An Introduction to Cryptocurrency as a Payment Method

Editorial
8 Min Read

Cryptocurrency is the future of finance and this is a fact no one can deny. When Satoshi Nakamoto introduced the concept of digital currency to the world, no one knew it would become so big, surpassing the worth of a US dollar. 

In the Bitcoin whitepaper, Nakamoto shared his vision to create an alternative to the centralized banking system controlled by powerful people. This new coin would dismiss all authorities and become a decentralized system where every individual would have ownership over their assets with no third-party involvement. 

Although this vision slowly was forgotten, the Bitcoin and rest of the cryptocurrency market have now become a separate digital economy parallel to the traditional economy. However, the massive adoption is conditioning TradFi to integrate cryptocurrency into their systems now.  

But before we jump into the details, you should know that nothing mentioned in this article is financial advice. Let’s begin with the basics of cryptocurrency:

What exactly is cryptocurrency?

Cryptocurrency is a digital currency built using cryptography for transactions and stored on a blockchain. It is created as a source of exchange between two parties with no third-party associated. 

It’s basically a peer-to-peer system with no bank or government involved. The transactions are recorded in the form of a database using advanced coding for exchange and transmission stored on a public ledger that can be viewed by anyone but cannot be altered in any way.

Cryptocurrency isn’t really a complex concept once you get hold of it. It’s actually much more secure and convenient than fiat money because you don’t need to carry around bills physically.

Where is cryptocurrency stored?

The answer to this question is Digital wallets. Just like a real-life wallet, the cryptocurrency is kept in crypto wallets on blockchain. Users create their own accounts with a unique encryption-coded key that only they can access to see their digital assets. It’s the safest way of storing monetary assets because no one can see your key except yourself. 

Every blockchain has its own wallet such as MetaMask for Ethereum, Dapper Wallet for Flow, Phantom for Solana, and many more. Although these wallets can store any type of cryptocurrency, these tokens can only be accessed on wallet-compatible platforms. 

Famous Cryptocurrencies you should know

Like fiat currency, there are also different cryptocurrencies but instead of by country, each digital currency is a token of a company, blockchain, or an ecosystem in Web3. 

For beginners, BTC or Bitcoin is the oldest and biggest digital currency in the world. It has the largest market cap with each coin worth almost $20K or more. Bitcoin was invented by Satoshi Nakamoto as software aka blockchain and later as a cryptocurrency, currently invested by millions of people worldwide. 

ETH or Ethereum is the second-largest coin in the crypto market that is widely known in the NFT community because the majority of non-fungible tokens are listed on this blockchain. Cryptocurrency is also used to buy, trade, and sell NFTs on the marketplace. 

Solana or SOL is the third-largest crypto token for its blockchain, while BNB is for Binance exchange which is also quite famous among traders and investors. 

Other cryptocurrencies include Cardano (ADA), ApeCoin (APE), FLOW, Dogecoin (DOGE), XRP, Polygon (MATIC), Polkadot (DOT), Shiba Inu (SHIB), Tron (TRX), Avalanche (AVAX), and many more. 

Now that you know the basics about cryptocurrency, you can now explore the monetary uses of this new asset that holds the same value as a traditional asset. 

How can Cryptocurrency be used as a Payment Method?

As mentioned above, the digital currency was solely created as a medium of monetary exchange using the internet. Instead of the banks or governments controlling the transactions, the internet and coding would do it automatically without anyone’s involvement.

When it comes to cryptocurrency as a payment method it’s the same as sending or receiving money from bank accounts, which is replaced by crypto wallets. When someone buys anything, they can simply transfer the crypto tokens into the merchant’s wallet; it’s that simple.

As crypto adoption increases, many users have invested almost all their money in crypto, so if they want to buy something they’re forced to convert it to USD. Seeing this, many shops and businesses introduced crypto payments as a method, making it easier for crypto owners to buy things. 

Gucci stores in the US recently announced they would accept crypto payments from ApeCoin, the native coin of the Bored Ape Yacht Club NFT project, and Bitcoin. Similarly, Tesla announced they would accept Dogecoin payments as Elon Musk backs the crypto coin. Rolex and Patek Philippe have also added digital currency as a payment method to buy products.

AXA, a Swiss insurance company, recently announced they would accept Bitcoin to buy insurance plans.

Although digital currency as a payment method is quite a low scale, the massive adoption of cryptocurrency is forcing many brands to include them. 

In Web3 space, virtual currency is used to buy NFTs and other collectibles from marketplaces. Additionally, the metaverse platforms like The Sandbox or Decentraland also have their own currency that creators and users can earn as rewards. 

How to buy Cryptocurrency?

Here’s a step-by-step to buying a cryptocurrency 

  • Create a wallet account on a crypto exchange
  • Connect your debit/credit card with your account
  • Convert your fiat currency into your desired cryptocurrency
  • You will receive the tokens in your wallet equivalent to the dollar amount once the transaction is complete. 

Note that, you should check the rates of digital tokens to ensure you’re buying the right ones. Furthermore, since every platform or brand accepts a certain type of cryptocurrency, you need to ensure you have it in your wallet. 

Final words

Cryptocurrencies are the future of the internet. As governments accept crypto payments with regulations, more and more companies will start adding cryptocurrencies. This is why it’s important that you keep up with the latest technology to see how it will influence the world. 

To conclude, cryptocurrency as a payment method is set to revolutionize our daily exchanges, the same way when debit/credit cards were first introduced. 

Note: The information mentioned in this article is not financial advice. Make financial decisions at your own risk. 

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