Do you think that crypto adoption will still be a while? Aside from the complexity and technical jargon, it may simply be due to persistent misconceptions. Time to clear some of them up.
Whenever you talk about crypto, they are not far away: the myths and legends that keep misconceptions alive over time. In this list, we separate the wheat from the chaff and find out which sayings may hold a grain of truth.
Let’s kick off the list with an assertion we hear often enough when explaining our ESG ratings:
All cryptocurrencies are bad for the environment!
So much for generalization... While it is true that some cryptos, especially those that rely on proof-of-work (PoW) consensus mechanisms like Bitcoin, Dogecoin, or Monero, have been criticized for their significant environmental impact due to high energy consumption and electronic waste, it is not correct for all of them. Our ESG ratings clearly show that there are significant differences when it comes to the environmental footprint of both coins and tokens.
Graph 1: The annual power consumption of the biggest offenders
Graph 2: The power consumption per transaction of the biggest offenders
Source: Green Crypto Research | August 2023
Another relevant factor to look into is speed because it relates to power consumption per transaction. The more transactions we can perform per second, the better the energy is used.
Furthermore, we believe that sustainability is a matter of commitment, too. Therefore, we also assess verifiable commitment when evaluating the ESG rating of a coin or token. Think of (tangible) roadmaps towards going green or offsetting the current carbon footprint, for instance, by planting trees like Cardano or buying carbon credits like Polygon.
My transactions on the blockchain are perfectly anonymous!
Au contraire! The first cryptocurrency (Bitcoin) was created in 2009 in response to the financial crisis with pretty much the opposite in mind: Trustless transactions marked a core element in Bitcoin's design, aimed to enable peer-to-peer transactions without relying on intermediaries, such as banks or payment processors.
Most cryptos operate on public blockchains, where all transactions are recorded on a transparent and immutable ledger. Meaning that transactions are visible for everyone at any time because every "on-chain movement" is logged, including information on the amount, sender, recipient, and time.
Although cryptocurrency transactions are often pseudonymous and use alphanumeric addresses ("public key") instead of real names, do not let this lure you into a false sense of anonymity. Technically, it is still possible for cracks to trace your IP back to your wallet address - even if it does not provide any information about your identity.
Cryptos are for thugs who seek to cover up their illegal activities!
This is a very common misconception when it comes to crypto. And indeed, cryptocurrencies are sometimes abused for illegal activities. Just as the traditional financial system is not immune to it. So the question is not whether illegal activities are taking place, but what percentage of the total industry these activities represent.
Today, less than one percent of total crypto transactions can be linked to illegal use.
A recent article by Daniel Kuhn on Coindesk offers some interesting insights. He notes that the U.S. Department of Justice (DOJ) seems to focus primarily on comparatively minor issues such as social media scams, darknet abuse, and online fraudsters - "activity that’s rarely discussed openly, but which exists as a sort of background hum for anyone spending time on Crypto Twitter and Discord."
The reputational damage to crypto is expected to be as great as the financial consequences for those scammed. Zooming out, however, reveals that it entangles a relatively small portion of the crypto community. The 2023 Crypto Crime Trends Report by Chainanalysis states that less than 1 percent of total crypto transactions can be linked to illegal use. In fact, the main volume of crypto transactions is likely to consist of buying and selling, on-chain transfers, fiat transactions, staking, or trading NFTs.
Crypto is just a hype!
This statement tends to strike unexpectedly at family gatherings or business events, often in the form of a question (but not really) by people who carry cash with them at all times. This thesis is usually supported by the high volatility of crypto assets and the idea that all cryptocurrencies harm the planet.
Yet, coins and tokens are an application of blockchain technology and thus essentially related to DeFi and Web3. Ownership of digital assets combined with decentralization has led to numerous use cases for cryptos. Crypto has the potential to accelerate and simplify current financial services while simultaneously improving user experience by being available around the clock. Think Western Union, for one, but peer-to-peer.
Regulations will be the end of crypto!
Funnily enough, this one-liner could also hit at a family reunion, muttered by your second cousin while moderating a Reddit debate on a new conspiracy theory on his cell phone.
Do not despair, dear cousin. Yes, we still don't know in detail what the pending regulations mean for the crypto industry. However, incidents such as the FTX scandal or the crash of Terra Luna have demonstrated why they are needed. It is a fact that the volatility of crypto and the associated financial risk are considerable. It is no coincidence that the industry was and still is often compared to the Wild West. For crypto to be adopted in the mass market, there must be clear rules and guidelines for its use, taxation, and especially sustainability.
To support the latter, GCR has expanded its ESG rating criteria in line with the requirements of the Sustainable Finance Disclosure Regulation (SFDR) as well as the EU taxonomy. Read more on that here.
Crypto will make me rich overnight!
Two words: wishful thinking. Sorry to burst your bubble but let's get real, folks: There are thousands of different cryptocurrencies, and new projects emerge every day. You might as well win the lottery.
So, before diving headfirst into the crypto sphere, the best thing to do is roll up your sleeves and familiarize yourself with the subject matter. You will then quickly learn what nonsense this way of thinking truly is.
Crypto is an all-male domain with Crypto Bros as the archetype!
Boy oh boy, where to start (see what I did there?)... This is where it gets tricky. Because it is not untrue, at least parts of it. The numbers vary but consistently confirm that significantly more men own crypto than women. Most surveys and statistics show that between 60 and 70 percent of crypto owners are male. Meanwhile, I could not find anything about the number of bros. Therefore, allow me to draw from my personal experience as a woman in crypto.
By showcasing the compatibility of ESG, sustainability, and crypto, we can inspire more women to embrace the world of digital currencies with confidence.
I have spoken to many people in the crypto industry in the last two years. Although the majority of them were men, I can only remember a handful that could be described as Crypto Bros. Most individuals were attentive, entertaining, polite, interested in different opinions, and committed to the cause. Many want to create an impact but only a certain type uses crypto laser eye images on their social profiles. So no, the classic Crypto Bro, while not a myth, is clearly less prevalent in the industry than is commonly assumed.
To wrap up, there is still more than enough room for women in crypto! And without intending to serve clichés: The better we can show that ESG, sustainability and cryptocurrencies are not mutually exclusive, the more women will likely be attracted to digital currencies. There's still a lot to do!
What is your favorite crypto myth and which misconceptions do you have to clear up again and again? Let us know in the comments.
About Green Crypto Research (GCR)
We assess the compliance of crypto assets with ESG standards and provide an estimation of the identified sustainability risks. Our ESG ratings are used by crypto exchanges, asset managers, and index providers to offer sustainable crypto solutions to their customers.