Let’s continue counting down the eight great misconceptions about money. This time, it’s about cryptocurrency.
Misconceptions about traditional currency stem from having fixed ideas about long-established things without zooming out to see the full picture. Misconceptions about cryptocurrency, however, arise from cognitive biases toward new things, either by being misled by their names or by making flawed analogies to the physical world.
Part 1: Eight Misconceptions About Money: Fiat Currency Edition
5. Cryptocurrency = Privacy Protection
If I had to pick the single most important misconception to clarify, I wouldn’t hesitate to say this: Mainstream cryptocurrencies are not private. “Mainstream” refers to the vast majority of coins, including Bitcoin, Ethereum, and Solana. Only a very small number of exceptions, such as Monero, Zcash, and MobileCoin, exist—these are typically called “privacy coins” for distinction.
“Cryptocurrency” is widely translated in Chinese as “加密貨幣” (Encrypted Currency), which I believe is the main reason most newcomers mistakenly believe the privacy of transacting parties is protected. The reality is that the wallet addresses, coin types, amounts, and other details involved in a transaction are not encrypted at all; they are published in plaintext for the whole world to see. Using instant messaging as an analogy, it’s as if your conversations were broadcast naked online in plaintext, with the participants identified only by nicknames. One can imagine just how transparent this is. I won’t arrogantly claim that “Encrypted Currency” is a mistranslation, but I have always insisted on using “密碼貨幣” (Cryptographic Currency)—currency realized through cryptography. This isn’t to be contrarian, but to reduce misunderstanding.
Although everyone talks about privacy, the general public largely ignores it unless they feel their data is at risk of being sent to mainland China. This is something I’ve observed in daily life, especially in Taiwan. Fortunately, the Web3 development community takes existing problems very seriously. The Ethereum Foundation has even made enhancing privacy a top priority to prevent Ethereum from becoming a mass surveillance hub as dApps achieve mass adoption. I will explore this topic further in a dedicated series called “Privacy is Normal.” For now, the first thing newcomers need to understand is that mainstream cryptocurrency transactions are not encrypted.
👉 Cryptocurrency is very secure, but not at all private.
6. Cryptocurrency = Virtual Currency
Another common translation for “Cryptocurrency” is “虛擬貨幣” (Virtual Currency), a term I also avoid. As its name suggests, it’s too “virtual” or insubstantial. It can refer to in-game currency or assets within tools like Alipay, but it’s rarely used to describe funds in a digital bank. In short, it’s a nebulous term. Interestingly, Hong Kong has recently followed mainland China in renaming “virtual banks” to “digital banks,” partly because the term “virtual” is considered misleading.
You don’t need to be a linguist to know that the Chinese character for “virtual” (虛) often carries negative connotations, appearing in words like “false” (虛假), “hypocritical” (虛偽), “weak” (虛弱), and “vain” (虛榮). As for the character “擬” (nǐ), it means “to imitate.” “Virtual” (虛擬) thus refers to using digital technology to imitate a physical-world entity. A virtual flower, for instance, takes a real flower as its “ideal form” and tries its best to resemble one.
Some might think that cryptocurrency is imitating traditional money, but I disagree—or at least, believe it’s more than that. As mentioned before, the function of money is to define, store, and exchange value. Value itself has no physical form. It’s just that before digital technology was invented in the last century, humanity had to use tangible objects for millennia to achieve the effect of exchange. Therefore, it has always been traditional currency that imitates value. With the rise of information technology and the internet, even before the blockchain was born, people were already using digital ledgers to interpret money. Banknotes and coins have become increasingly marginalized; physical existence has never been an essential element of money.
This isn’t just splitting hairs for the sake of argument. If you believe that cryptocurrency is meant to simulate traditional currency—failing to grasp that its essence is to interpret the definition, storage, and exchange of value—you will inherit all the limitations of traditional money. This severely restricts society’s imagination for money and tokens. Setting aside use cases, consider just the verbs: beyond the traditional “spend,” “save,” “borrow,” and “lend,” cryptocurrency introduces “mine,” “burn,” “stake,” “restake,” “synthesize,” and more. Its possibilities far exceed those of traditional currency.
