As at the time I am writing this post Bitcoin is selling for $1003 to 1 Bitcoin. I personally joined the Bitcoin business when 1 Bitcoin costs $720; you can do the maths yourself – the increase in price happened withing 3 weeks.
However, there are some Myths that keeps some people away from doing business with Bitcoins. I understood we all have our fear of the unknown but not with bitcoin because those things that actually kept you off doing business with Bitcoins are not true. Do you even know that you can make lots of money by just keeping your money in Bitcoin over a long period of time?
Today, I will be talking about 7 Myths that keeps people from doing business with Bitcoin and I hope this post will deliver someone today!
1. Bitcoin Is Not Helping Nigerians Business; It’s Just like Every Other Fiat Currency
Unlike Flat Currency, Bitcoins are:
• Easy to transfer
• Easy to secure
• Easy to verify
• Easy to granulate
• Potentially anonymous
• Faster to transfer
• Cheaper to transfer
2. The Cost Of Mining Determine The Value Of Bitcoin
Just because something takes X resources to create does not mean that the resulting product will be worth X. It can be worth more, or less, depending on the utility to its users.
In fact the causality is the reverse of that (this applies to the labor theory of value in general). The cost to mine bitcoins is based on how much they are worth. If bitcoins go up in value, more people will mine (because mining is profitable), thus difficulty will go up, thus the cost of mining will go up.
The inverse happens if bitcoins go down in value. These effects balance out to cause mining to always cost an amount proportional to the value of bitcoins it produces. Value is ultimately determined by what people are willing to trade for – by supply and demand.
3. Bitcoins Are Not Safe Because They Are Stored In Wallet
No, your wallet contains your secret keys, giving you the rights to spend your bitcoins. Your bitcoin wallet is just like your bank details stored in a file. If you give your bank details (or bitcoin wallet) to someone else, that doesn’t double the amount of money in your account.
4. There Is No Way To Control Inflation In Bitcoin
Inflation is simply a rise of prices over time, which is generally the result of the devaluing of a currency. This is a function of supply and demand. Given the fact that the supply of bitcoins is fixed at a certain amount, unlike fiat money, the only way for inflation to get out of control is for demand to disappear. Temporary inflation is possible with a rapid adoption of Fractional Reserve Banking but will stabilize once a substantial number of the 21 million “hard” bitcoins are stored as reserves by banks.
Given the fact that Bitcoin is a distributed system of currency, if demand were to decrease to almost nothing, the currency would be doomed anyway.
The key point here is that Bitcoin as a currency can’t be inflated by any single person or entity, like a government, as there’s no way to increase supply past a certain amount.
5. Bitcoin Will Eventual Fall Because It Cannot Be Taxed
Thus is by no way true because cash transactions hold the same level of anonymity but are still taxed successfully. It is up to you to follow the applicable state laws in your home country, or face the consequences.
While it may be easy to transfer bitcoins anonymously, spending them anonymously on tangible goods is just as hard as spending any other kind of money anonymously. Tax evaders are often caught because their lifestyle and assets are inconsistent with their reported income, and not necessarily because government is able to follow their money.
6. Merchants Can’t Set Prices In Biotcoin Because Of The Volatile Exchange Rate
The assumption is that bitcoins must be sold immediately to cover operating expenses. If the merchant’s back-end expenses were transacted in bitcoins as well, then the exchange rate would be irrelevant. Larger adoption of Bitcoin would make prices sticky. Future volatility is expected to decrease, as the size and depth of the market grows.
In the meantime, many merchants simply regularly pull the latest market rates from the exchanges and automatically update the prices on their websites. Also you might be able to buy a put option in order to sell at a fixed rate for a given amount of time. This would protect you from drops in price and simplify your operations for that time period.
7. The Developer Of Bitcoin Software Can’t Be Trusted
The Bitcoin protocol was originally defined by Bitcoin’s inventor, Satoshi Nakamoto, and this protocol has now been widely accepted as the standard by the community of miners and users.
Though the developers of the original Bitcoin client still exert influence over the Bitcoin community, their power to arbitrarily modify the protocol is very limited. Since the release of Bitcoin v0.3, changes to the protocol have been minor and always in agreement with community consensus.
Protocol modifications, such as increasing the block award from 25 to 50 BTC, are not compatible with clients already running in the network. If the developers were to release a new client that the majority of miners perceives as corrupt, or in violation of the project’s aims, that client would simply not catch on, and the few users who do try to use it would find that their transactions get rejected by the network.
There are also other Bitcoin clients made by other developers that adhere to the Bitcoin protocol. As more developers create alternative clients, less power will lie with the developers of the original Bitcoin client.