How People Often Misrepresent Bitcoin, So Often Misguided About Bitcoin
Misguided about Bitcoin. Here is a collection of false perceptions that have developed in society related to understanding of Bitcoin. It is basically reading culture is still quite minimal in Indonesia, plus, because it is not easy to explain Bitcoin.
Meanwhile, existing reference sources, more in foreign languages. So complete is so many things that inhibit the understanding of Bitcoin in Indonesia. This misunderstanding is taken globally, not just in Indonesia alone. Here’s how misconceptions about Bitcoin often arise:
- Bitcoin like other digital currencies, there is a central owner behind him. So the owner can take full control, both the creation of his new currency, affect the price in the market, and can determine the policies subjectively to the user.
Bitcoin is different from the digital currency that had existed before since Bitcoin is fully decentralized. So there is no centrality in Bitcoin, there is no person in charge as the US against the Dolarnya, or RI against the Rupiah.
Bitcoin does not print like Fiat currency by the central bank. Bitcoin is produced by volunteers who maintain the Bitcoin network ecosystem through a process called the “mining / mining” term. While in the mining process, is actually a process of verifying the overall transaction Bitcoin.
And from that process, volunteers (miners) have also maintained the overall integrity of Bitcoin transaction data and information. The entire data, stored in a database called (Blockchain). The volunteers who have contributed in maintaining the integerity of the data and the overall information of the transaction, are rewarded with a number of Bitcoin, and those criteria have been established within the Bitcoin system protocol.
Because Blockchain continues to be maintained by its integrity by volunteers, the validity and security of the Bitcoin system becomes difficult to penetrate. And almost impossible, especially Bitcoin uses peer-to-peer network, and there is no centralized system, and there is no dedicated central server in it.
Because it does not use this central server that makes the security of transactions to be layered. Unlike centralized servers, which are easily penetrated on the server, if the server is broken, then the entire system will also stop.
Bitcoin has no centralization , of course any personal, institutional, or agency that functions as a controlling center in full. Creation of new Bitcoin units can be done by anyone, open to everyone. And that is precisely what will keep the integrity of the Bitcoin system running.
Bitcoin price , is not determined by any party, because Bitcoin is decentralized. Bitcoin value attachment, first emerged as a reward for the power a person has spent while he is running Bitcoin. At that time, on October 5, 2009, New Liberty Standard published Bitcoin rate with a value of 1 USD = 1,309.03 Bitcoin (BTC). The value is based on the amount of electricity required to produce or create a new Bitcoin. And the rise and fall of bitcoin prices is entirely in the market. Market participants themselves who determine the price of Bitcoin up or down.
Bitcoin is not like gold:
- Bitcoin is easy to transact, either transferring or receiving
- Bitcoin is safer, and easy to secure
- Easily verify transactions
- More practical
Bitcoin not Like Fiat money (paper money):
- The amount of Bitcoin is limited and predictable. The total amount of Bitcoin is 21 million, and the amount will be reached in 2140. Unlike paper money, it can be printed anytime you want without any limitations. This is what makes paper currency always fall in value because its creation continues to be pumped from time to time. And it’s falling in value as more and more bubbles of new money have been printed.
- Bitcoin no centralized authority (such as US -> Dollar, RI -> Rupiah)
- Not based on the debt system, as in Fiat
Bitcoin is different from other digital currencies before because:
- Bitcoin can potentially be anonymous (does not require any identity)
- The history of the transaction is stored neatly and can be explored openly by anyone.
- Fast transfers
- The cost is cheaper.
- Bitcoin in the backing of the power required for the creation process of New Bitccoin.
It is not true that Bitcoin is “backed” by the processing power to run the system. The term “Backing” is incorrect. A currency in the “backing”, then it means the currency is pegged and determined by a certain party with something else. Power energy is needed for the process of making new Bitcoin. But the energy power can not be exchanged with Bitcoin.
Bitcoin is not in “backing” by anything. Because Bitcoin is capable and potentially a currency from within itself. And this is the same as in Gold. Because Gold is also not in “Backing” by anyone and on anything. Bitcoin is also so, just like gold.
- Bitcoin is actually not worth it at all because it is not in “Backing” by anything “
In this case, other people can also argue that Gold is also not in “backing” by anything.Bitcoin has a congenital nature brought about by its system. And these Bitcoin user individuals reward subjective values when looking at Bitcoin. Ultimately, Bitcoin can also be a transferor of value, and it can also be exchanged because these individuals have rated Bitcoin.
- The value of Bitcoin is based on the magnitude of the cost of electricity, and the computing power of the mining process.
