What is FUD? Busting the biggest Bitcoin FUD myths
When Bitcoin prices shoot up, cryptocurrency critics spread an unholy trinity. Fear, Uncertainty and Doubt, otherwise known as FUD. Bitwala breaks down why you should ignore FUD and invest in cryptocurrencies.
Critics are quick to say that cryptocurrencies have no intrinsic value. Bitcoin’s detractors would much rather stick with fiat currencies like the dollar or euro . But, upon closer inspection, fiat currencies don’t appear to have intrinsic value either.
Since the time of the Ancient Greeks, most civilizations have used the gold standard. This means that currencies were backed by the value of physical gold. Countries began to move away from the gold standard as early as the 1930s, the age of fiat currency as we know it was kickstarted when the United States stopped using the last remnants of the system in 1973.
Since then, the world has moved to a fiat system. Fiat currencies are backed only by the ongoing existence of the governments that issue them. In addition to having no physical backing, fiat currencies can be printed at will. This means that fiat currencies, which have questionable intrinsic value in the first place, routinely lose their value through money printing.
Despite what critics say, Bitcoin’s purchasing power is continually increasing. Here’s why. Only 21 million Bitcoin can ever exist. It’s hard-wired into the cryptocurrency’s coding. This means that as demand goes up, supply will decrease. As the current prices show, the available supply of Bitcoin is already running low.
Critics say "criminals love crypto", but they love cash more
Another classic piece of FUD is that Bitcoin is the payment method of choice for criminals. Despite this being an effective notion for politicians hankering after those conservative boomer votes, it is simply not true. While it’s undeniable that cryptocurrency has been and will likely continue to be used in criminal activity, it is eclipsed by the eternal currency of choice for criminals: Cash.
Cash is the ultimate anonymous payment method for illicit activity. The only way to trace cash is by tracking individual serial numbers on notes. Even then, there’s often no way to prove ownership. Cash is universally accepted and well-established methods for laundering the proceeds of crime exist. Contrary to what critics say, the same cannot be said for cryptocurrency.
Most cryptocurrency exchanges and wallets now have Know Your Customer (KYC) procedures to confirm the identities of customers. This makes it possible to know who is behind payments linked to criminal activity, as wallet addresses and transactions can be cross-examined, making it easier to catch people up to no good.
Linking cryptocurrency with crime is a lazy way for critics to try to give the industry a bad name. The blockchain analytics tools already in use by both private companies and governments make catching cyber criminals easy. What’s more, exchanges and wallet providers willingly cooperate with law enforcement to bring criminals to justice.
"Bitcoin uses too much energy"
Unlike fiat currencies, Bitcoin isn’t just magicked into existence at the push of the button. It takes work. Bitcoin is produced as a reward for mining. Mining is a process in which powerful computers crack complex mathematical problems to create “blocks” of verified transactions. These are then added to the blockchain. While this is a very lucrative practice for miners, it does consume a lot of energy.
According to the University of Cambridge Bitcoin Electricity Consumption Index, Bitcoin takes up more electricity than the entirety of the Netherlands. According to the data, if Bitcoin’s energy consumption were ranked against all other nations, it comes in at number 32, just behind the United Arab Emirates.
But it’s not all doom and gloom for Bitcoin’s mining methods. Miners, keen to shake off their reputation as polluters amid a conscious global shift towards sustainable energy, are cleaning up their act. According to a 2019 study, 76% of cryptocurrency miners use electricity from renewable sources. The report found that 39 percent of all energy used in generating proof-of-work cryptocurrencies came from renewables. This is an increase from the 2018 report which stated that only 28% of energy used in mining was renewable.
Either way, Bitcoin production pales in comparison to other sectors. The industrial sector uses a huge 45% of global energy, with building and transport taking up 29 percent and 21 percent respectively. By comparison, Bitcoin consumed a mere 0.51%.
Bitcoin critics might find that the environmental angle is a novel way of criticising cryptocurrency, but the facts show that the industry is already cleaner than other sectors. Perhaps this is why climate-conscious millennial investors often choose cryptocurrency as their first investment.