Why Everyday People Don’t Trust Crypto and Some Answers To Placate Their Fears by@alesh

Why Everyday People Don’t Trust Crypto and Some Answers To Placate Their Fears

More than 300 million people now have crypto wallets as bitcoin and other cryptos break into the public sphere. Dogecoin, a token I'm sure you're familiar with, recorded an 8000% increase in 2021 alone. But as crypto awareness increases, everyday people are still wary about crypto adoption and the future of financial institutions. I talk about some of the issues they have with crypto and how to convince them. After all, crypto is the new frontier of economic innovation.
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Isaac Melchizedek

Designer & Freelance Content Writer. Interested in Crypto, NFTs, and the metaverse.

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Now, more than ever, crypto and bitcoin are breaking into the public sphere. On social media, celebrity-entrepreneurs like Elon Musk and rappers like Snoop Dog are some of the loudest voices you’d hear “evangelizing” crypto adoption. While this mainstreamification of crypto works, we now have more than 300 million people holding wallets and various coins. It does pose a number of challenges, one of the most obvious being how to explain crypto to non-technical users and make them trust it the same way they trust banks and other traditional financial institutions.


Like everyone else hyped about this financial revolution, I’ve had my fair share of explaining and convincing skeptics and potential users. Most recently, a close friend raised a couple of questions about cryptos and why she thinks everyday people are still unconvinced about it.


My friend is a sales and marketing expert and has read a couple of blockchain, cryptocurrencies & NFT explainers but still feels quite uneasy about the whole thing, her reason: volatility and risk.


The Case Against Bitcoin: The People vs Crypto

To conservative investors, the idea of making x22 annual return on investment (as was the case with BNB between November last year and this month) or x80 ROI from a project like Dogecoin that is often described as a joke or "a way to poke fun at some of the wild speculations in cryptocurrencies " violates everything investing stands for. A project has to be serious, innovative and promising before anyone would consider betting their money on it. But with crypto, it seems everyone is just gambling on anything and everything to make money.


More alarming is the exponential growth these crypto projects seem to garner, both in terms of market cap and price increase. Historically, the highest ROI S&P 500 had recorded in its 90 years history was a 38.46% increase in 1975, and its lowest has been a 37% right at the peak of the Great Depression of 2008. But this year alone, IoTeX, a token I'm sure you're unfamiliar with, has grown 2478% higher and by around 200% in the last month alone. Crazily, this is not an outlier. In fact, crypto market aggregators like Coin Gecko rarely publish market insights that don't have at least a coin with a 50% price increase in a day.


So, my friend's uneasiness about the crypto "craze" is understandable. In fact, according to her, in the minds of people that are totally new to blockchain tech, it all seems like a scheme to milk the poor off their hard-earned money. She also feels that OG crypto pioneers like Satoshi Nakamoto operate in a sort of boys' club whose membership is nothing short of exclusive. In her words:


“[it seems] they’re just coming together to gather our money, then at some point, is it that they’ll rug pull or everything will just crash. And those guys at the top, Satoshi and people working underground, will just take our money and japa [that is, disappear].”


Another thing people wary of Bitcoin and other cryptos talk about is that digital tokens, their platforms and the entire blockchain tech have zero regulations. If this is true then, they are justified to see these crypto pioneers as overlords of a new pyramid scheme or worse, capable of crippling the economic life of millions of people. Just like the housing crisis led to the Great Recession of 2008.


If you think that's all, you'd be wrong. Weirdly, the mysteries surrounding the identity of Satoshi Nakamoto is another reason people don’t trust crypto. The argument is simple but actually powerful. If you can’t identify the person in charge, how will they take responsibility for the mistakes or losses their invention caused? Imagine Mark Zuckerberg is also as mysterious as Satoshi, how do you think the U.S government would have reacted to the fake news, election manipulations and data privacy issues the company has caused? Totally different from a simple congressional hearing, right?


Sometimes the People are Right

Let's be honest with ourselves, there are a lot of ridiculous projects poised as crypto that are now worth millions of dollars of people's money. And for the most part, there exists no regulation whatsoever on non-technical limitations or prerequisites a project must-have. This is why a lot of Initial Coin Offerings, ICOs (crypto version of public offering) have turned out to be scams or just fundamentally ill-conceived. But when you put words like "crypto+fintech+next big thing+high yield" together, people seem to lose their rationality and allow greed to drive their investment decisions.


