BitcoinMythBusters helps you to give conclusive answers to justified or unfound criticism about Bitcoin. Click on the answer to copy the text for usage in whatever social network, forum or messenger app you like. No need to waste your time by manually addressing the same concerns over and over again.
Bitcoin is entirely digital & not backed by anything and thus has no intrinsic value.
Answer
Mankind evaluates every invention based on its utility for a particular purpose. Bitcoin proves its value by continuing to maintain superior monetary characteristics over current forms of currency - backed by advanced cryptography and the most resilient computer network in existence.
Detailed Answer
For proponents, Bitcoin's intrinsic value lies in the fact that it is a scarce, uncorrelated asset with unique intangible properties (immutable, open, borderless, decentralized, censorship resistant, etc.).
For the first time in history, anyone in the world with an internet connection can function as their very own bank while participating in the economy with full control of their wealth.
The six characteristics of money are durability, portability, divisibility, uniformity, limited supply, and acceptability. Many bitcoin proponents adamantly believe that bitcoin checks all of these boxes and is therefore hard money with real intrinsic value.
Oftentimes, those who ascribe zero intrinsic value to bitcoin have done so by way of imperfect knowledge, a narrow perspective, and/or old-aged frameworks that under-represent, if not misrepresent, the capabilities of bitcoin and the very idea of "value".
Further reading: Kraken Intelligence - Bitcoin & Intrinsic Value
Bitcoin is used by drug dealers, money launderers and ransomware attackers; therefore it is bad.
Answer
Independent reports suggest that the illicit use of Bitcoin is not higher than in the traditional banking system. Like any useful technology Bitcoin can be utilized to do good or harm.
Detailed Answer
It is unlogical to say that Bitcoin is only used for criminal activities while at the same time denying its usability as money for all of us.
graph TD
A[Is Bitcoin functional?] --> |No| B[Bitcoin is not functional <br/>for criminals nor anyone else]
A --> |Yes| C[Bitcoin is functional for everyone,<br/>including criminals]
style B fill:#ff6666
style C fill:#42B983
Studies show that BTC is not excessively used for illegal activities, e.g. former CIA intelligence analyst Michael Morell concluded in his research that only about 1% of all Bitcoin transactions can be linked to illegal actions. 1.
Further reading: Unchained Capital - Bitcoin is Not for Criminals
1 Michael Morell et al. - An Analysis of Bitcoin’s Use in Illicit Finance ↩
Governments will not allow a competing currency which they cannot control.
Answer
The decentralized nature of Bitcoin makes it impossible even for governments to eliminate it completely. By trying, companies in these countries could lose the ability to compete in a financial sector entirely reshaped by cryptocurrencies.
Detailed Answer
More and more influential individuals and companies 1 are invested and believe in the cryptocurrency. El Salvador was the first country to declare Bitcoin as legal tender 2. This rapidly evolving trend makes it increasingly difficult to prevent the further propagation without provoking counter-reactions.
Further reading: Quillette - Can Governments Stop Bitcoin?
1 CNBC - BlackRock’s Rick Rieder says the world’s largest asset manager has ‘started to dabble’ in bitcoin ↩
2 Reuters - In a world first, El Salvador makes bitcoin legal tender ↩
Bitcoin is too volatile in order to be used as currency or store-of-value.
Answer
Bitcoin is a young, uncorrelated asset that has risen rapidly in value and will be in its price discovery phase for many years to come. The volatility should decrease as it stores more value due to greater adoption and maturity.
Detailed Answer
At this point in time, as Bitcoin has already achieved a considerable market capitalization but is still several orders of magnitude below a global store of value 1, it makes sense to consider it as an emerging store of value.
If Bitcoin ever reaches the status of a world reserve currency it can be assumed that the price will develop in tandem with the world economy.
But even nowadays, when push comes to shove, Bitcoin's "volatility" is barely noticeable when compared to a hyperinflationary currency.
1 River Financial - How Much of the World's Money Is in Bitcoin? ↩
Further reading: Unchained Capital - Bitcoin Is Not Too Volatile
Bitcoin mining uses ever increasing amounts of energy without anything in return.