This statement is incorrect. The statement tries to bring Bitcoin closer to the Labor Theory Value (Karl Marx) . Because not necessarily also suppose something that requires power of “N” then the resulting product will be worth “N”. Because it could be, the product that has been produced the value may be larger, or even smaller. And of course, it will depend on where the utility of the product is for its users. And finally this individual user who later gives an assessment of the product.
In fact, the theory is actually undeniable when looking at the reality of the process and the workings of the Bitcoin system. Bitcoin’s mining costs are based on how well the Bitcoin mining is done. Inside bitcoin:
- If the price of Bitcoin rises -> many people will mine.
- If many miners -> the level of difficulty mining will rise.
- If the difficulty level rises -> mining costs will also rise
The explanation : If bitcoin prices go up, then many people will be quite interested in mining. Of course, because they think this is quite profitable for them. And because of the large number of people who are mining, the potential for solving puzzles in mining can be done faster. The puzzle solving opportunities can be solved more, and may be faster than the 10 minute average time.
Because the average completion can be faster than 10 minutes, eventually the level of difficulty will also increase. As the difficulty level rises, the costs required to mine will also increase. The electricity used increases, the connection costs increase, and the possibility of miners will increase or upgrade the device in order to adjust the difficulty level. And the reverse if it turns out bitcoin prices down.
- If the price of Bitcoin decreases -> miners become reduced
- If the miners are reduced -> the odds of difficulty level will decrease also increase. And the new bitcoin opportunities to be generated will also be reduced.
- If the difficulty level drops -> then the cost required to mine is also reduced.
- If the new Bitcoin supply is reduced -> boost Bitcoin’s price to rise because of the lack of Bitcoin in the market.
So from that, it will be a balance. The effect, causing the cost of the mining process to be more proportional, in proportion to the amount of Bitcoin that can be produced, but not at Bitcoinnya price.
- Bitcoin has no intrinsic value, unlike the others
This is certainly not true. With Bitcoin, users can have the capability to handle large transactions even through a global transaction message. And it is distrib- uted by assigning a “timestamped” that will record the data permanently in the bitcoin database (called Blockchain).
Of course this becomes quite different than others, because this can be done by Bitcoin can even be distributed widely, and anywhere. There is an exchange that can indicate the number of messages that can be attached. But in December 2013 and then, 1 Bitcoin has been able to attach 1000 messages, and each message can be sent within approximately 10 minutes.
A message that, can be said to have value, because in Bitcoin, can confirm the proof of ownership of the message or document it. In Bitcoin, this can be realized by using the same hash function used in a transaction. If we assume this in an electronic notarization service that is widely applicable in a foreign country, for example, the cost would be approximately $ 10 per document. And if this is applied equally in Bitcoin, then certainly 1 Bitcoin, will have an intrinsic value of 10,000 Dollars per 1 Bitcoin.
In some other commodities that have intrinsic value, generally the intrinsic value is less than the value traded in the market. For example gold, if gold is not used as a store of inflation-proof value and is only used for industrial processes alone, it certainly will not become what it is today. Why so, because the industrial need to produce gold is much smaller and less than the amount of available gold supply .
Historically, this intrinsic value is the same as giving attributes such as divisibility, fungibility (neutrality of money), scarcity, endurance, or being able to make certain commodities to serve as a medium of exchange. Of course this is not a major prerequisite.
The notion that Bitcoin has no intrinsic, would be more contradictory, since it would further indicate that Bitcoin’s intrinsic value is actually greater than any other commodity. Because it turns out it can be a good quality to use as a medium of exchange. This can be said to be comparable, or even better than the money itself.
Well, let’s now look at the value of Bitcoin from its network globally, and not partially. Let’s compare it with the value of a connected phone also in a network. A phone without a network, then of course the phone becomes useless. Similarly, the value of each Bitcoin, if without any global network such as merchant, Bitcoin exchange (exchange) , wallet and others. In this case, the call requires a network to transmit information. Likewise with a Bitcoin unit, it is necessary to transmit information containing the economic value through that network.
So basically, a value is ultimately determined by people who are willing to transact or trade it. And that is determined by supply and demand.
- Bitcoin is illegal because it is not a legal tender (legitimate currency)
In America, precisely in March 2013, the Financial Crime Enforcement Network has issued new guidelines on ” de-centralized virtual currency “. And obviously the guidelines of this new rule refer to Bitcoin. In it is mentioned, “The user of virtual currency is not Money Services Businesses (MSB) under the FinCEN regulations, therefore it is not an object of MSB to register, report and record and comply with existing regulations.” miners, while doing Bitcoin mining, they use it personally for themselves. So it is not required to enroll in MSB or as a Money Transmitter .