7. Wallet = A Container for Cryptocurrency
In this mobile-first era, I don’t know how many people still use a leather wallet, but I believe most people understand that a wallet is traditionally a carrier for money, typically used to hold banknotes and ID cards.
It is precisely this clear understanding of a wallet’s original meaning that causes most people to misunderstand the function of a cryptocurrency wallet, assuming it is also a container for assets. In reality, the “wallet” is just an analogy, and unfortunately, a very misleading one. Digital accounting involves no physical existence. If you absolutely must ask “where the money is,” you could say that since the ownership of value is recorded on the blockchain, the blockchain itself is the asset container—a public vault for everyone’s assets.
As for a cryptocurrency wallet, the money is never inside it. A more appropriate analogy is a keyring. It helps users store and manage their private keys. As long as you have your private key, you can go to the “public vault” and access your own assets.
👉 Embedded Wallets: The Account is the Wallet, Bringing Web3 to 5 Billion Netizens
8. Private Key = An Unlocking Tool
Analogies help with understanding, but they often create misunderstandings at the same time. I just said a more accurate analogy for a “wallet” is a keyring, but the “key” itself is also an analogy that explains one characteristic while failing to cover others.
Because a key in the physical world corresponds to a lock, people generally imagine their cryptocurrency is locked in a specific safe that no one else can open. But in the world of cryptography, a private key corresponds to another key, called the public key. Your cryptocurrency is simply placed at a random location, and anyone who happens to guess that location correctly can access the assets within. From this perspective, the key is more like a treasure map.
The blockchain has no admission process. Every day, countless new and old users create new wallets. But a “new” wallet is merely one randomly generated from an extremely, extremely vast number of possibilities. There is no mechanism to ensure that a wallet address is not already in use. In other words, if you are lucky enough, you could generate Satoshi Nakamoto’s address when creating a wallet, and the assets inside would belong to you. Conversely, if someone else happens to generate your address, sorry, you’ll have to “share the wealth.”
This may be hard to accept, especially for newcomers, but it is a fact—or at least, an accurate analogy. The system works because the probability of guessing correctly is extremely close to zero (but it is not zero). It’s like how there are so many celestial bodies in the universe that Earth could be hit by a giant meteor at any second. Humanity has remained safe so far purely because the universe is so vast that the probability of being hit is very, very low.
In fact, the probability of Earth being hit by a meteor is much higher than the probability of your private key being guessed by someone else. Whether accepting this concept makes you feel more relieved or more worried, however, is hard to say.
👉 The 24-Word Mnemonic Phrase: A Treasure Map in the Blockchain World
Cryptocurrency isn’t private, traditional currency is the imitation, a wallet is actually a keyring, and a key is surprisingly a treasure map. I hope the above helps you dispel these misconceptions, rather than scaring you away just as you step into the world of Web3.
P.S. A typhoon is battering Hong Kong, but the newsletter is out as scheduled, truly “come rain or shine.” The (world’s) information is abundant, but (this old guy’s) mind is simple. The day before yesterday, all of Hong Kong knew a super typhoon was coming, but being someone who doesn’t check social media or have WhatsApp, I was the last to know. I only went to the market in the evening to buy groceries for two days at home, only to be greeted by once-in-a-decade empty shelves. But a simpleton has his luck. The next morning, when the No. 3 signal was up but the No. 8 hadn’t arrived, I visited the market again and it was fully stocked. The vendors said that prices were sky-high the day before, but now they were selling at rock-bottom prices to clear stock before the market closed. Hong Kong people are just this efficient, sometimes overly so; and this dedicated, sometimes to a fault. Right now, there is flooding, fallen trees, and even landslides everywhere, but I know that tomorrow morning, the city will “return to normal”—shops will open, deliveries will be made, as if nothing ever happened. A sincere salute to all the medical staff, drivers, and other service personnel who held their posts during the typhoon. 🫡
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