The Biggest Myth about Cryptocurrencies

[JamesNZ]

The biggest myth about cryptocurrencies is that they can be invested in. Namely, to invest, there must be a resource to invest in and which serves as a source of profit for investors. Cryptocurrencies lack such a resource. Let's look at a few examples of traditional investment instruments to understand this.

In the case of stocks, that resource is the company's business operations or equity. Business operations generate profits, from which investors can benefit by receiving dividends. Equity can be liquidated or used to repurchase shares, allowing investors to profit from liquidation proceeds or share repurchases.

For real estate, precious metals, oil, wheat, etc., investors profit from their intrinsic value by using it for various purposes such as housing, making jewelry and electronics, obtaining energy and food products, etc.

A more complex example is fiat currencies. In this case, the resource is debt. Units of fiat currency are created when commercial and central banks lend money to businesses, individuals, and governments. This means they represent debt. Subsequently, investors invest goods, services, and labor into this debt through market exchanges with these entities. However, since the entities must return the units to the banks, investors profit from them. They profit from businesses and individuals through counter-exchanges, i.e., by receiving goods, services, and labor from them when they need units for loan repayments. And they profit from governments because governments allow them to pay taxes in these units. If businesses and individuals do not make counter-exchanges, they will default. Then investors will profit by banks selling them seized property of these debtors to obtain the units for closing outstanding loans.

With cryptocurrencies, nothing like the above exists. In other words, there are no business operations, equity, intrinsic value, debt, or any other resource that investors can profit from.

So, what are people doing when they say they "invest" in cryptocurrencies? What are cryptocurrencies if not investment instruments?

Well, people are simply participating in a scheme where they give money and other assets to each other in the hope of getting more back in the future. Cryptocurrencies are merely a numerical record of this scheme.

For example, a few moments ago, one member of this scheme gave another $61,066. The Bitcoin system recorded this by increasing the number associated with the first member's address by 1 and decreasing the number associated with the second member's address by 1. Initially, members gave each other $0.001 for the same numerical record (+1/-1). One can also enter the scheme by spending electrical energy, which is recorded by the cryptosystem through an arbitrarily predefined increment of numbers.

The aforementioned does not constitute investment because there is no resource: a) of which a value per unit can be determined; b) that serves as a source of profit for investors. Value per unit is actually the amount of profit that can be generated per unit of that resource. In other words, cryptocurrency systems do not have digital money or digital assets, as is commonly believed. This is because money and assets are actually resources that meet the above two criteria.

When someone tells you they have "invested" in cryptocurrency or hold crypto "assets," ask them the following: how much can be profited per unit of this "asset"? They will likely respond with something like, "well, the last price of Bitcoin was $61,066, so that's about how much it can be profited". However, this is not the profit we're talking about because those dollars did not come from a resource within the Bitcoin system but from the pocket of the last "investor". The correct answer is "zero" simply because there is nothing within the system that can serve as a source of profit for investors.

Therefore, cryptocurrencies are not about investing in assets, monetary transactions, supply and demand, or anything related to economy or markets. Instead, they are about digitally recording participation in pyramid-style schemes, storing that record in decentralized databases called blockchains, and wrapping it all up in economic jargon. That is literally all there is to cryptocurrencies.

[Easteregg69]

Something about electricity. We stop the wind turbines when there is overproduction.

Rub that together.

[vjudeu]

That is, there is no business activity, equity, intrinsic value

There is some "instrinsic value", but you need to know some math, to understand it. For example: Bitcoin is the biggest source of low SHA-256 hashes in the world. It also shows everyone publicly, how strong this particular hash function is. The same with ECDSA: for example, because Bitcoin exists, you can see, that 130-bit public keys and 65-bit hashed public keys are unsafe. Without Bitcoin, you wouldn't know that, so you wouldn't know, how strong your keys should be, to not be stolen by some third party.

Also note, that SHA-256 or ECDSA is not something Bitcoin-only. It is also used in other places. Which means, if SHA-256 will fail, or if ECDSA will fail, then by having Bitcoin blockchain, which is public, you have any chances to observe in advance, and predict, when it will fail. Without Bitcoin, there would be no incentive for cryptographers and mathematicians, to share their observations, because they wouldn't be rewarded properly. Think about it: maybe humans didn't solve some millenial problems, because the rewards for solutions are too small?

Another thing is also the way of claiming the reward: if you have Bitcoin, then you can solve some complex math problem, and claim the reward, without revealing your name publicly. Without Bitcoin, you would be forced to use your real name. And not everyone wants to be written in the history as "the one, who turned off the Internet, by breaking SHA-256" or "the one, who invalidated credit cards, by breaking public keys".

