Myth-busters: Crypto edition.
A new report from Chainalysis seeks to show why your favorite crypto myths have no basis in reality.
While the report debunks over 30 myths, there are a handful that are very relevant to the current crypto environment.
Crypto and gambling are not one and the same
One of the biggest myths in the space is that crypto investments are allegedly akin to gambling. Chainalysis points out that this belief is not necessarily innocuous, and could potentially stifle innovation.
“DeFi has shown that smart contracts can enable faster, simpler forms of lending. While most of that lending today is used to acquire other crypto assets, it’s not hard to imagine a future where more conventional loans like mortgages can take place on-chain and remove friction from the present-day process,” Chainalysis wrote.
Though, there’s no denying that speculation has driven some of the growth seen across crypto markets today. However, “some” is the key word used by Chainalysis. Many investors hold their memecoins alongside more serious investments, just like serious traditional investors can buy both Apple and GameStop stocks.
In the last year, there has been growing concern within crypto markets due to events such as the depegging of TerraUSD and the collapse of FTX. These occurrences have given rise to misconceptions that blur the lines between myth and reality, with both crypto newcomers and experienced investors experiencing confusion.
The same goes for those who act like crypto is too complicated for consumers. While there are complicated parts of crypto — let’s not even dive into layer-1, layer-2 or layer-3 — “purchasing and trading crypto doesn’t require understanding the technology that supports it.”
Chainalysis likened it to consumers not understanding the SWIFT system, which allows for international bank transfers. So long as consumers use trusted sources — and are able to find said sources — then this myth is another one that needs to be checked off the list.
It’s not just for criminals
Speaking of trust, crypto isn’t only a vehicle for criminals. Chainalysis notes that over the years, blockchains have been used to aid criminal investigations and increase transparency. For instance, there are tools and ways to track wallet addresses and blockchain analytics, and crypto exchanges are required to abide by Know-Your-Customer and anti-money laundering rules.
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“Blockchain analysis tools are key to helping crypto organizations comply with these rules as they provide transaction monitoring services and tools for tracing the movement of illicit funds. Law enforcement usage of these tools has led to several successful investigations of criminals abusing cryptocurrency,” Chainalysis wrote.
This also debunks the theory that crypto is both anonymous and untraceable. Bitcoin, for example, is meant to be traceable. Crypto transactions are tied to specific wallets and, while it’s not a Venmo situation where you can see who your friends and family are sending money to, it is trivial to track and trace the actions of specific wallet addresses.
“Far from being anonymous, the blockchain has produced the most transparent, democratized financial system the world has seen yet, with all transactions recorded in a public ledger,” the Chainalysis report wrote.
Crypto also isn’t just a phase that investors will grow out of, transaction volume — despite disruptive events such as the Terra depegging and the Sam Bankman-Fried debacle and many, many bankruptcies — is still higher than it was in 2019 and 2020. Crypto has a global market cap of around $1.18 trillion.
“The raw number of transactions happening is higher than ever. In other words, crypto usage is still rising even if transaction values aren’t as high,” Chainalysis wrote.