Ever since the inception of Bitcoin, there have been several misconceptions related to this popular cryptocurrency. Seven years later, and quite a few of these misconceptions are still present today. There are some very basic things that very few people seem to know about Bitcoin, even though they are all vital pieces of information.
A significant number of Bitcoin novices purchase cryptocurrency and store the funds in an online or exchange wallet. While this is rather convenient, it also means that the end user will not have full control over his money. In the Bitcoin world, funds should only be stored in a wallet address to which the user has the private key, which he does not share with anyone else.
Although most online wallet services allow users to export the private key to a different wallet solution, that is not the case for exchange wallets. Funds should only be kept in these third-party wallets for instant conversion purposes. Otherwise, users put their funds at risk of being stolen or getting lost if the company were to shut down unexpectedly.
When talking about Bitcoin and taxation, there is always a mental hurdle to overcome. Bitcoin is not issued or controlled by banks and governments, hence no one can define if taxes should be paid or not. That reasoning only goes so far, though, as various countries effectively tax Bitcoin transactions. A full list of countries can be found on Wikipedia.
To the uneducated eye, Bitcoin may seem like the most anonymous form of sending and receiving digital money. That is not entirely true, though, as Bitcoin has often been criticized for its lack of privacy and anonymity features. But the cryptocurrency is pseudonymous, allowing users to mask their identity by using wallet addresses instead.
Just because a Bitcoin transfer does not include someone’s name or address does not make it anonymous. All transactions are publicly visible on blockchain in real-time. No one needs special software or access to view these details either. In that regard, Bitcoin may be one of the most transparent forms of money the world has ever seen.
Although this should be public knowledge by now, Bitcoin is not the wheel reinvented when it comes to the concept of cryptocurrencies. Hashcash is by far the most popular form of cryptocurrency in the pre-Bitcoin era. Additionally, one should not discount B-Mone either. There is also DigiCash. All of these types of digital currency rely on some level of centralization, though. Bitcoin is the first major decentralized and trustless cryptocurrency to grace this planet.
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