If you’re anything like me, you’re tired of hearing about how cryptocurrency is the future. Sure, it sounds great in theory, but what are the pitfalls? With all the misinformation and half-truths on the internet about cryptocurrency out there, it’s hard to know which way to go. Redzone coins is on a mission to help consumers make informed decisions about cryptos, and it’s starting with a series of short videos to bring you all of the facts you need.
What is cryptocurrency?
Cryptocurrency is digital money that functions as a medium of exchange, rather than relying on central banks or other third parties. Of course, that doesn’t mean there’s no third party involved—cryptocurrencies are only as secure as the software used to keep them secure. And that software has bugs, because it’s still very new.
Here’s What No One Tells You About Crypto Currency :
1. It’s not real money, and it’s not backed by anything real
A lot of people think that cryptocurrency is like a credit card or a bank account. This is the kind of mindset you have because cryptocurrencies are technically digital, which means that they’re subject to the same laws of physics as computer systems. Put simply, if something goes wrong with how your computer runs your money, it may be possible to blame your preferred cryptocurrency for the damage.
2. Cryptocurrency is a good place to hide funds from taxes
Cryptocurrencies can be a great way to keep funds from being exposed and taxed by governments—either yours or another one in the shape of Uncle Sam. The use of cryptocurrencies, however, can also lead to taxes in the future.
3. Cryptocurrency is too risky to invest in
Many people who decide to buy cryptocurrency are shocked when they discover how low interest rates for investment funds are in comparison to traditional investments such as certificates of deposit, U.S. Treasury bonds, and other currencies.
Some people think that because cryptocurrencies have high volatility and their value can drop 25-50% in a single day there’s no upside for investing in them—when that happens, look at it from a risk perspective: the worst case scenario is you lose your money (and if you’re already following the tips above, this is unlikely).
4. Cryptocurrency isn’t worth it
People who think that cryptocurrencies are just too risky are making a big, unnecessary assumption about their investment. Sure, there’s a lot of volatility, but people who have followed the tips above know that over their lifetimes the ups and downs are actually pretty small.
It’s true that cryptocurrencies do have a lot of risks involved—especially if you’ve invested money you can’t afford to lose—but in the long run your investment should be plenty profitable if you’re looking at it from a risk or return perspective.
5. Cryptocurrency is perfect for criminals
Criminals have been using cryptocurrencies for money laundering purposes since they emerged. However, the idea that cryptocurrency is wholly bad because of its association with crime is unfounded. While it’s true that Bitcoin has been used by a number of nefarious characters since it was originally released in 2009, there are also plenty of legitimate investors and users out there as well. The point is to learn as much as possible before you invest your money in any currency.
6. Cryptocurrency transactions are completely anonymous
Most cryptocurrencies like Bitcoin use a public ledger known as blockchain, which records every transaction that has ever been made using the currency. While this does not mean that these transactions can be traced back to the people making them, it does mean that any competent investigator is going to be able to follow the digital money trail and see how much of it a person has and where it is coming from.
7. Cryptocurrency investors are wealthy people only
Interestingly enough, the price of cryptocurrencies is actually very close to what regular fiat currency prices are—but there’s a huge difference between how you can buy them and how you can spend them. Regular people are going to have a hard time putting their hands on cryptocurrency, but it’s not completely out of the realm of possibility. If you’re willing to invest in Bitcoin or another cryptocurrency, you can use an ATM that allows you to withdraw your digital currency and deposit it into a fiat account.
8. Cryptocurrency can be used for malicious purposes
One of the things that makes cryptocurrency so appealing is that it doesn’t discriminate—no one is going to track who you are when you’re sending money through the blockchain (as long as you use an anonymous wallet address). There are plenty of legitimate uses for this type of anonymity—but there are also plenty of illegitimate ones as well.