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Bitcoin FAQs

1. Is Bitcoin anonymous?

   It’s a common misconception that Bitcoin transactions are completely anonymous and untraceable. In reality, Bitcoin transactions are only partially anonymous, or “pseudonymous,” at best.

    

   When sending bitcoin payments, a person’s public wallet address is visible to the entire public network. While this string of alphanumeric characters does not contain any identifying information, modern-day forensic blockchain techniques can link wallet addresses to individuals. This means that once your identity is connected to a certain blockchain address, all of the transactions associated with that address are publicly available for anyone to see. 

    

   Check out our Learn Center article on How Do Cryptocurrencies Use Cryptography? for more information.

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2. Is Bitcoin a pyramid or Ponzi scheme?

   Over the years, many critics have likened Bitcoin to a pyramid or Ponzi scheme. These fraudulent operations rely on new money entering the market to provide returns to existing participants. 

    

   Bitcoin is a computer program and it does not guarantee holders any returns. Instead, it simply operates as a fully decentralized, freely-traded digital currency. Its value is driven by factors like supply and demand, adoption, and market sentiment — the same principles that determine the value of most asset classes including real estate, gold and even baseball cards. 

    

   Unlike a fraudulent scheme, if people stopped buying into Bitcoin, the protocol itself would continue to operate. 

    

   While there have been instances of scammers using Bitcoin to carry out their frauds, Bitcoin itself is not a pyramid scheme.

    

   Check out our article Busting Crypto Myths: Bitcoin is a Ponzi Scheme for more information.

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3. Does Bitcoin have any intrinsic value?

   It's often said that Bitcoin has no intrinsic value. However, this is simply not true.

    

   Bitcoin's value is largely derived from three factors — its utility, scarcity, and security. Bitcoin’s finite supply and borderless nature has made it an attractive digital store of value and medium of exchange for many.

    

   Check out our article Busting Crypto Myths: Bitcoin is Not Backed By Anything for more information.

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4. Isn’t Bitcoin only used for illegal activities?

   A prevalent myth among crypto critics is that Bitcoin is primarily used for illegal activities due to its pseudonymous nature. While it certainly has been used in some illicit transactions in the past, the overwhelming majority of Bitcoin usage is for legitimate purposes, including online purchases, remittance payments, and as a store of value.

    

   In fact, a 2023 report found that only 0.24% of all cryptocurrency transactions, including Bitcoin, were linked to criminal activities.

    

   Moreover, law enforcement agencies have developed sophisticated tools to track and trace illegal activities involving cryptocurrencies. This advancement has since made cryptocurrency a significantly less effective way to conduct illegal activities than government issued cash.

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5. Is Bitcoin too volatile for it to be a store of value?

   Some critics argue that Bitcoin's price volatility makes it unsuitable as a store of value. However, Bitcoin's volatility has decreased over time as the market continues to mature. Therefore, it's important to distinguish between short-term price fluctuations and long-term value. 

    

   When compared to other asset classes, including gold, Bitcoin often outperforms other markets in terms of annualized returns. While it is easy to criticize the short term price changes of Bitcoin, many choose to take a far more long term view on the future potential of their bitcoin purchases.

    

   Check out our article Store of value: What does it mean? for more information.

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6. Can Bitcoin be easily hacked and manipulated?

   It's often claimed that Bitcoin can be hacked or manipulated easily. In reality, Bitcoin's blockchain is highly secure due to its decentralized and cryptographic nature.

    

   While individual wallets or exchanges may be vulnerable, the underlying Bitcoin protocol has remained operational and highly secure in the face of many hacking attempts. In practice, hacking or manipulating the entire Bitcoin network would require an almost unimaginable amount of computational power and resources.

    

   Check out our article What is Bitcoin mining? for more information.

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7. Is Bitcoin a bubble that will burst?

   Some believe that Bitcoin's meteoric rise in value is indicative of a speculative bubble. 

    

   While Bitcoin' price has experienced significant fluctuations, it has also shown resilience and continued growth over the years. Its adoption by institutional investors as well as its relevance as a global store of value suggests that it may have staying power beyond short-term market dynamics.

    

   Predicting the future of Bitcoin's price remains highly uncertain, but the protocol continues to operate without fail as intended. 

    

   Check out our article What is a Bitcoin halving? for more information

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