I think there are misconceptions in any industry as people struggle to grapple with the new concepts and ideas of how a particular technology or product works (or doesn’t work). Well, Bitcoin is after all, a fairly new kid on the block (launched since 2009).
JP Buntinx, a friend who is also an ardent Bitcoin enthusiast living in Belgium, shared these 4-pointers in themerkle recently. He said…
Ever since the inception of Bitcoin, there have been several misconceptions related to this popular cryptocurrency. Seven years later, and quite a few of these misconceptions are still present today. There are some very basic things that very few people seem to know about Bitcoin, even though they are all vital pieces of information.
#4 Not Owning The Private Key = No Control
A significant number of Bitcoin novices purchase cryptocurrency and store the funds in an online or exchange wallet. While this is rather convenient, it also means that the end user will not have full control over his money. In the Bitcoin world, funds should only be stored in a wallet address to which the user has the private key, which he does not share with anyone else.
Although most online wallet services allow users to export the private key to a different wallet solution, that is not the case for exchange wallets. Funds should only be kept in these third-party wallets for instant conversion purposes. Otherwise, users put their funds at risk of being stolen or getting lost if the company were to shut down unexpectedly.
#3 Bitcoin Is Taxable In Certain Regions
When talking about Bitcoin and taxation, there is always a mental hurdle to overcome. Bitcoin is not issued or controlled by banks and governments, hence no one can define if taxes should be paid or not. That reasoning only goes so far, though, as various countries effectively tax Bitcoin transactions. A full list of countries can be found on Wikipedia.
#2 Bitcoin Is Anything But Anonymous
To the uneducated eye, Bitcoin may seem like the most anonymous form of sending and receiving digital money. That is not entirely true, though, as Bitcoin has often been criticized for its lack of privacy and anonymity features. But the cryptocurrency is pseudonymous, allowing users to mask their identity by using wallet addresses instead.
Just because a Bitcoin transfer does not include someone’s name or address does not make it anonymous. All transactions are publicly visible on blockchain in real-time. No one needs special software or access to view these details either. In that regard, Bitcoin may be one of the most transparent forms of money the world has ever seen.
#1 Bitcoin Is Not The First Cryptocurrency
Although this should be public knowledge by now, Bitcoin is not the wheel reinvented when it comes to the concept of cryptocurrencies. Hashcash is by far the most popular form of cryptocurrency in the pre-Bitcoin era. Additionally, one should not discount B-Mone either. There is also DigiCash. All of these types of digital currency rely on some level of centralization, though. Bitcoin is the first major decentralized and trustless cryptocurrency to grace this planet.
I especially like the way JP wrote pointer #2. As much as I’d hate to admit, he maybe right, but to an extent. Bitcoin transactions are definitely transparent BUT since there are close to an average of 250,000 Bitcoin transactions taking place every single day , there is no way anyone is able to track a particular transaction or even the identity of the user who transacted. This is due to the high security nature of cryptography.
Users using a digital wallet where the sender and the recipient’s address are all scrambled (eg. 1Bg86yyFn2EkJyG29yKKbXSFRQoP2MuQR4 ) can by no means tell anything about the user. Take a look at a real-life screenshot below and you’ll get the idea. It’s 100% annonymous and safe!
So, tell me, what Bitcoin wallet do you own? My favorite is from Blockchain.info.
[p.s. In one of my future posts, I plan to talk more about digital wallets and I’ll show you in a video exactly how to download one for free and install it on your smartphone. So stick around yea!]