And they have some nonsensical limitations. The Bitcoin system, for e.g.,  has a limitation that the maximum sum of numbers associated with the addresses of scheme members can be 21 million.

It is easier to pick some constant limit, than to properly adjust the number of units in the system. In case of fiat currencies, how do you know, if people behind the system produce enough coins? What if they produced too much or not enough? How can you measure that? In case of constant supply, you don't have to worry about it, because you can adjust a price for a single unit, instead of adjusting the number of units in circulation.

[Blitzboy]

Cryptocurrencies, like Bitcoin, arent some pyramid scheme. The critics lack the whole picture. They hang on conventional ideas of value. Not about factories or tangible goods is crypto. Its concerns technical progress and a worldwide turn toward a digital economy. Investing in Bitcoin buys more than simply a "coin." You are funding the direction of finance going forward. The true revolutionary tool here, people, is blockchain technology. About security, openness, and efficiency.

This goes beyond mere money. It concerns our interactions in the digital environment. Its about realizing how technology can transform our existence.

[pooya87]

Actually the only thing that makes an investment is the profit. You could give 10 bucks to me and I can place it my pocket. Then I start whistling for 1 minute and 20 seconds and after I'm done I give you 20 bucks back. In that scenario you will have made an investment because you made a profit. You invested in my pocket

As for cryptocurrencies, aka altcoins, they are like pennystocks. There really isn't any company or any utility or product. There is only a game of chance that you play with your money to make a profit.
When it comes to bitcoin there is also the utility that gives it an intrinsic value and due to increasing adoption it gains value which makes bitcoin an excellent investment on top of being the only decentralized payment system.

A more complex example is fiat currencies. With them, the source of profit is debt.

That makes the debt an investment by your definition ("scam" bonds governments issue) not the fiat itself.

However with the definition I provided fiat is also an investment as long as it can give you profit. For example after the El Loco became president in Argentina the inflation went to the moon (260% and I Think it also went above 300% as well). In that situation any fiat currency other than Argentinian Peso has been an excellent investment because it gave an excellent profit (eg. 157% profit if you bag held USD instead of Peso).

[Catenaccio]

The biggest myth about cryptocurrencies is that it is possible to invest in them.

People can invest money in anything they see good for their capital but they always have to keep in mind a basic warning that, with any investment there are two opposite things exist at the same time, probability to get risk and benefit, loss and profit from your investment.

Make sure you do enough research before spending money for investment in anything.

When you hear in the media or on social networks that someone has 'invested in cryptocurrency', it is an oxymoron. Something like 'hot ice'. It is impossible to invest in cryptocurrencies. Namely, investing presupposes the existence of a source from which investors can profit.

It's their responsibility to quickly believe in something they saw or heard of recently but don't use allocate enough time for due diligent research. By spending money carelessly like this, if they get loss, they truly deserve that loss.

Investment sounds better and safer than trading but both of them, investment and trading, contain risk, risk of losing initial capital.

[Peanutswar]

People afraid to make an investment in bitcoin because of the different rumors they get like its complicated at all, you need to understand tons of thing related to bitcoin, there's a lot of coin to invest, which is the same if they make an investment with the stocks and other form of it that you need to understand how it works, how to gain profit with this, how to lessen the risk and what are the ideal business to invest, just recently people afraid to explore things that they didn't experience yet, all they want is to have a safe haven with their money and that secure their profit which in reality just the same in investing with crypto.

[Dunamisx]

The biggest myth about cryptocurrencies is that it is possible to invest in them. When you hear in the media or on social networks that someone has 'invested in cryptocurrency',

The word investment is what first motivated some for choosing bitcoin because they now its something that they can invest on and make profits later from it, this is how it all began, but you cannot use your fiat currency like this, and there are no opportunities like this in a centralized traditional monetary system as we have in a decentralized network like with bitcoin, that is why many were so eager to know and learn more about various opportunities they stand to derive from the adoption of bitcoin.

[kryptqnick]

Investing itself does not presuppose that there must be an intrinsic value of what we are investing in. It's just about putting money (or, figuratively speaking, various resources like effort and time, too) into something with an expectation of it paying off. If people buy Bitcoin and hold it, with an expectation that the price will increase in the future, that's investing. Sometimes people also invest in fiat, actually, by choosing to make their savings in something like the USD because of high inflation rate of local currency and a possibility of profiting relative to the local currency and the local market.
So I disagree with the op that it's impossible to invest in cryptos.

