5 Facts You Should Read Before Buying Bitcoins

Bitcoin, the infamous cryptocurrency made popular by tech-savvy libertarians and others suspicious of economic centralization, often sparks passionate arguments about the nature of government, money, and markets.

Some believe that Bitcoin is a threat to society by creating opportunity for terrorists and criminals. Others believe it's the salvation of the market from government and special interests, redeeming money from centralized political control.

The truth, like usual, is a little more nuanced. Once we cut through some of the myths and fallacies, we'll see that cryptocurrencies are imperfect-but-useful currencies that will likely exist alongside other forms of money for some time.

1. Bitcoin is not just an "electronic version" of gold

Saying that Bitcoin is an "electronic version" of gold is extremely dangerous, because, while there are similarities between the two assets, there are extreme differences.

Bitcoins can be tracked, can't be melted down, and require different logistics for moving than gold or other hard assets.

The economics are simply different. Understanding this is necessary to spot other derivative myths, like the idea that, "Litecoin is Bitcoin's silver."

The only real similarities are a limited supply of the money that is supposedly "deflationary." The assets are very different and should be treated very differently.

Considering gold and silver have non-monetary uses -- especially silver -- the comparisons of cryptocurrencies to precious metals likely does more harm than good to our ability to understand either.