Is Bill Gates right? 7 myths or truths about cryptocurrencies

  • Bill Gates criticizes the cryptocurrency world, but Microsoft invests heavily in blockchain.
  • The crypto market has specific rules in Brazil, and blockchain offers a technology capable of inhibiting criminal actions.
  • Unlike the dollar, bitcoin has an issuance limit; Furthermore, most of the energy used in mining the digital currency comes from renewable sources.

Bill Gates’ negative statements about cryptocurrencies are nothing new. Recently, the billionaire fired that digital currencies and non-fungible tokens (NFT) are “100% based on the dumbest theory”. He further says that investors make money from worthless assets, because people are willing to pay for it.

Nonetheless, Microsoft, founded by the tycoon, makes heavy investments in blockchain. “This demonstrates a little of the company’s positioning in the face of this technology”, says Bernardo Srur, director of the Brazilian Association of Cryptoeconomy (ABCripto).

Before getting carried away by the wave of criticism from Gates, know seven myths or truths about cryptocurrencies.

1. Myth: Bitcoin is unbacked

Bitcoin and dollar have similar value guarantee system. (Source: Shutterstock/Reproduction)

Traditional currencies issued by central banks were backed up in value by an equivalent amount of gold. “But the ballast of paper money no longer exists as it used to.”, says Leonardo Camata, director of alliances and innovation at ISH Tecnologia.

As of 1971, for example, the dollar was decoupled from gold, and began to float freely. The currency’s value is underpinned by confidence in the US economy. In the same way, Bitcoin’s backing is guaranteed by the use of and trust in blockchain technology.

2. Myth: the crypto market is unregulated

Cryptocurrencies are designed to be decentralized finance (DeFi) without the influence of national laws. Governments do not have the same power to restrict transactions in digital currencies as they do in the traditional financial system, but that does not mean that there are no rules.

The Brazilian crypto market already has its own regulations”, explains Srur. In addition to the obligation of investors and exchanges to report transactions to the Federal Revenue Service and provisions against money laundering and terrorist financing, the Legal Framework for Cryptocurrencies has already been approved by the Chamber of Deputies.

3. Myth: Bitcoin is a financial pyramid

Some criminals take advantage of the lack of knowledge about digital currencies and the good faith of investors to apply financial pyramid scams. But cryptocurrencies have nothing to do with this type of financial fraud.

“Pyramids have already been invented with all kinds of products and services, from fattened cattle and ostrich to telephony”, recalls Camata. In this context, Bitcoin becomes yet another gimmick used by fraudsters to promise surreal gains and deceive the unsuspecting.

4. Myth: Digital currencies don’t help the environment

Bitcoin can be friendly to the environment. (Source: Shutterstock/Reproduction)

Cryptocurrency mining requires performing complex mathematical calculations to process transactions, which requires a large amount of electrical energy. “On the other hand, the traditional banking industry also consumes a lot of energy”, warns Camata.

More than 58% of the energy used by bitcoin miners, which accounts for almost half of cryptocurrencies, comes from renewable sources., points out a survey by the Bitcoin Mining Council. In addition, crypto assets are used to trade carbon credits, which contributes to the environment.

5. Myth: Cryptocurrencies Facilitate Illegal Activities

Many cyber scams such as ransomware (data hijacking for a fee), use cryptocurrencies to carry out their operations. In this way, digital assets end up being associated with these illegal actions.

However, only 0.15% of the total volume of digital currency transactions was related to illicit activities in 2021, according to a report by Chainalysis. “The transparency that blockchain offers is bad business for criminals,” says Srur. The technology makes it possible to track all operations, including their beneficiaries.

6. Truth: Blockchain is not hacked

“To date, there is no news of a successful hacker attack against, for example, the bitcoin blockchain,” says Srur. For an operation to be validated, 51% of computers on the network need to confirm the transactionwhich makes manipulation difficult.

What happens are social engineering attacks or credential theft that allow criminals to transfer funds in the portfolios of investors or companies. But the blockchain itself remains intact and immune.

7. Truth: Bitcoin is really scarce

Bitcoin cannot be freely created in the same way that money can be printed.,” says Camata. BTC has in its source code a device known as hard capwhich provides for an issuance limit of 21 million tokens, not one more.

Quantity capping simulates the finite amount of resources such as physical gold. In addition, the remuneration for mining each block drops by half every four years or so, a process called halving. These two mechanisms guarantee scarcity and protect the crypto asset from inflation.

About Yadunandan Singh

Born in 1992, Yadunandan approaches the world of video games thanks to two sacred monsters like Diablo and above all Sonic, strictly in the Sega Saturn version. Ranging between consoles and PCs, he is particularly fond of platform titles and RPGs, not disdaining all other genres and moving in the constant search for the perfect balance between narration and interactivity.

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