Answer
The consumption of energy is an essential requirement to enforce and maintain Bitcoin's unique characteristics - namely, its immutability, openness, borderlessness, decentralization, resistance to censorship, and scarcity. Bitcoin miners tend to set up their equipment in places where energy costs are particularly low. It is becoming increasingly apparent that electricity from renewable energy sources can be much more competitively priced compared to conventional energy sources.
The big question, however, is another:
How much does mankind value a scarce, completely decentralized and censorship resistant monetary system that is open for everyone - regardless of race, personal wealth, or the degree of government incompetency/malignancy?
Detailed Answer
There is no denying that Bitcoin mining will always stand in competition with other energy consumers for electricity. Nonetheless there are regions in the world, where unused excess energy is produced, e.g. Iceland (geothermal power), Sichuan/China or Siberia/Russia (both hydroelectric power). Here a global buyer of energy like Bitcoin miners are very welcome. Bitcoin can be considered a power grid nomad.
The reward halving, which happens every 4 years has an important impact on the energy usage:
-
Scenario 1: The price of Bitcoin continues to appreciate substantially
The amount of energy needed will rise much slower than the Bitcoin price and finally reach a plateau.
-
Scenario 2: The price of Bitcoin appreciates only slightly
Less energy is needed to mine Bitcoin due to stagnating competition in mining.
Further reading: Coindesk - The Last Word on Bitcoin’s Energy Consumption
Fillippone - Debunking the "Bitcoin is an environmental disaster" argument
Bitcoin is open-source and just one of thousands of cryptocurrencies. Thus, Bitcoin is not scarce and cannot be of any value.
Answer
The Bitcoin network has proven to be working flawlessly since its inception in 2009. This reliability, its unique monetary properties and a highly secured network are leading to an ever increasing network effect, which makes it very hard for any competitor in the fields "store of value" and "medium of exchange" to gain traction.
Detailed Answer
Bitcoin can be compared to the protocol on which the internet runs - TCP/IP. Both are rather simple base layers, on which more advanced technologies can be built upon, e.g. HTTP for websites in case of TCP/IP or the Lightning network as a payment layer for Bitcoin. It is extremely unlikely to get worldwide consensus to change the internet protocol, which is used by billions of devices. The same is valid for the Bitcoin protocol.
All hard forks of Bitcoin (BCH, BSV and others) have not gained any traction and are constantly losing out on all relevant metrics, e.g. hashrate, market cap or node count.
Further reading: Lyn Alden - Analyzing Bitcoin’s Network Effect
Like the tulip bulbs of 17th-century Holland, Bitcoin is a retail mania, that will vanish.
Answer
Normally investment bubbles never come back after they burst. Bitcoin on the other hand had multiple of those cycles - with each bubble being larger than the previous one. This can be interpreted as natural adoption loops with more and more people getting curious and learn about the unique properties of Bitcoin during each bull run.
Detailed Answer
The chances of Bitcoin to vanish is getting smaller with each new individual, company or state holding it. Bitcoin is showing characteristics of growth - both in price and acceptance metrics - similar to an increasingly dominant tech company or protocol.
Logarithmic display of Bitcoin's increase in market capitalisation from 2012-2021 (Chart Source: Blockchain.com)
Further reading: Satoshi Nakamoto Institute - How We Know Bitcoin Is Not a Bubble
The volatility, slow transaction time and high fees disqualify Bitcoin for everyday use as a payment method.
Answer
The volatility should decrease as Bitcoin stores more value due to greater adoption and maturity. Slow transaction times and the resulting high transaction costs can be solved with the help of layers, which are built on top of the Bitcoin settlement layer. The most popular being the "Lightning Network" at the moment, which enables almost instantanious transactions for negligible fees.
Detailed Answer
It is essential for the security of Bitcoin that as many people as possible can store and update the Blockchain - a database with all transactions ever made. In order to achieve that the Blockchain size should only grow modestly, which in turn leads to a limited amount of transactions per second and thus elevated transaction fees in times of high traffic. As of today there is no technical solution to increase transaction throughput without sacrificing decentralization and security.
flowchart LR
Scalability o--o Decentralization & Security;
Decentralization o--o Security;
The Blockchain Trilemma: You can only improve 2 at a time
The most promising solution to use Bitcoin even for small purchases while maintaining its unique monetary properties is the second-layer-solution Bitcoin Lightning.