[legiteum]

Speculation is a value, as evidenced by the fact that humans spend trillions of dollars on it every year, and this activity have been a core part of the human experience since history began.

All digital currencies are speculation instruments and as such they are valuable. You don't need to know any more than that.

You could perhaps make the argument that speculation doesn't "help anybody", but then again neither does most of what the modern world spends its resources on, e.g. entertainment, tasty food, recreation, and so forth. Humans are not animals that only do the exact actions necessary to survive.

As for what is "valuable" and "not valuable" the only proper answer to this question is, "whatever people find valuable". That answer isn't very satisfying for some people, but any attempt to answer it in a universal way inevitably leads to and endless list of edge cases and reductive arguments.

Almost all digital currencies are only investment instruments as they have no unique value beyond that. Exceptions are ultra-privacy enhanced cryptos like Monera, and non-blockchain digital currencies that are faster, cheaper and more private than credit cards like Haypenny.

But as we've seen with Bitcoin, investors don't need a speculation instrument to have any intrinsic value in order for it to be bid up past a trillion dollars in value. People value.. what they value.

[Mia Chloe]

The stuff that you refer to as myths in the crypto space are mostly as a result of Poor research , poor  understanding and rumors . The problem many people who pay too much attention to these so called crypto myths face is that they fail to do research on important things including security and end up jumping into investing in crypto. And unfortunately for a majority of them they end up investing in altcoins that are mostly pump and dump schemes and boom they lose all Thier money and say that crypto is scam.

The fact is people who depend on rumours as their source of information will hardly make progress in the crypto space. This is mainly because the crypto space and internet is full of lies and misleading information.

[darkangel11]

Computational power is a resource.
Electricity is a resource.
Online ledgers are resources.
Bitcoin is like a company, but without headquarters and a CEO. It's a decentralized entity, which is why so many people can't imagine how that's possible, yet it is.

Since you can invest in companies that protect and move data, you can also invest in bitcoin.
Since you can invest in companies that allow for fast international payments, you can invest in bitcoin.
Think about it for a moment and you'll come to the conclusion that bitcoin is in many ways similar to traditional investments.

[JamesNZ]

Computational power is a resource.
Electricity is a resource.
Online ledgers are resources.
Bitcoin is like a company, but without headquarters and a CEO. It's a decentralized entity, which is why so many people can't imagine how that's possible, yet it is.

Since you can invest in companies that protect and move data, you can also invest in bitcoin.
Since you can invest in companies that allow for fast international payments, you can invest in bitcoin.
Think about it for a moment and you'll come to the conclusion that bitcoin is in many ways similar to traditional investments.

Sure, electricity or computer power is a resource - but that resource is what people throw away to join the pyramid scheme. It is not a resource inside the Bitcoin system that can be used as a source from which Bitcoin holders could profit. If you hold Bitcoin you don't have the right to a specific amount of electricity that someone is obligated to deliver you. There's neither electricity nor anything else inside the Bitcoin system that can be used as a resource from which Bitcoin holders could profit. So no one invested in Bitcoin. Bitcoin is just a way to record participation in a pyramid-like scheme.

Cryptocurrencies, like Bitcoin, arent some pyramid scheme. The critics lack the whole picture. They hang on conventional ideas of value. Not about factories or tangible goods is crypto. Its concerns technical progress and a worldwide turn toward a digital economy. Investing in Bitcoin buys more than simply a "coin." You are funding the direction of finance going forward. The true revolutionary tool here, people, is blockchain technology. About security, openness, and efficiency.

This goes beyond mere money. It concerns our interactions in the digital environment. Its about realizing how technology can transform our existence.

If you read the opening post carefully you can see that Bitcoin or any other crypto is not a pyramid scheme. A pyramid scheme is when you give money and stuff to people and then hope people will give you money and stuff back in the future. Bitcoin is just a numerical way to record your participation in that scheme and store the record in a decentralized database.

[Mr.right85]

I like the fact that your familiar with the business world and know the much you can about it’s business operandum or modules but, are you really serious right now, that having to invest or count Bitcoin investments to be a misconception largely based on terminology as Bitcoin isn’t invested in let alone, been profited from? Because, that’s what I get from the below quotes.

The biggest myth about cryptocurrencies is that it is possible to invest in them. When you hear in the media or on social networks that someone has 'invested in cryptocurrency', it is an oxymoron. Something like 'hot ice'. It is impossible to invest in cryptocurrencies. Namely, investing presupposes the existence of a source from which investors can profit.

