More misconceptions about crypto

Despite the huge advances in leading cryptocurrencies in terms of transaction volumes, anti-cryptocurrencies are still trying to impose their negative narrative.

“It’s all worthless,” they say.

“It all disappears as if it didn’t exist,” they continue.

The crypts are a “complete bubble,” said Jamie Dimon, CEO of JPMorgan Chase. (Of course, this was not an obstacle to his bank later validating its blockchain patents and coming out with its JPM Coin.)

All this noise comes from a long series of misconceptions about the block circuit. Here are just four of the most common …

Misunderstanding # 1

“Cryptans cannot be used as money because their limited supply puts them at risk of deflation.”

True, Bitcoin is susceptible to deflation.

Yes, the 21 million Bitcoins ever created will never add up.

In addition, about 20% of Bitcoin’s existing reserves (over 3 million coins) are lost forever.

The “deflationary money theory” is, of course, nothing new. It’s as old as the idea that “boots with gold aren’t bought because there’s not enough gold to actually use it for money.”

The idea is that people spend the money that is more available and collect the money that is rarer.

Why this misconception is: Bitcoin is just one of the cryptocurrencies, the only widely used crypt that was created with the idea that it would be scarce.

Other crypts do not follow this model. Cryptographic coins can be created with any properties.

They may be prone to deflation; they may be prone to inflation.

They may be related to population growth, economic growth or some combination of these.

When creating money, developers can take into account all the subtleties so that it is less during economic booms (when the risk of inflation is high) and increases during recessions (when the risk of deflation increases).

Cryptographic money can even be programmed to keep an eye on economic cycles without anyone else having to intervene or wait for politicians to make decisions.

So if you hear arguments like “crypts don’t work because the currency with limited stock doesn’t work,” you can be pretty sure that the author isn’t very familiar with this technology.

Cryptographic money can be made to do all the things that a regular currency does and much more.

The big difference: Cryptos are money without borders, without flags, that no corrupt government can control. And that is why they are such an attractive solution to the problems that are constantly plaguing the world financial system.

Misunderstanding # 2

“Cryptography is a bubble because it allows businesses to make their money out of thin air.”

Why this misconception is: You don’t have to be a blockchain genius to see this reasoning error. You just have to understand two things:

First , we’re talking almost entirely about start-ups issuing their non-local tokens (running in someone else’s blockchain). These are ICOs ( Initial Coin Offerings ) used by start-ups to raise money. In all cases, the stock of these tokens is somewhat limited by the platforms on which they have created their token.

(To learn more about what distinguishes ICOs from local tokens like Bitcoin and Ethereum, read “What Gives Tokens Their Value? ” And “Readers Ask: Why Don’t You Like ICO Startups?” )

Secondly , even in the world of start-ups and ICOs, this is not uncommon; their activities are not much different from what ordinary businesses do when they create units.

How do traditional companies create stocks? One day there are no shares and the next day there are millions, with the founders holding the majority. Were they created out of thin air? Absolutely, if you assume that these companies have no value.

Is this a problem? If it is unregulated and done in a hurry, then yes. But just like with any ordinary stock market, only those start-ups that offer something important to society can keep the value of their shares.

Everyone else just disappears quietly.

That’s how money, asset classes and markets just work. There is nothing new here.

Misunderstanding # 3

“Cryptographic money is just a fad because no one has found it practical.”

No practical use ?!

What about the millions of secure, private transactions that have already taken place?

Where is the global, decentralized, borderless, neutral, censorship-free monetary system that no one can control?

Aren’t these practical uses ?!

“Why not just use systems like PayPal?” sounds like a normal objection.

Because PayPal is a whole other thing. It is a centralized database. It exists on the banking system. And it is forcing users to go back to the banking system to spend their money again.

This means that PayPal staff may refuse to accept your account.

Even if you open an account, they may not approve your transaction. Or they may close your account altogether.

In addition, they have the power to decide who you can and cannot deal with at all.

Most importantly, they do not offer any new currency system, but only use government-controlled currencies issued by the central bank.

To be honest…

To think that cryptocurrencies and DLTs (shared general ledger technology) are useless because we already have payment-enabled companies is as good as saying that the internet is useless because we already have fax machines.

Blockchain and DLT enable a range of new applications that go beyond payments.

They create a new level of trust in the Internet, where two parties carry out a transaction with a wise contract without having to trust each other or know each other.

They can be sure that their business relationship is operating exactly within the given parameters.

And they know that there is no way for either party, the central authority, or any corrupt company to violate or manipulate this transaction.

Misconception # 4

“Cryptographic money never reaches the masses because the complexity of the financial and justice system is too great to fit in the bloc.”

This is an ancient anti-technological argument that probably began with the first tools invented by our ancestors.

Just imagine asking them, “How can you even think about using daggers and stones? We only need our two hands, a little bit of strength and a good mind!”

With regard to technological developments, I would refer to the term ‘infrastructure redevelopment’. The point is that new technology must always work hard to be accepted in today’s world.

Why?

Because by definition, existing infrastructure is built for older technology.

The first cars, for example, were forced to drive on dirt roads (often muddy) built for horses and carts.

“These machines are a passing madness,” it was thought then. “You can’t drive them properly on our roads!”

To some extent, of course, they were right until the infrastructure itself – such as asphalt roads and motorways – caught up with the new vehicles.

So yes, the financial and justice systems are too complicated at the moment. But this is so much because the systems are inefficient and the trust problem is serious. These problems cause delays of several days before transactions are approved and much longer if a dispute has to be resolved.

For comparison, DLT can solve problems in real time. It’s all already written into the transaction process itself.

One last thought …

There are many more misunderstandings, misunderstandings and misrepresentations, and they usually come out to critics who only think they understand the technology.

But almost every time you look a little deeper, you can find evidence of intellectual laziness, bias, or both.

This does not mean that the blockchain and DLT have solved all their problems. Not that they can do it very quickly.

But they won’t go away. And they’re going to change the world in ways we can barely imagine right now.

The best,

Juan

Article – Weiss Ratings

Translation: Lucreds Plus OÜ