In general, there are a number of currencies, but not officially backed by the government. A currency, basically nothing more than an account unit that is convenient for use by its users. Meanwhile, the legal regulations in a country may vary. In general, any commodity trade including such as Bitcoin digital currency, BerkShares, currency in games like WoW gold, Linden dollars, is not illegal.
- In America Bitcoin many assume that Bitcoin become a form of terrorism, because it will endanger economic stability
Terrorism by definition in the US, it is necessary to commit acts of violence to be said to be a terrorist and has violated the law. These statements which are mostly made by these politicians have no facts and are unfounded.
- Bitcoin only multiplies people to avoid taxes
Actually, cash transactions also have the same level of anonymity, but can still be in tax collection. So this actually depends on how the rule of law prevails in each country. And later on, each user will decide to follow the laws in force in that country or not. Of course, there will be consequences if it does not comply with applicable law.
Transactions in Bitcoin are indeed possible to be anonymous, and this is the same as any other currency transaction that can be transacted anonymously. Tax evaders can be caught because their lifestyle does not match their reported assets and income. So not because the government is able to follow the circulation of money.
- Early Bitcoin adopters are more benefited, so there is unfair treatment
Early adopters, of course, also took a higher risk, with time devoted, as well as with the money it had to adopt Bitcoin. This perception is the same as an investor in a company, or a person who buys a company’s stock of IPO. And it could be that the early Bitcoin adopters used it more as a store of value, rather than using it as a value transfer.
- A total of 21 Million is not enough
To note is, 1 Bitcoin (BTC) consists of eight digits. So actually Total Amount:
21 Million BTC = 2,099,999,997,690,000
More than 2 quadrilion (thousands of trillions). In 1 BTC = 100,000,000 Satoshi (small unit of Bitcoin). Because the value of 1 BTC is too large, so the transaction can also be done with the smallest units, such as mili bitcoin (mBTC), or micro bitcoin (uBTC).
- Bitcoin is a Ponzi Scheme
It is said ponzi, if the founders persuade the investors with the lure of getting doubled profits to join. Bitcoin there is no such thing or guarantee. Bitcoin has no central authority, no central entity.
In the ponzi scheme is zero sum game , the total profit and loss of all participants is zero.Profits obtained by a participant, obtained from the loss of other participants. And the loss of a participant, becomes a benefit for the other participants. So in a ponzi scheme, early adopters will only always benefit at the expense of the final adopters. And the final adopters will always only get a loss.
In Bitcoin, between the early and the last adopters, can have an equally favorable opportunity, if there is an increase in the price of Bitcoin. Likewise, if bitcoin prices fall, either early adopters or ends, the same chance also gets a loss. Primarily with Bitcoin for being decentralized, all adopters can benefit and use them. Both as a transferor of value, as well as a store of value. In fact, this is acceptable to the public at large.
Satoshi nakamoto was also the creator of Bitcoin, positioning himself at the same level. In his system, he is not the goalkeeper in his system. Even some of his Bitcoin was not used until now. You can check your own Bitcoin Satoshi has never moved to this day.
- Bitcoin is a pyramid scheme
On the contrary, Bitcoin opposes the pyramid scheme mathematically. Bitcoin is made algorithmically, and quite rare. There is no benefit exponentially to hook new users.Qualitatively, there will be benefits if the amount of demand is rising, but it is not exponential at all (grows multiplied mathematically) .
- Because Bitcoin is stored in the wallet, then with a copy of wallet file can get more Bitcoin.
This is certainly not true. Because in the wallet there is a private key. With this private key function, then someone has control over the ownership of Bitcoin. And all outgoing transactions, can not be done without accessing private key which is only known by the original owner.
- Bitcoin lost can not be replaced, not good for the currency
Basically, bitcoin is divided into the smallest unit of 0.00000001. If it turns out that some of the missing coins are mostly due to user negligence to his private key, then that would not be a problem in Bitcoin. And it’s not a problem and bitcoin as currency. Because because with the loss of the coin, it will push the other coins nillai to rise.
- If Bitcoin turns out to be lost, why is there no mechanism to replace the lost coin?
It’s hard enough to tell which coin is really missing, or that the coin has moved on someone else’s wallet. Quite difficult to distinguish it. The meaning of the coin turned out to have moved on another wallet, is due to negligence of the owner so that a number of bitcoin that can be taken by others.