The simplest example is stocks. With them, the source of profit is a company's business activity and equity. Business activity creates revenue, and when that revenue exceeds expenses investors can profit by receiving dividends. Equity can be liquidated, and then investors profit by receiving funds from that liquidation.

If your going to judge future coming developments and innovations by the definition of what was from a distant past, it would make it even hard for you to understand. Don’t forget the fact that, a lot in our world is in dynamics and as such, we now have digital assets, things not imagined over 2 decades again.

[Ultegra134]

You claim that with cryptocurrencies, there's no source of profit, activity, or actual value to invest in, but numerical records are similarly found in pyramid schemes. I'll ask you this: How is gold any different? Bitcoin is a currency that is considered an asset—a digital one—but still an asset that isn't that different from gold. How is gold's price determined? supply and demand, and also the monopoly schemes that take advantage of the gold supply in third-world countries such as Africa, depleting their resources. Yet, it's considered a great investment even though it doesn't produce any income or revenue.

[JamesNZ]

You claim that with cryptocurrencies, there's no source of profit, activity, or actual value to invest in, but numerical records are similarly found in pyramid schemes. I'll ask you this: How is gold any different? Bitcoin is a currency that is considered an asset—a digital one—but still an asset that isn't that different from gold. How is gold's price determined? supply and demand, and also the monopoly schemes that take advantage of the gold supply in third-world countries such as Africa, depleting their resources. Yet, it's considered a great investment even though it doesn't produce any income or revenue.

How's gold different? It's simple. Gold is a metal not a numerical record. In gold people profit from its intrinsic value. On the other hand, from a numerical record associated with address of people in the Bitcoin system no one can profit. That record is just a way to track participation in a pyramid scheme. For instance, someone just gave $60,708 to a participant, and the Bitcoin system recorded this numerically, as explained in the opening post.  The first person invested in nothing. It just joined the pyramid scheme by giving money to the old scheme participant with the Bitcoin system recording this as +1/-1. +1/-1 is in no way comparable to gold.

[glendall]

Cryptocurrencies, like Bitcoin, arent some pyramid scheme. The critics lack the whole picture. They hang on conventional ideas of value. Not about factories or tangible goods is crypto. Its concerns technical progress and a worldwide turn toward a digital economy. Investing in Bitcoin buys more than simply a "coin." You are funding the direction of finance going forward. The true revolutionary tool here, people, is blockchain technology. About security, openness, and efficiency.

This goes beyond mere money. It concerns our interactions in the digital environment. Its about realizing how technology can transform our existence.

I can't understand why it is said to be a pyramid, as we know, to get just 1 BTC, we have to try independently, not under demands, it's not like a pyramid scheme where the one at the top will be lucky, but in whatever Bitcoin we have, that's what we get if we want to get big. In my opinion, we have to save actively

[ditec_wrogn]

Dear JamesNZ,

I was utterly appalled to read your post, which is riddled with misinformation and a complete lack of understanding about cryptocurrencies. Your blatant bias against this emerging technology and your failure to grasp its fundamental principles are both disappointing and unacceptable.

First, your claim that it is impossible to invest in cryptocurrencies is not only false but also demonstrates a fundamental misunderstanding of what cryptocurrencies are and how they work. Cryptocurrencies are digital assets that can be bought, sold, and traded on various platforms, just like stocks, real estate, and other investment instruments. They have value because people are willing to buy and use them, and their value can fluctuate based on market demand and other factors.

Furthermore, your argument that cryptocurrencies are not investment instruments because they do not generate revenue or equity is misguided and shows a lack of basic financial knowledge. Many investment instruments, such as gold and other precious metals, do not generate revenue or equity either, but they are still considered legitimate investment opportunities.

Your explanation of the sources of profit for stocks, real estate, and fiat currencies is also flawed and demonstrates a lack of understanding of basic economics. You claim that the source of profit for fiat currencies is debt, but this is only partially true. The value of fiat currencies is determined by a variety of factors, including government policies, economic indicators, and market demand.

Your description of cryptocurrencies as "numerical records of participation in pyramid-like schemes" is not only inaccurate but also offensive to the many legitimate projects and communities in the cryptocurrency space. Cryptocurrencies are built on blockchain technology, which is typically a decentralized and transparent ledger system that enables secure and transparent transactions. This means that the transaction data is usually distributed across a network of computers, rather than being controlled by a single entity, and that anyone can view the transaction history on the blockchain. However, it's important to note that while blockchain technology is often decentralized and transparent, there are some exceptions. For example, some private blockchains are centralized and not open to the public. However, in the context of cryptocurrencies, public blockchains are the norm.

