When it comes to cryptos, people usually think of either becoming unbelievably rich or being scammed. However, there’s more to these currencies than meets the eye.
According to recent studies, over 500 million people use these currencies for payments, and it seems the number will only grow. Here’s why more and more people are turning to them.
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Cryptocurrency: What Is It?
A cryptocurrency is a digital token that exists in a decentralized network. Their name comes from cryptography, a technique used to encode the tokens, making them impossible to counterfeit or duplicate.
The first cryptocurrency was Bitcoin (BTC), developed by Satoshi Nakamoto. Since its launch in 2009, hundreds of new tokens have been launched, attracting the interest of millions.
Types of Cryptocurrency
Many users categorize cryptocurrencies according to their origin or use. These are some of the most common types:
- Transactional: tokens mostly designed to serve as payment methods like Bitcoin.
- Utility: tokens used for specific functions in their specific platform. For example, Ether in the Ethereum platform.
- Security: cryptos that represent the ownership of an asset.
- Stablecoins: Cryptos whose values are linked to a specific FIAT currency and are mostly used for payments like Tether or USD Coin.
- Governance: tokens used to vote on the decisions of a blockchain platform, like Maker.
Advantages of Cryptocurrencies for Payments
Completely Free Market
One of the main appeals of cryptocurrencies is their free market. Unlike traditional FIAT currencies, cryptos aren’t generated by any authority or nation, keeping the market free from government interference.
Some external factors can still affect a token’s market value (like a celebrity endorsing a specific token). But its final price will always depend on offer and demand.
Encrypted and Anonymous Transfers
Each crypto wallet has a unique address to receive and send tokens, making it impossible to send or receive wrong transfers.
Thanks to the nature of blockchain technology, each transfer is completely encrypted. The identity of the holders is completely anonymous. So, if anyone wants to try the Olympic Games in-play bets this year with cryptos, they’re free to do so, and no one will know.
No Third Parties Involved
Crypto’s transactions are completely P2P (Peer-to-Peer). Thanks to this, no third parties are involved in each operation, reducing delays or disruptions in all the operations.
Excellent Counter to Inflation
Thanks to their nature, cryptocurrencies are unaffected by local inflation. This has made them perfect for people in countries with unstable economies. Some, like El Salvador, have even adopted them as legal tender, allowing people to buy products and services with them.
Disadvantages of Cryptos as Payment Options
Unprotected Market
The crypto market is free from government interference. But this has also made it a perfect breeding ground for all kinds of scams. Those interested in these currencies must be careful before exchanging tokens or their FIAT money.
Availability
Although more people use cryptocurrencies nowadays, many shops and services still don’t accept them as payment. Depending on the country, holders might have to exchange their tokens for FIAT to buy anything.
Volatility
The value of many cryptos can spike from one moment to another. But it can also decrease at the same speed, so holders must choose a token carefully if they want to use it long-term.
Is It Worth Using Cryptocurrencies?
As with any other payment option, cryptocurrencies have many pros and cons. But they still represent a solid choice for those wanting to avoid traditional FIAT transfers and their issues.
Those who want to use cryptos must first investigate whether they’re accepted in their country. Many platforms like Binance offer facilities to exchange FIAT currency, so they’ll be good to go if the local shop accepts.