Read this before you invest in cryptocurrency

Blockchain transactions are all anonymous
Nope. While cryptocurrencies have a reputation for anonymity, patterns in the blockchain can still reveal information about users at either end of a transaction. There’s even some suggestion that a user’s IP address can be made visible during the transaction process – basically, these transactions leave a ‘digital trail’ that can reveal your identifying information. So, if you’re saving up your digital coins to purchase military-grade weapons, illicit drugs or any other illegal goods, be warned.

There’s no risk in investing in it
Unless you’ve been living under a rock, you’d be aware that cryptocurrencies are known for their violent lurches in value – which is why there are so many crypto millionaires out there today, and also why more than a few people have been left crying into their beer. The question is, WHY are cryptocurrencies so vulnerable to such huge peaks and troughs? Well, there are lots of reasons, including media hype, political risk, regulatory changes and governance issues, and speculation on social media – according to The Guardian’s Mark Beaumont, “the merest hint of FUD (fear, uncertainty and doubt) on a coin’s Twitter or Reddit threads can tank its price quickly.”

It’s the currency of choice for criminals
This is a bit of a stretch. Research from UTS shows that half of all bitcoin transactions are used to purchase illegal goods – so if you’re a criminal, you’re in great company. The flipside is that presumably the other half of all bitcoin transactions AREN’T used to purchase illegal goods. At any rate, there’s nothing inherently illegal about cryptocurrency and blockchain, but there could be in future: German researchers have found a trove of illicit materials embedded in the Bitcoin blockchain, including links to child pornography. “As a result, it could become illegal [or even already is today] to possess the blockchain, which is required to participate in bitcoin,” they write.

It’s a regulator’s nightmare
Actually, this one is true. According to the Washington Post, cryptocurrency brings with it the threat of “illegal initial coin offerings, money laundering, tax evasion, cyberthefts, exchange outages, excessive speculation and more.” That’s great news if you’re a career criminal; less so if you’re trying to build long-term financial security. There’s no global solution yet, but regulators around the world are talking about what needs to be done to bring the Wild West of digital currencies under some kind of control. Whether or not that’s a good thing depends on how you think about the new financial paradigm we’re living in – but either way, watch this space.