Debunking Myths: From Scams to Revolutionary Technology

Cryptocurrency has sparked intense debate, with some labelling it a scam, and others saying it’s ‘just a fad’. While concerns of fraud and speculation persist, it’s important to look at the underlying technology and its potential. We address common misconceptions and uncover how blockchain and crypto are revolutionising how we handle transactions in the modern age.

1. Crypto is a scam.

““I’ve got friends who have lost thousands of dollars to crypto. It’s all a scam.”

In 2009, an individual (or group of individuals as no one is certain) called Satoshi Natakmoto solved one of the most puzzling problems faced by man, the Byzantine General’s Problem. Why should this matter, and why is the technological breakthrough so important to mankind? Let’s get a quick understanding of the Byzantine General’s Problem. In essence,

“The Byzantine Generals’ problem is a game theory problem that describes how difficult it is for dispersed parties to reach a consensus without the help of a trusted central party.”

The technology solved the need for a middleman. Why is that important and why should you care? Because middlemen come at a significant cost… and that cost is passed onto you, the consumer. The cost could be in dollar terms, wasted time, error rates or trust between persons, entities, businesses or governments. Trust as we all know can be fragile at best, and as such, middlemen have had a captured market charging fees and profiting from the friction… until now!

Satoshi created the Bitcoin Network and the native cryptocurrency Bitcoin (BTC). The cryptocurrency bitcoin (BTC) powers and secures the network through mining effort and energy. This effort helps verify transactions, achieving consensus or truth, whilst rewarding the decentralized mining participants with bitcoin (BTC).

The technology continues to evolve. Other blockchains are emerging with their own consensus mechanisms to verify the truth. More and more middlemen are being made obsolete. Communicating contracts, payments or settlement finality without having to trust each other is not a scam. It’s happening; just like the motor car replaced the horse and cart, this technology is not backward-looking. It promises a new era of cost savings, reallocated capital investment, transparency, security, speed and scalability.

Being called a “Scam” would infer that it is baseless, without merit or potential adaption, a fraudulent or deceptive act or operation”. This is most certainly not the case according to data and research coming from some of the largest companies and institutional players in the world.

A term you may hear is Web 3.0. So what is Web 3.0? According to AVAST

“Web 3.0, also known as Web3, is the third generation of the World Wide Web. Web 3.0 is meant to be decentralized, open to everyone (with a bottom-up design), and built on blockchain technologies…”

A whole new era of blockchain-enabled internet functionality is looming. Statistics clearly show a shortfall of these coding and web developers to meet the needs of companies trying to enter the space with new and innovative applications and business solutions. If crypto is a scam, then a massive amount of institutional and intellectual capital is completely wrong… The numbers are stacking up that blockchain and cryptocurrencies have a bright future.

“In the first half of 2024, venture capitalist (VC) investments in crypto doubled compared to the previous year, reaching the record figure of 5.8 billion dollars… As anticipated, 2024 marked a significant recovery for investments in cryptocurrencies. Bitcoin, the largest and most expensive cryptocurrency in the world, saw its value increase by 47% in the first half of the year.”

2. Crypto is a Ponzi Scheme. All I see are pump and dumps.

“I’ve tried schemes before. This crypto thing is just about getting others in to buy coins for a higher and higher price. It’s a Ponzi scheme and will fail. I hear horror stories of people putting money into crypto because a coin is pumping in price and then the value drops like a rock and they lose everything.”

Pump and dump schemes are an unfortunate part of any evolving asset class. This is nothing new and has been part of any new human technological advancement. What needs to be considered here is a lack of research into the project before investing any of your hard-earned money.

Never rush into an investment. Take your time to delve deeper into the project, its founders, confirmed partnerships, the time it has been in the market and the problem it intends to solve. Does it have a proven track record or is it just a marketing hype prospect to extract value from unsuspecting investors?

Again, this is nothing new and is not isolated to being a cryptocurrency/ blockchain “thing”. It’s a human get-rich-quick mentality that is being preyed upon. Like a historical meme coin, in the 1700’s there was tulip mania.

