currencies" (cryptocurrencies)". In it, the regulator warns of the high risks when investing and using electronic coins.
At the same time, the crypto movement in Russia is growing. Even Burger King, or rather its Russian branch, has released its own cryptocurrency called Voppercoin, built on the blockchain platform Waves.
As far as we know, none of the bills in the State Duma of the Russian Federation provides for a ban on the use of cryptocurrencies.
Misconception #5. Bitcoin is a pyramid scheme
A pyramid scheme is not created by money, but by people. Absolutely any currency can be used for this purpose. Surely many people know and remember the infamous MMM, which is the clearest example of a pyramid scheme. However, no one even thinks to blame not Mr. Mavrodi for its creation, but the ruble, which was used.
A pyramid scheme is based on the principle of enriching the first depositors through the influx of money from later participants. If we say that the Bitcoin network is a pyramid scheme, then we might as well call the stock market a pyramid scheme, where stock price grows from the demand for them, and the profit is made by the owners of a large number of these shares. The analogy, of course, is a bit crooked, but the point does not suffer.
The Bitcoin network is not a pyramid scheme, although risks are certainly present.
Compared to other means of payment, bitcoin is still very, very young - the likelihood of its fall is as great as the likelihood of further growth.
Delusion #6. Bitcoin mining will cause an energy disaster
In various reputable and not so reputable publications it is constantly suggested that the growing capacities for mining will lead to the fact that the amount of electricity consumed by them will only grow, which will lead to a catastrophe. The scale of the alleged tragedy is voiced varying from local to global. To understand whether we are in danger or not, let's look at the numbers and facts.
According to the IEA, the amount of electricity consumed on the planet in 2017 is approximately 158,714,610 GW⋅h. There is no exact data on the energy consumption for bitcoin mining, but it can be estimated based on the current complexity of the Bitcoin network, according to rough estimates.
These calculations were made by Leonard Weese, a mentor at a Hong Kong business gas pedal whose specialty is blockchain startups.
They show that it took 9,636 GW to mine the Bitcoin network in 2017⋅ч. Remembering the high school math course, we get that the energy consumption of the Bitcoin network is only 0.00625% of the world's energy consumption.
In addition, it should be borne in mind that mining predominantly uses cheap electricity. Most farms use the energy of hydroelectric power plants, geothermal sources, geysers, etc. The logic here is simple - the cost of mining determines its profitability.
If you add to the expensive equipment and not very cheap electricity, then such a farm, at best, will work at zero. That is why mining in industrial centers and cities makes no sense, and all large farms are located in places where electricity is cheap and energy costs are kept to a minimum. For example, the mining farms of the famous company Genesis Mining are located in Iceland, which partially solves the problem of equipment cooling costs.
The prospects for an energy catastrophe can be estimated by the following facts:
- The annual power consumption of the Bitcoin network is enough for just 19 hours of consumption in the United States.
- One coal plant in Taiwan could power five Bitcoin networks.
- The Bitcoin network now consumes half as much power as Google did in 2015.
Even the most reputable analysts cannot predict how the Bitcoin story will end - its collapse or the transition of the global financial system to a completely different level. Bitcoin and cryptocurrencies can be treated differently, but they can hardly be ignored.