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Cryptocurrency FAQs

1. Are cryptocurrencies bad for the environment?

   A recurring criticism of Bitcoin and many other mining-based cryptocurrencies is that they consume vast sums of energy thereby damaging the environment.

   It’s true that running these networks does require energy. However, what’s often misreported is the fact that a vast majority of the energy used to power these mining-based cryptocurrencies comes from renewable sources. 

   Additionally, only a very small handful of cryptocurrency projects continue to use the energy-intensive proof-of-work (PoW) mechanism to power their networks. Many, including the second-largest cryptocurrency project, Ethereum, use the far more energy-efficient proof-of-stake (PoS) mechanism instead.

   Check out our article Busting crypto myths: Bitcoin is destroying the environment for more information.

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2. Are cryptocurrencies a viable replacement for fiat currencies?

   The idea that cryptocurrencies are an inadequate replacement for fiat currencies can be easily refuted by considering several key factors.

   Firstly, cryptocurrency transactions often incur lower fees compared to traditional financial systems, particularly for international transfers. This cost-efficiency can be an attractive feature for various users.

   Cryptocurrencies also hold the promise of financial inclusion. They can bring financial services to underserved and unbanked populations, effectively bridging gaps in access to traditional banking infrastructure and promoting greater financial inclusivity.

   The security and transparency of blockchain technology, which underpins cryptocurrencies, ensure that transactions are tamper-proof and easily verifiable. This feature reduces the risk of fraud and fosters a higher level of trust than is typically associated with traditional financial systems.

   Cryptocurrencies are also borderless and diminish the need for cumbersome currency conversion processes. Moreover, certain cryptocurrencies, such as Bitcoin, feature a capped supply, making them immune to inflationary pressures driven by central banks. This characteristic can make them a valuable store of value, especially in times of economic uncertainty.

   Check out our article Can Bitcoin be used for cross-border payments? for more information.

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3. Is it illegal to use cryptocurrencies?

   While some countries have partially and completely outlawed cryptocurrencies, a large number of jurisdictions now accept cryptocurrencies in varying capacities.

   The G20 intergovernmental forum is in the process of developing a new cryptocurrency regulatory framework to improve the oversight and supervision of cryptocurrency transactions. This group represents twenty of the world’s largest economies, and illustrates the growing level of crypto acceptance among major jurisdictions.

   Like many things, however, the crypto regulatory landscape can be subject to change.

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4. Are cryptocurrencies a scam?

   Like any new innovation that attracts significant sums of investment, cryptocurrency has seen its fair share of scams. These include phishing scams, Ponzi schemes, and other types of fraudulent activities designed to part people with their crypto assets.

   Many of these scamming techniques existed long before the arrival of cryptocurrency, and are far from exclusive to the industry.

   The generalization that all cryptocurrencies are scams is simply not accurate. Many cryptocurrency projects exist that perform innovative functions that benefit users in meaningful ways. Unfortunately,the fact that a small minority of criminals have used cryptocurrency to carry out their crimes has led others to dismiss the revolutionary technology as a scam.

   Check out our article How to keep your crypto safe for more information.

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5. What do I need to start using cryptocurrency?

   For the most part, the only thing you need to begin buying, selling, and trading cryptocurrency is a smart device (smart phone, tablet, laptop, etc), an internet connection, and government-issued currency.

   With these, you can create an account, fund it with your local currency, and begin your crypto journey!

   Check out our article How to buy Bitcoin for the step by step process of how to get started with the world's largest cryptocurrency.

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