Cryptocurrency Mistakes To Avoid In Dubai
First and foremost, Cryptocurrencies (CCs) need to be understood as a new kind of money. If we make the mistake of thinking they are stocks or other forms of securities, we will miss out on much of what makes them exciting and potentially valuable.
For instance, Bitcoin is an incredibly volatile asset with wild swings in price associated with considerable risk. On the other hand, volatility may be part of its economic function. You must understand it as a currency – especially if you want to use Bitcoin as an actual currency rather than an asset looking for appreciation.
Similarly, recent research suggests that by not treating CCs as currencies and treating them instead as assets subject to capital gains tax, we might be losing billions of dollars.
Therefore, it is worth bearing in mind that for many people, especially those who are new to the industry, common mistakes are being made concerning how both users and regulators are approaching CCs.
Believing Cryptocurrencies Are “Money”
This mistake may seem obvious – but it is often repeated by media outlets looking only at the price of Bitcoin or other cryptocurrencies without considering what they represent.
At best, considering CCs first and foremost as speculative assets limits their potential appeal; at worst, it could be misleading to those adopting them as a form of money.
In particular, this mistake becomes even more pertinent when talking about the impact CCs could have on financial inclusion and economic development in low-income countries.
Considering that over 2 billion adults remain unbanked, it is essential not to disregard or understate how valuable cryptocurrencies can become a medium of exchange for ordinary people.
Those who would otherwise only deal with the traditional banking system borrow from relatives or private lenders at exorbitant interest rates. The general public must educate themselves on cryptocurrencies as currencies rather than assets.
In doing so, we will see how the complex nature of blockchain technology does not hinder but could help lower-income groups engage in economic activity by enabling ‘microtransactions.’
Using Cryptocurrencies As A Means Of Exchange
One obstacle to using CCs as a means of exchange is the volatility in price associated with them.
However, while this is partially due to their speculative nature, you should note that CCs are also highly volatile because their actual use – by ordinary people – is low.
Indeed, few businesses accept Bitcoin or other cryptocurrencies at present, which means that users cannot convert into local fiat currencies without incurring significant losses.
On top of this comes high fees for transactions, which make converting from one CC to another and then into national fiat currency a costly endeavour that deters the kind of small day-to-day transactions that are possible through blockchains.
Two things need to happen:
- First, people will need to use cryptocurrencies to exchange – a process could take days or months, depending on each user.
- Second, fees will need to significantly decrease for CCs to be considered an alternative form of money and a preferable one.
They should achieve this through greater competition amongst cryptocurrency platforms. In other words, those who value low transaction fees should consider supporting those cryptocurrencies that can achieve it.
“Blockchain” Rather Than “Cryptocurrencies”
One mistake often made when talking about cryptocurrencies is to talk in general terms and speak of blockchain rather than specific CCs.
Indeed, it has become common to say phrases such as: “the company is working on developing a blockchain solution”, – which can be unhelpful for those unfamiliar with the industry.
The word ‘blockchain’ has been applied to several different kinds of technology (not least Bitcoin’s blockchain).
Thus, by using it generically, we risk ignoring or understating how each type of blockchain functions and why they differ from one another depending on their purpose.
Therefore, while speaking about “blockchains” sounds inclusive, it risks being unintelligible for those unfamiliar with the industry.
It may even give rise to false expectations surrounding the utilisation of this technology, especially when considering that many types of blockchain applications cannot function without cryptocurrencies.
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