- The limited amount of Bitoin in the presence of lost coins potentially becomes a deflationary spiral.
Spiral deflation can occur due to slowing economic activity. If this is seen as one of the potential strengths of deflation it may be true. Economic factors such as hoarding due to human factors, may also reduce the likelihood of this deflationary spiral.
- Bitcoin can not control and control inflation
Inflation can be seen from the increase in the prices of goods over time as the impact of currency decline. And this is a function of supply and demand . The fact is that the total amount of bitcoin is limited, much different from Fiat money. So with the total amount of Bitcoin supply will be able to handle inflation. But Bitcoin as the currency of decentralization, will be destroyed also if demand decreases or even hardly exists.
The most decisive and important here is that Bitcoin can not be inflated by any person or agency or institution, neither the government nor. Because there is no way that can be used to increase the amount of supply.
- The bitcoin community consists of many anarchists or there is a conspiracy theory
Most individuals in Bitcoin are quite diverse in their ideological stance. Since Bitcoin is popular nowadays, most see it because it can reduce the cost of e-commerce globally.
- A person with computing power that dominates more than half the total number can take over the network
True, and this is a weakness of Bitcoin. But with the development of the network, it becomes quite more difficult to be able to do that. Although using the super fastest computer as the whole world is done together though.
The chance of an attacker is quite limited. Neither against the desire to make some fake Bitcoin, fake transactions, or also take Bitcoin others. These things will cost a lot more expensive, the attacker needs a large resource in order to master the network. On the contrary, someone will benefit by getting the incentives that can be obtained in Bitcoin mining.
In addition, if there are such efforts, it will only last for a moment, once the attack finally fails and stops, then the network returns to normal operation again.
- Bitcoin can be hacked
So far there has never been an attack on blockchain that could lead to the theft of a certain amount of Bitcoin by changing the transaction confirmation output. No one has reported a vulnerability in Bitcoin core software, nor is the protocol vulnerability used by Bitcoin.
That’s because Bitcoin can guarantee it by using standard cryptographic functions. These cryptographic functions have also been reviewed by many cryptographers. And considered almost impossible to penetrate in the future.
For example, Bitcoin uses SHA256 and ECDSA which are known as standard algorithms.SHA256 is also used by the American government and is a FIPS180-3 standard (Secure Hash Standard). If you doubt such an algorithm, you should also not trust Bitcoin, credit card transactions, or other electronic transactions.
In fact, that Bitcoin as a function of currency has never been “hacked”. If indeed there are some big sites that use this currency and successfully hacked, then it does not mean that Bitcoin has been proven to be in Hacked. Basically, most of the events of these sites are wallet websites whose security side is inadequate. And they are outside the context of the Bitcoin system as intermediaries .
When there is a lot of theft in a number of wallets in 2011 to 2012, a number of wallet developers have also improved its security features. Such as encrypting wallet, more support with the use of digital signature, there is offline wallet development to get layered security, there is also paper wallet, and even there is also wallet hardware. Since then, the number of thefts has decreased.
- Quantum Computers will break Bitcoin security
While ECDSA would indeed be unsafe if dealing with a quantum computer. And now this type of computer is still not there. Even some future time may still not exist. While DWAVE is often written in the media, though that is true, it is not a quantum computer type that can be used for cryptography.
Bitcoin can be more secure and security will increase if on each transaction using a different address. But the security of Bitcoin has also been designed in such a way, so that the future can be further improved, especially if there is such a thing that proves to be a threat.
Meanwhile, the risk of this quantum computer if it has emerged, not only has implications for Bitcoin. Precisely in a number of financial institutions such as the Bank, it is more vulnerable and easiest to be targeted firing.
- Bitcoin can not be said to be decentralized because developers can freely detect it through Bitcoin Software
Although the original Bitcoin software client developers and can exert their influence in the Bitcoin community, their power to arbitrarily and modify the protocol is very limited.
By the time Bitcoin version 0.3 was released, there had been protocol changes being more minor. So that will always be in accordance with the consensus of society. To modify the protocol, say say intend to increase the block reward from 25 BTC to 50 BTC, then it will not be compatible with the release of software that has been running and used in the network.
Meanwhile, if there are developers who release new software while the majority of miners in the network using different software, then eventually it will be considered corrupt, invalid, violate the provisions. His efforts will ultimately fail because transactions made with the new software version are rejected by the network.
There is also a Bitcoin software version that adheres to the original Bitcoin protocol. As more and more developers make alternatives, the amount of dishonest power is also ultimately less than the original bitcoin software.