The issue of regulation is even more problematic because the underlying technology that powers these products,- the blockchain - is radically created to avoid central authority involvement. So, the prioritization of decentralized systems seems to cause regulation to be a tradeoff. At least, for now.


Sometimes They're Wrong

Actually, this heading is misleading because most of these "problems" people have with Bitcoin and other cryptos are because they don't understand how it works. And let me be honest with you, I really don't understand it either (otherwise I'd be building my own token instead of writing this article) but I can still share one or two things that should help put some issues to rest.


For the most part, these are non-issues. They're not as serious as people new to crypto space have been led to believe.


And they can be summarized as:

  1. Cryptocurrencies are high-risk investments because of their volatility, which makes them a bad investment
  2. What if: a crypto project crashes, the owner steals your money, rug pulls? And we lose all our money?
  3. The mystery of Satoshi Nakamoto. This whole thing is not legitimate if we don't know the person that started it, right?
  4. No regulations, for real?


The Risk of Investing

First, I agree with most people that crypto can be a high-risk investment because of its volatile nature. But there are quite a lot of cryptocurrencies that are not volatile at all. Stablecoins like tether (USDT) and BUSD are benchmarked on the US dollar and other physical currencies so they lack the ridiculous volatility traditional cryptos have.


Besides, volatility doesn't make crypto bad investments. It has exactly the opposite effect, especially with Bitcoin. The truth is, while crypto trading is extremely volatile (Bitcoin, inclusive), it is also important to note that despite their high risk, they do provide impressive returns on investment to compensate for such volatility.


Historically, Bitcoin rarely has a net loss in a three-year investment cycle. It will probably come as a surprise to you, but it does secure 1000% ROI instead for those that can HODL BTC that long. (Source: Bytwork.com)


Answering the What Ifs

What if cryptocurrencies crash like the stock market? What if founders of major projects rug pull? What if this is one perfectly executed scheme to steal billions of people by a secret group led by Satoshi Nakamoto? What if the crypto bubble burst like the dot-com crash?


It sounds weird when people ask what will happen if major crypto tokens and currencies crash because it has actually happened a couple of times before. I think they didn't notice because they don't really understand what it means for a market to crash. According to experts, it is considered a crash when the market abruptly loses a significant portion of its value within a day or two. To traditional exchanges like the Dow and S&P 500, a crash would be a 25% - 50% single-day loss of all investments. But for cryptos, it may even be more due to its high volatility.


Earlier this year, BTC's price plummeted by 11% from an all-time high of $62k within 24 hours. It ended up losing almost 50% within a two-month period before recording any significant gains. Despite this, Bitcoin adoption is still at an all-time high, with a record number of bitcoin addresses being opened by people.


If we're to take this to an extreme and ask what would happen if bitcoin or Ethereum were to record -200% of their price value in 24 hours. It sure is tough to predict this happening, but if it did happen, one thing that is sure is that with time, those net losses will once again turn to profit. Why? Because there are millions of daily economic activities that rely on the blockchain and insofar as they are legitimate and innovative alternatives to traditional systems of finance, people are bound to try them out and drive them towards profitability once again.


One piece of advice I always give beginners and experts in crypto investment is to diversify their portfolios. Inasmuch as you made good returns on your investments, it makes sense that you invest in real estate, agriculture, or securities.


What if Mr. Satoshi were to steal your money?


The thing is, neither Satoshi nor any other person can access your money on the blockchain. This is because, unlike banks and traditional financial institutions, crypto doesn’t store your money in a single place. Your coins are stored in the decentralized blocks across hundreds of thousands of devices. To speak plain English, all coins are stored in hundreds of thousands of computers that make up the blockchain. Of course, hackers have successfully carted away people’s crypto before, but those are either a result of scams, code bugs or decentralized exchanges like Bitfinex. With time, however, the blockchain will get better and more difficult to manipulate. Only if you have a majority share of the entire blockchain can you manipulate it, but why would you want to mess around with it when you have the most to lose, right?


What-If: the Question of Rug Pull


A rug pull is a type of scam in the cryptocurrency industry where developers abandon a project and run away with investors’ funds. - CoinMarketCap


You've probably heard about the Squid Game-inspired project used to scam that took millions of investors' money in one of the biggest and most recent rug-pulls in the crypto market. And you wondered if the same thing would happen to your investments or wallet. The chances are quite unlikely provided you don't invest arbitrarily. The same due diligence expected of you when investing in a startup or buying a real estate property is expected of you when investing in NFTs, tokens, DeFi, and cryptos.


