Myth: Crypto is not suitable for payments
One of the main reasons crypto was developed was to create a payment system that did not require an intermediary. This basic starting point is often lost in the media coverage and among investors who are focused on price development and volatility. The price development is important, but it is even more important to understand that the claim that crypto cannot be used for payments is wrong, and a myth that is often heard.
Can you pay for things with crypto?
Crypto might be complex to understand, but using it to pay for something is relatively easy. In this article we look at how and where you can pay with crypto, but also that there are challenges as the technology is still in its infancy.
How to make a payment with crypto
In the early days sending a payment with crypto required deep technical knowledge. Fortunately, the complex process has now become much simpler, and is very similar to the process you already know when you use an app to send or receive money to and from your bank account (e.g. Vipps or Mobilepay). How you conduct a crypto-payment depends on the wallet-app you choose, but in general it works like this:
1. You need cryptocurrency
You don't necessarily need an account with a crypto-exchange or any other entity to buy crypto. However, unless you are familiar with creating a wallet yourself, sending and receiving crypto via a decentralized wallet is one of the easier and safer ways to get your hands on crypto.
A regulated cryptocurrency exchange like Firi allows you to exchange fiat (your national money such as NOK) for crypto. It will also give you some extra features if you need them, for example Firi will help you store your cryptos for you, offer rewards and help you with any technical issues or other questions through support in your own local language.
2. You must have a wallet
If you don't choose a centralized exchange like Firi, there are other ways to get a crypto wallet. Wallets can be installed on your computer or mobile phone and act as an app to access your cryptocurrencies.
Your wallet doesn't actually store the cryptocurrency; it contains the keys you need to access them - these are your private keys and only the holder of the keys has access to your crypto. Your wallet has a public key that is used in transactions; it acts as an email address used to send and receive payments.
There are hundreds of wallets to choose from, each with its own unique features. Some are compatible with almost all cryptocurrencies, while others only work with a few select cryptocurrencies. You should therefore choose one that is compatible with the cryptocurrency(s) you wish to use. Most cryptocurrency exchanges provide users with a wallet that allows you to transfer money to other users or make payments using services compatible with the exchange. Many wallets can use the device's camera to scan QR codes to create unique addresses for sending and receiving cryptocurrency. Some even have communication features that allow you to make contactless payments with crypto.
3. Send and receive a payment
You must use the wallet to send and receive payments regardless of whether this is on the mobile device or via a table. All wallets are different, so follow the instructions in the wallet you have chosen. Often it is a simple process similar to the one used in payment apps such as Swish, MobilePay or Vipps.
Where can you pay with cryptocurrency?
Cryptocurrency is still in its infancy, but the list of places you can use crypto to pay for goods and services is growing every day. Most businesses that accept cryptocurrency as payment do so through cryptocurrency payment gateways, which are payment service providers that generally guarantee the conversion of cryptocurrency to fiat currency at the time of transaction, so there is a stable price.
To meet the growing demand from customers, leading payment giants such as Mastercard, Visa, PayPal, Stripe and Venmo have all partnered with crypto companies and given millions of users access to crypto as a means of payment. Most major retailers such as Overstock, Microsoft, Expedia, and Starbucks have also integrated crypto payments, allowing their customers to purchase digital and physical goods directly with cryptocurrency. Other major companies include the popular streaming service Twitch, Norwegian Air, Etsy and Burger King.
El Salvador and the Central African Republic have gone a step further and recognized Bitcoin as legal tender, further increasing the use of cryptocurrencies as a means of payment for ordinary households. Crypto payment processors such as Ibex Pay and OpenNode have now been able to embrace large fast food chains and local businesses. Countries such as France, Venezuela, Colombia and South Korea have also seen an increase in the number of retail and food businesses accepting payments in crypto.
Advantages and disadvantages of paying with cryptocurrency
Benefits:
- Pseudonymity: Because crypto is decentralized and user information is usually not required, it is partially anonymous. This allows you to manage your finances without monitoring by authorities or others who may be interested in your personal information. However, some would argue that cryptocurrency is pseudonymous, as your wallet address can be used to identify you and often your money must go through a KYC (anti money laundering) procedure where the recipient must know the identity of the payer.
- Peer-to-Peer: Crypto is designed to be peer-to-peer, i.e. work directly between buyer and seller, which reduces the need to involve a third party as an intermediary. You can send money to, or receive, money from anyone without any other services.
- Fewer fees: Many financial services charge you or the business you deal with to let you use your money to make or receive payments. The peer-to-peer nature of cryptocurrency allows for fewer fees; you can consider this a lower cost for all parties involved in a transaction.
- Pay anywhere: Cryptocurrency allows you to make or receive payments anywhere, anytime, as long as you have an internet connection.
- Available to everyone: Many people do not have quick access, or no access at all, to financial services such as banks and loans. However, most have an internet connection via mobile devices. This allows anyone to make and receive payments, take out loans or access financial services wherever they are.
- Speed: If you send money across national borders, payments with crypto are much faster (seconds to minutes) than the usual payment systems (3 - 5 banking days).
Disadvantages:
- Transaction Fees: Although there are fewer fees in cryptocurrency transactions compared to traditional financial services, you still have to pay transaction fees to the blockchain network you use. These vary widely from time to time and from one blockchain network to another. Most cryptocurrency developers and communities are working on solving this problem, but it is worth keeping an eye on the size of the fees.
- Price volatility: It's no secret that cryptocurrency prices are volatile. This means that the value of your cryptocurrency will change over time. It's possible that the price of your cryptocurrency will drop between the time you buy something with it and the time the network approves the transaction - meaning you haven't sent enough to pay for the item. Conversely, if prices rose during that time, you could be sending too much. For example, a business owner may fear having less in their account if the crypto market experiences a downturn and cryptocurrency prices fall. However, this can quickly be solved with conversions to so-called stablecoins, which are cryptos that always have a stable value, and although this may entail additional costs, it is the solution for the business owners.
- Not revocable: Once a transaction is completed, it is locked in the blockchain and cannot be undone. The only way to get money back if there was an error is to have the recipient voluntarily send it back in another transaction.
- Risk of loss: As with other forms of currency, you can lose your crypto. You are responsible for where you want to store your crypto. If you prefer to handle the private keys yourself; there is no way to get them back if you lose your private keys or passwords. Therefore, for many users, it can be safe to choose a platform like Firi to store your cryptocurrency. Both because your cryptocurrency is protected with the best systems on the market, but also because you are not in danger of losing the access code to your crypto.
Crypto as a means of payment seems to flourish in the long term
The proliferation of blockchain technology on a large scale is inevitable, which means that cryptocurrencies will follow suit. As payment services, merchants and users increasingly adopt crypto as a means of payment, cryptocurrencies are gaining recognition as a serious alternative means of payment – which in some cases they already have become.
We know that blockchain works, that networks are reliable infrastructures, and that cryptocurrencies are efficient means of payment with clear advantages over traditional methods. This is why we continue to see growth in adoption year after year, regardless of price fluctuations and regulatory hurdles. That said, the ability of crypto and blockchain to unlock the full potential of digital payments should not be underestimated.