A Quick Guide to Cryptocurrency Payments
Cryptocurrencies have been making the headlines over the past decade - not always without controversy.
Regarded by many as the payment method of the future (and even the future of money), cryptocurrencies, or crypto, are a versatile yet little understood financial asset.
Here’s our simple guide to all things crypto. Continue reading below to learn how cryptocurrencies work, their pros and cons, and how to use them to make payments.
What is a cryptocurrency?
A cryptocurrency (or crypto-currency) is a digital currency issued via a decentralized system - as opposed to fiat currencies which are issued by a central authority such as a government.
Much of the innovation behind cryptocurrency relies on the technology used to create cryptocurrencies, issue new units, and record all crypto transactions: blockchain.
Bitcoin, the first and one of the world’s most popular cryptocurrencies, was launched around 2009. Since then, other cryptocurrencies have been created, including Ethereum, Tether, Dogecoin, Solana, Ripple, and many more.
How do cryptocurrencies work?
Cryptocurrencies are a virtual (non-tangible) payment instrument that runs on the blockchain, a decentralized, public ledger (or database) used to record crypto transactions and issue new currency units.
The issuing of new cryptocurrency units is done through a specific software process called mining. You can learn more about the blockchain and crypto mining here.
Cryptocurrencies can be acquired from crypto brokers or cryptocurrency exchanges (Binance is one of the major ones) and can be stored and spent using cryptocurrency wallets or crypto cards.
What can I do with cryptocurrency?
Cryptocurrencies can be used to buy goods or services, pay bills, or as an investing or savings instrument.
Purchasing goods and services
The range of products and services which can be purchased using crypto is expanding by the day, from software and technology products to insurance or luxury goods.
Each cryptocurrency can only be issued in a finite or sometimes a maximum number of units. This limitation in supply causes an increase in demand for that currency and hence a rise in its value.
Bitcoin is a good example of this as at the time of its launch, one Bicoin could be bought for $0.0008. Bitcoin price then peaked at more than $68,000 in 2021.
Are cryptocurrency transactions secure?
The name ‘cryptocurrency’ suggestively evokes cryptography, a technique of securing information and communications in order to prevent fraud and counterfeiting.
This makes cryptocurrencies inherently secure, with no risk of counterfeiting, duplicating, or double spending cryptocurrency.
Crypto wallet transactions themselves are also secured with two-factor authentication. You can learn more about the security of digital wallets here.
This however does not make the crypto ecosystem safe from any type of cybercrime. Scams like fake websites, Ponzi schemes, or fake celebrity endorsements in relation to cryptocurrencies are fairly common.
This is why you should only buy, trade, or spend cryptocurrencies with established, reputable sources. Here’s more information about how to recognize and avoid the most common types of online fraud.
Pros and cons of cryptocurrencies
Like everything else, cryptocurrencies have their benefits and drawbacks.
As a decentralized currency, crypto makes the transfer of funds between peers easier and faster, with no third parties (banks) or processes (verification, currency exchange, etc) involved.
This also reduces the cost of transactions, especially in the case of cross border transfers which otherwise are subject to considerable bank fees and charges.
Also, crypto transactions are considered safer than the traditional money transfers because all crypto transactions are accurately recorded on the blockchain, an intrinsically safe and secure technology.
As a decentralized system, cryptocurrencies are not controlled by a single actor who controls the flow of ‘coins’ into the market, making them available to anyone interested in owning or spending crypto.
Cryptocurrencies can also be a profitable way to invest or save if you wish to avoid exchange rate movement and inflation.
While the privacy and security of crypto transactions are a huge benefit, they don't come without consequence - they make illicit activities such as money laundering harder to track and trace.
At the same time, crypto exchanges and crypto wallet applications may not be entirely secure from hacking, data breaches, or data loss. Due diligence needs to be applied the same as with any other web application or service.
From an investment viewpoint, cryptocurrencies are a high risk asset due to their high price swings. This also makes it difficult to acquire certain currencies, with the market being shared between a limited number of organizations and individuals.
Last but not least, cryptocurrency creation requires a great deal of computing power, meaning a lot of electricity needs to be spent in the process of generating crypto coins.
How to make a cryptocurrency payment
The first step to making a payment using cryptocurrency is to own a type of crypto asset. You can exchange fiat money for cryptocurrency via crypto exchanges (like Coinbase or Binance), in apps such as Cash App, or through brokers.
You can store and spend cryptocurrency using a digital wallet compatible with the cryptocurrency you own. Some of the most popular wallets are the Coinbase wallet, MetaMask, BlueWallet, TrustWallet, among others.
If you want to purchase goods, pay for services, or pay bills, first check if the seller or provider accepts payments in cryptocurrencies.
If they do, you can usually make the payment in a few clicks - either by getting the vendor’s bitcoin address and making a payment using your wallet app, or by using your app to scan a QR code provided by the retailer. Once you confirm the payment, the crypto amount will be delivered to the recipient account in seconds.
Cryptocurrency cards are another way to pay using cryptocurrency.
Crypto cards can be used for payments just like a regular debit card. The only difference is that instead of being linked to your bank account, a crypto card is linked to your crypto wallet.
You need to have or add funds to your crypto wallet before you can pay using your crypto card - much like a prepaid card.
You can learn more about the ins and outs of crypto payments here.
Can I transfer cryptocurrencies via Fin.do?
Fin.do is a platform for instant money transfers across 150+ countries. We currently accept a wide range of fiat currencies and you can send any currency from and to any of our supported destinations.
What makes Fin.do different from other money transfer services is that you can send any currency you wish from any card - regardless of the currency your card was issued in.
This means you may send USD from GBP cards, EUR from PLN cards, and so on. It makes Fin.do a great way to exchange your local currency into an international currency like USD and avoid high exchange rates when placing international orders for cryptocurrencies.
Read more about international same currency transfers via Fin.do here.
Cryptocurrencies are a digital currency that’s becoming more popular among both businesses and individuals. Cryptocurrencies work on a decentralized, public ledger called blockchain, unlike fiat currencies which are issued and controlled by the central authority of governments.
While still far from mainstream adoption, cryptocurrencies can be used today for the purchase of goods and services, settlement of bills, peer to peer transfers, and as a means of investing.
Cryptocurrency payments can be made to accepting merchants using crypto wallets or crypto cards.
Like other financial instruments, cryptocurrencies have both advantages and disadvantages, revolving around their security, ease of use, access, and volatility.
Fin.do enables you to exchange or transfer any currency to cards across 150+ destinations worldwide. You can use Fin.do to reduce the costs of your same-currency or cross-currency transfers when placing international cryptocurrency orders.
We hope this beginners’ guide to crypto has been helpful. You can learn more about Fin.do and give it a try here.