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#1. Cryptocurrency is the same as NFTs
A couple of years ago, you rarely saw chatter about NFTs on social media. Fast forward to 2022, and almost everyone is talking about NFT. However, for someone new to anything blockchain, NFT and cryptocurrency could also be the same thing.
In a sense, this hypothesis is not out of place. Both NFT and crypto are offshoots of blockchain technology. Blockchain is the technology behind cryptocurrencies and was born from an idea of Bitcoin creator Satoshi Nakamoto, who designed it to support the pioneering cryptocurrency.
After Bitcoin, the developer community saw the currency as a fascinating alternative to fiat money. Here was a form of money that the government did not call and was inherently faster and safer. Thanks to Bitcoin, thousands more cryptocurrencies now exist.
NFTs, short for non-fungible tokens, are digitized assets. Non-fungible tokens are the opposite of fungible tokens, where fungibility implies the possibility for one type of token to be replaced by another token of the same type. For example, 1 BTC = 1 BTC and any $20 bill is fungible for another $20 bill.
As a result, an NFT is the only one in existence, making it unique. It possesses three main qualities: scarcity, indivisibility and uniqueness. NFTs can represent scanned versions of real-life objects, such as domain names, tickets, art, and even tweets.
NFTs are usually exchanged for cryptocurrencies or cash in NFT markets such as OpenSea, Rarible, NFT Binance and so on. The largest cryptocurrency exchange in the United States, Coinbase, is also preparing to release its market.
NFTs are currently the latest trend in the blockchain universe, thanks to high-profile people like Jack Dorsey NFTing his first ever tweet, which brought them further recognition. Another reason is the staggering figures they exchanged hands, such as a whopping $69 million raked in by artist Beeple for his visual artwork “Everydays – The First 5000 Days.”
#2. You can make more money with cryptocurrencies than stocks
This notion stems in part from the idea that cryptocurrencies are the land of overnight millionaires, Lamborghinis, etc. The truth is that while cryptocurrencies typically produce better returns than traditional investments like stocks, the risk can be just as dramatic.
When it comes to cryptocurrency investments, enthusiasm is often not accompanied by knowledge. A study conducted by market research firm Cardify revealed that established investors were increasingly showing a preference for cryptocurrencies more than stocks, with novice traders primarily driving this trend. In addition, most of the investors surveyed said they are still new to cryptocurrencies.
Does all this mean that cryptocurrencies are better or more profitable than stocks? Not necessarily. First, stocks are also subject to price fluctuations. This may be due to a company’s policy change or soaring market sentiment. Twitter’s current legal tangle with Elon Musk after Tesla’s CEO pulled out of a deal to buy the micro-blogging platform. The tug-of-war caused Twitter’s stock prices to plummet, leaving investors at the whim of the market.
At the same time, stocks have historically been a benchmark for investors and are a proven and reliable way to put your money to good use. Crypto has also produced satisfactory profits for many investors, but only if done with due diligence.
Therefore, cryptocurrency investors should not feel the need to put all their eggs in cryptocurrency. A hybrid investment approach, which involves portfolio diversification, can be more rewarding in the long run. The important thing is to remember the golden rule of investing: never put more money than you are willing to lose.
#3. Cryptographic transactions are untraceable, anonymous
Did you know that crypto transactions are not anonymous? Not even people who have interacted with cryptocurrencies for years realize this. In fact, the belief that crypto transactions are anonymous and untraceable is one of his biggest appeals and source of criticism. But which cryptocurrency is actually pseudonym, which is an important distinction.
The Bitcoin website notes: “Bitcoin is designed to allow its users to send and receive payments with an acceptable level of privacy and any other form of money. However, Bitcoin is not anonymous and cannot offer the same level of privacy as cash.
So how is it possible that encryption offers privacy but is not completely and completely anonymous?
First, crypto transactions use “addresses,” which are the virtual places where funds are sent. Unlike conventional payment systems, addresses are not tied to the sender or recipient (and therefore to their identity): they are randomly generated. In addition, transaction data in a cryptocurrency’s network follows a specific path that can be tracked and tracked. This makes it easier to find the source and destination of funds within a transaction.
Crypto transactions can be de-anonymized by anyone with resources and quite determined. Here are two ways this could happen:
- If an address can be linked to a user’s true identity in some way, for example, if you use a centralized exchange. Such an exchange will work with the authorities to provide details of which accounts have sent funds to which addresses.
- Since blockchain transactions are public and transparent, anyone can capitalize on this and identify a user through clustering.
In fact, the pseudonym crypto is why there are very successful blockchain surveillance companies like Chainalisis. The U.S. government has often contracted the company to track crypto crime.
Final Thoughts: Everyone Has to Start Somewhere
At first, cryptography can be puzzling, and that’s okay, since 15 years ago, no one had ever heard of “cryptocurrency” or “blockchain.” It’s a new concept of money that’s revolutionary, and that’s why they caught on.
Hopefully, this guide has debunked some myths about cryptocurrencies.