Further watching:
There is a lot of news about Bitcoin being hacked and millions of dollars taken. This cannot be a secure system.
Answer
Bitcoin has been working flawlessly almost since its inception in 2009. What is getting hacked are crypto exchanges and other centralized entities. It is similar to stating that the US-Dollar is a bad currency because banks get robbed.
Detailed Answer
Bitcoin is by far the most secure network system due to its decentralized nature and the countless specialized computers around the world, which ensure that the system cannot be tampered with.
To take full advantage of the security one should make sure to self custody his/her coins.
"Not your Keys, not your Coins!" - Andreas M. Antonopoulos
Once people stop pouring new money into Bitcoin it will quickly collapse.
Answer
Bitcoin shows no signs of a Ponzi scheme: Old investors are not paid with money from new ones, there was no premining of coins and it does not have a leadership team. A pyramid scheme, as opposed to Bitcoin, needs constant growth in order not to implode. Bitcoin grew very organically since its creation and the market is pricing the asset, as it sees fit.
Detailed Answer
How is a Ponzi Scheme actually defined? And does Bitcoin tick the boxes? See below:
| Signs of a Ponzi scheme | How is it with Bitcoin? |
|---|---|
| Promised high investment returns | Satoshi (the creator) never promised any return |
| Misleading or outright wrongful statements regarding business strategy | Bitcoin has been open-sourced from the very beginning |
| "Extroverteted" leadership team | Bitcoin's creator is unknown. The rest of the dev community is highly decentralized |
| Unregistered Investments and Unlicensed Sellers | Bitcoin (luckily) doesn't need a license |
Further reading: Lyn Alden - Bitcoin: Addressing the Ponzi Scheme Characterization
Once a powerful enough quantum computer is available Bitcoin is dead.
Answer
This might be a danger once quantum computers with enough processing power are available (possibly from 2035-2050). Work on post-quantum encryption standards is ongoing and would get implemented into the Bitcoin protocol, once the need arises.
Detailed Answer
Without quantum-resistant encyryption standards there are 3 possible attack vectors for quantum computers:
- Breaking the hashing algorithm of Bitcoin (SHA-256)
At this point in time it is not clear whether quantum computers are able to crack this type of algorithm.
- Breaking the public/private key algorithm (ECDSA - Elliptic Curves cryptography)
Reused Bitcoin addresses - i.e. addresses which published a signature - are at risk of getting cracked. If SHA-256 can be broken as well then all Bitcoin addresses are vulnerable.
- Use quantum computers to mine much more efficiently than with state-of-the-art hardware
This would possibly only be a temporary threat until other miners switch to quantum mining as well.
Further watching:
Further reading: Forbes - Here’s Why Quantum Computing Will Not Break Cryptocurrencies
Most of the Bitcoin mining happens in China. The mining hardware is manufactured there as well. Thus China can take control over Bitcoin anytime!
Answer
The potential to do damage by possessing the majority of mining power is very limited: A double spending of the miner's own funds would be possible by investing massive amounts of energy and money before the Bitcoin protocol was changed to exclude the bad actor and rendering his effort futile.
This very theoretical threat is further mitigated by the trend toward increasingly global distribution of hash power.
Detailed Answer
So called 51% attacks, where one entity has more than half of the hashing power, are very expensive to pull off, require an enormous amount of coordination and deliver very little benefit for the attacker.
This is what cannot be done with a 51% attack:
- You can't steal the people's money
- You can't change the consensus rules
- You can't make invalid transaction become valid
This is what can be done with a 51% attack:
-
Double spending of the attackers Bitcoin
Very expensive attack that could be fended off with a code change. It is certainly safer to just use your hashpower to profit from securing the network rather than attacking it.
-
Mine empty blocks and render the network useless
Has to be upheld for a long time to prevent the intended use of Bitcoin. This attack costs massive amounts of money and energy. If the attacker does not stop on its own a code change could be implemented to render the attackers hardware worthless.
Further watching:
Further reading: Jameson Lopp - Are Chinese Miners a Threat to Bitcoin?
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