The main point
Because blockchain and its applications are still unexplored territory for many people, mistakes and misunderstandings surrounding crypto still abound. Binance is on a mission to identify and clear up some of the most common misconceptions related to digital assets.
For digital currencies and traditional government-backed fiat currencies, value comes from mass acceptance and adoption. When it comes to crypto, mass acceptance and adoption is on the rise.
Some still believe that crypto is not “real money,” but that it is used to buy and sell assets, goods, and services in the real world every day, and is relied upon as a store of value.
Because blockchain is a relatively new technology, there is a lot of confusion and misunderstanding surrounding crypto. We take a look at some of the most common FUD (fear, uncertainty, and doubt) surrounding crypto-fueled narratives and sorting fact from fiction.
Even though blockchain and cryptocurrencies have been a hot topic for several years now, many people around the world still have a very shallow or no understanding of the topic – something Binance aims to remedy by advancing crypto knowledge and making Web3 education accessible accessible to everyone. Something that is of interest to the public is also widely misunderstood presents fertile ground for many misunderstandings and misrepresentations, and this is clearly the case with blockchain and cryptocurrencies.
Some misconceptions about cryptocurrencies are harmless, but there are some that can sow confusion or even panic that fuel FUD (fear, uncertainty, and doubt) and make people suspicious of digital assets for no apparent reason. Addressing such dangerous misperceptions is an important component of promoting crypto literacy, so we at Binance have decided to identify and remove the most common ones.
This doesn't mean that the crypto ecosystem is perfect. This is a rapidly changing field and continually challenges newcomers to practice critical thinking and conduct their own research. However, to produce optimal results, this research must be supported by good basic understanding, not popular myths and common mistakes.
Myth 1: Digital Assets Have No Intrinsic Value
People new to crypto (or outside of crypto) often argue that most digital assets are not backed by anything tangible or by any form of “real” fiat currency – certainly not including stablecoins. In their logic, “not supported” is the same as “does not have any value”.
However, most fiat currencies are also not backed by physical assets. Examples are the US dollar or the British pound. Neither of these currencies is backed by any physical assets — both currencies are simply issued by governments, and it is the "trust" in their respective governments that constitutes a large part of the value of fiat currencies.
Just as people see the value of fiat money because they trust the government, users increasingly value digital currencies because they put their trust in the technology that underpins them. The value here comes from the open source code being available for anyone to view and verify for themselves, which eliminates the need to trust third parties who may be self-serving or corrupt. These are two very different foundations of belief, but both can be considered reasonable.
Another component of a currency's value is its level of acceptance and adoption. Although the adoption of digital currencies as a means of payment may still be limited, their acceptance and use for payments continues to increase from year to year. The uses of crypto also go far beyond payments and trade facilitation. Crypto can be used as a store of value, similar to commodities like gold, and bitcoin is the best example. Bitcoin is a rare asset – only 21 million will be created – and is therefore intrinsically disinflationary (unlike fiat currencies, whose value can be diluted by monetary policy).
Finally, smart contract-backed assets can be used to create a nearly unlimited number of utilities in the online realm, including distributed governance, digital art, new financial products, and unique virtual experiences.
So, the next time someone says digital currencies have no intrinsic value, it might be worth pointing out that disintermediation, payments, value-store capacity, and technological innovation are all — in themselves — intrinsically valuable. Additionally, the adoption rate of digital assets continues to increase. Stop thinking about that, and this is not a myth at all.
Fact: The value of currencies, both fiat and digital, comes from mass acceptance and adoption – and in the case of digital assets, this exchange rate rises consistently.
Myth 2: Crypto Isn't Real Money
When people talk about "real money," they usually think of a medium of exchange and a unit of account that can primarily be used in some kind of commercial activity.
Crypto skeptics often assume that digital assets are not used for daily shopping. In the simplistic view of some, the digital asset domain is nothing more than a place where speculative trading of tokens occurs. However, contrary to popular belief, crypto is very much used as “real money” every day around the world.
Since the first famous bitcoin transaction for tangible goods (two pizzas!) in 2010, people around the world have used crypto to purchase products and services – often essential in situations and locations where fiat money is not available. In recent years, with the increasing integration of crypto with traditional payment systems and methods, many services have emerged that allow people to spend their crypto even at merchants who want to be paid in fiat.
An example is the Binance Card which allows its owner to use crypto to purchase goods and services wherever major fiat payment systems operate (so far available in certain jurisdictions). Then, there is Binance Pay – a contactless, borderless and secure crypto payment technology. All this means there are more options for users to spend their crypto around the world. Myth exposed!
Fact: Crypto is used to buy and sell real-world assets and commodities every day.
Closing
Don't let FUD (fear, uncertainty and doubt) fool you. Skeptics will pass off all sorts of myths as fact when the conversation turns to crypto. However, our view is that these misunderstandings are often caused by people not having access to the correct information or educational materials. We hope this blog can shed light on some of the more common myths surrounding crypto.
If you find it helpful, then there is a wealth of information on all kinds of crypto topics to be found on Binance Academy — our open access learning center providing free blockchain education. Additionally, we will also be publishing more entries in the Crypto Myths: Debunked series! us soon. Always do your own research and be sure to check your sources when sorting fact from fiction.
Further Reading
Why Does Bitcoin Have Value?
Explanation About Crypto Payments
Binance Academy Course: Crypto Basics