These are some of the reasons you shouldn't worry about rug pull from any big (legitimate) crypto project.


Bitcoin

  1. It is open-source, which means a lot of people see it whenever there are contributions or attempts to do anything drastic with it.
  2. As said earlier, the founder of Bitcoin is not involved with the project anymore and doesn't have direct access to it.
  3. All the early adopters of crypto have already made billions and hundreds of millions out of it. Why would they spoil their place in history with a couple of extra billions?


Ethereum

  1. Its founder is already a billionaire. Why would he jeopardize that, go rogue and spend the rest of his life in jail?
  2. Like Bitcoin, Ethereum is also a decentralized system which means that one person can't have direct control over everything.
  3. Some of the founders of Ethereum have launched other projects and have proven themselves to be credible.


Other Coins and Projects

  1. Insofar as it's not a Decentralized Finance (DeFi) project like SQUID, there’s a very thin chance it’s going to turn out as a scam. Even if it is, Binance has an exhaustive guide on how to make sure you’re not putting your money in a scam.
  2. Read the project whitepaper, visit its official website, and look up the people in charge of it. If it looks like a scam, it’s most likely going to be one.
  3. Crypto projects with less than a $200m market cap & existing for less than two years should be avoided. This doesn’t mean they’re scams. If you’re a newbie to crypto, this just saves you a lot of potentially stressful situations.


No Such Thing as an Exclusive Crypto Club

What my friend called the “boy’s club” of cryptocurrency is not actually a boys’ club. Much like communities that formed around online forums in the mid-2000s. Computer scientists, cryptographers, and those interested in cyberpunk too talked in online forums like everyone else. But while the rest of us were busy playing truth or dare in those forums, they were creating some of the solutions to the biggest problems in cryptography and digital assets creation.


Even till now, most founders and enthusiasts form online communities to create awareness, engagement, and adoption of their projects pre-ICO and when it finally gets listed. Countless discord servers and Telegram channels are opened daily dedicated to this. A casual search on Twitter or Google would reveal several links for you to join these servers and channels too.


The Mystery of Satoshi Nakamoto Doesn’t Matter to Bitcoin and Crypto.

While the founder(s) of Bitcoin is/are unknown, quite a lot of the major players in the blockchain and crypto industries are known. Ethereum founders including Vitalik Buterin and Gavin Wood are well-known, and so is almost every other founder of a blockchain exchange platform, cryptocurrency, DeFi product, and DApp. Nakamoto remains the exception, not the rule when it comes to knowing the identity of those in charge of contemporary crypto space.


Since the entire crypto market cap is far more than bitcoin’s share and will only continue to be, it is unnecessary to worry about the identity of Satoshi Nakamoto. Especially since he doesn’t and can’t make drastic changes to the blockchain anymore. For any update to be made to the blockchain it has to receive “locked-in permission from the miners” and be accepted by the majority of developers and those in the community.


What you probably don't know is that, before disappearing into thin air, Nakamoto gave control of the code repository of Bitcoin to Gavin Andersen, who now leads the Bitcoin Foundation. Andersen also received the network alert key from Nakamoto, essentially meaning that while Nakamoto was the founder and inventor of Bitcoin, much of its development and management is currently being managed by Andersen and a team of contributors.


Final Judgment: Crypto is Here to Stay. You May as Well Get On It.

The whole point of crypto is to overtake global financial systems and make central money systems obsolete. Currently, the amount of paper money and traditional financial monies by the top 10 countries in the world is around $64.5T whereas the entire cryptos in circulation are just around $3T. So, paper money and traditional financial institutions still account for more than 95% of financial holders in circulation.


If anything, this means that crypto is not remotely close to its goal of becoming the primary means through which people will think about and associate with money.


Crypto is here to say, your favorite big financial establishments are already buying it: JP Morgan, MasterCard, Visa, and Square are some of the popular examples. Football teams are paying their players with it, citizens and entire countries are investing in it and adapting to the change before they get left behind in the past.


It's not going to be one smooth ride, but keep in mind, paper money will continue to lose its hold on global wealth and economic activities and cryptocurrencies will take over. You may as well get on it when it's still early.

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Isaac Melchizedek HackerNoon profile picture
by Isaac Melchizedek @alesh.Designer & Freelance Content Writer. Interested in Crypto, NFTs, and the metaverse.
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