Your argument that the 21 million limit on Bitcoin is arbitrary and meaningless is also incorrect. While it is true that the limit is an arbitrary number, it is a fundamental aspect of Bitcoin's design and is intended to prevent inflation and maintain the currency's value over time. However, it's important to note that many aspects of Bitcoin's design, such as the block size limit and the mining reward schedule, are also arbitrary and have been the subject of debate within the community.

In short, your post is a disgraceful display of ignorance and misinformation about cryptocurrencies. I strongly urge you to educate yourself on this topic and approach it with an open mind, rather than perpetuating harmful stereotypes and misconceptions.

[JamesNZ]

Dear JamesNZ,

I was utterly appalled to read your post, which is riddled with misinformation and a complete lack of understanding about cryptocurrencies. Your blatant bias against this emerging technology and your failure to grasp its fundamental principles are both disappointing and unacceptable.

First, your claim that it is impossible to invest in cryptocurrencies is not only false but also demonstrates a fundamental misunderstanding of what cryptocurrencies are and how they work. Cryptocurrencies are digital assets that can be bought, sold, and traded on various platforms, just like stocks, real estate, and other investment instruments. They have value because people are willing to buy and use them, and their value can fluctuate based on market demand and other factors.

Furthermore, your argument that cryptocurrencies are not investment instruments because they do not generate revenue or equity is misguided and shows a lack of basic financial knowledge. Many investment instruments, such as gold and other precious metals, do not generate revenue or equity either, but they are still considered legitimate investment opportunities.

Your explanation of the sources of profit for stocks, real estate, and fiat currencies is also flawed and demonstrates a lack of understanding of basic economics. You claim that the source of profit for fiat currencies is debt, but this is only partially true. The value of fiat currencies is determined by a variety of factors, including government policies, economic indicators, and market demand.

Your description of cryptocurrencies as "numerical records of participation in pyramid-like schemes" is not only inaccurate but also offensive to the many legitimate projects and communities in the cryptocurrency space. Cryptocurrencies are built on blockchain technology, which is typically a decentralized and transparent ledger system that enables secure and transparent transactions. This means that the transaction data is usually distributed across a network of computers, rather than being controlled by a single entity, and that anyone can view the transaction history on the blockchain. However, it's important to note that while blockchain technology is often decentralized and transparent, there are some exceptions. For example, some private blockchains are centralized and not open to the public. However, in the context of cryptocurrencies, public blockchains are the norm.

Your argument that the 21 million limit on Bitcoin is arbitrary and meaningless is also incorrect. While it is true that the limit is an arbitrary number, it is a fundamental aspect of Bitcoin's design and is intended to prevent inflation and maintain the currency's value over time. However, it's important to note that many aspects of Bitcoin's design, such as the block size limit and the mining reward schedule, are also arbitrary and have been the subject of debate within the community.

In short, your post is a disgraceful display of ignorance and misinformation about cryptocurrencies. I strongly urge you to educate yourself on this topic and approach it with an open mind, rather than perpetuating harmful stereotypes and misconceptions.

Your cannot change the reality by denying it, by crying and wining, by using loaded language, and by misrepresenting my description of that reality. I understand that you're frustrated because my post demonstratrd that you are a participant of a pyramid-like scheme and not an investor.  But your response is pretty hilarious and pathetic. Try to accept reality instead of writing nonsensical walls of text.

[kuriboh]

People afraid to make an investment in bitcoin because of the different rumors they get like its complicated at all, you need to understand tons of thing related to bitcoin, there's a lot of coin to invest, which is the same if they make an investment with the stocks and other form of it that you need to understand how it works, how to gain profit with this, how to lessen the risk and what are the ideal business to invest, just recently people afraid to explore things that they didn't experience yet, all they want is to have a safe haven with their money and that secure their profit which in reality just the same in investing with crypto.

There are many reasons to fear investing in Bitcoin. You say many are afraid to make this an investment because of rumors. You are absolutely right that many people spread many kinds of rumors about Bitcoin. Because of this, many people don't want to invest in it and lose interest in it. This is especially true for newbies. I don't know if you've seen it, but I've seen newcomers get blown away more than they've been well-reassured about it.
These become very dangerous for those who enter this sector. Because they are new here to learn, it is natural that they will only want to invest in Tarapitak coins if they are well assured.

Yet, it's crucial to grasp the market dynamics before investing in Bitcoin and other cryptocurrencies. We can confidently navigate the investment landscape and reassure new entrants by doing so.