If you are considering a cryptocurrency investment strategy, look to the “blue chip” cryptos that have proven themselves from the start and maintain deep liquidity and actual adaption. Chasing the next hot thing could leave you with burnt fingers.

3. Is anyone really using it?

“No one’s using crypto. What’s the point of it? It’s just all magical internet money and has no real value. No one I know is using it to pay for stuff.”

The assumption here is that value exists only in the form of tangible assets like a car, a house or an ounce of gold. While this is true, there is also value in intangible assets like intellectual property, code and network value. Just because you can’t “see it” or “Hold it” doesn’t mean it’s without value.

For example, let’s propose a scenario where a set of twins had an idea for a social platform where anyone could share ideas, communicate and create content. Let’s further propose that a friend took that idea and created the platform but there was only a handful of people using it because he wasn’t very popular. If participation had stopped there, the network wouldn’t have been very valuable. History shows it scaled to the billions of users, and significant value was created.

It’s called “Metcalfe's Law, which states that the financial value or influence of a telecommunications network is proportional to the square of the number of connected users of the system (n2).”

So are people or networks of people using blockchain and crypto. The answer is yes. Large institutions and businesses have been testing, doing proof of concepts and adapting. Within Australia, simple research will show our large four (4) banks testing as far back as 2015.

A few years ago, a Brazilian cross-border payment provider adapted blockchain technology using a cryptocurrency coin. Because they didn’t need to go through the usual legacy banking/ correspondent banking system rattled with middlemen banks and fees, they were able to drop their usual fees from $20 to $2 and they saw a 700% increase in volume of transfers overnight. Brazilians saved money which translated to more food on the table, and the payment provider made more net profit because the cost of sending the value via blockchain and cryptocurrency was less than a cent!

The thing is, with most technology, retail customers will never know they’re using it. All they will see are the benefits.  Do you know what interoperable protocol powers your email? Do you care that Gmail can send to Hotmail? All you care about is that you can send an email to any address. The same will go with blockchain technology. It will sit in the back end providing seamless, faster, cheaper experiences. To invest in that protocol layer is the opportunity presented to all of us.

4. I just don’t get crypto. It’s too late. I’ve missed the boat.

“I’ve never been any good at tech stuff. It all goes over my head. I don’t have the time to learn something new. It’s for the younger generation anyway. Bitcoin is already tens of thousands of dollars. I can’t afford to buy Bitcoin! All the money has already been made by those that got in 10-15 years ago!”

When we first start learning new concepts or skills, the first steps are often the hardest. We’re prone to stay in our lane because it’s easier. Whether you are young or older in life, to make a change takes courage to be wrong many times. But with commitment, concerted effort, curiosity and a developing passion, a new knowledge base can be built.

It doesn’t matter if the technology “goes over your head” initially. It does with everyone new to blockchain. You are not alone. The “How” can come later. It’s probably best to focus on the who, what, when, where and why of a project.

But why would you bother looking into cryptocurrency and blockchain as an investment opportunity and why might be worth your while to start your research journey?

This asset class is the first new asset class to be created since 1694 when England created the Bond Market to help rebuild their fleet after defeat at the hands of the French. New asset classes don’t come along every day! Blockchain technology and the cryptocurrencies that power them have only been in existence since Bitcoin in 2009. That’s just 15 years! Compare that to the last asset class created and it’s just a baby, but a baby with huge growth potential.

Blockchain is solving real-world problems. The value proposition, adaption rates and expansion potential are real. Some of the largest institutional players in the world like Blackrock and Fidelity have done their due diligence and research papers. They understand the impact this technology will have on the world and the investment opportunities it presents.

Not long ago, they were uninterested; protectionists of their profit models and friction-ridden, middleman systems. Some were even so outspoken as to call bitcoin “rat poison” … oh how the tides have changed! Now they scramble for EFT product approvals and go on mainstream media saying, “We’ve had a closer look and understand it now. We didn’t before, but now we are excited.”

It's never too late, we are still so early. Maybe it’s time to dive deeper with your own research, take an uncomfortable leap and trigger your excitement for your vision of your future self.

To help get you started on the research journey, we put together a starter guide to help assist those new to the space.