A short guide to the world of cryptocurrencies: what it is and how crypto payments work

Cryptocurrencies have been constantly in the headlines for the past decade, but not always in an unambiguous light.

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Many see cryptocurrency as a way to pay for the future (and even the future of money itself). Cryptocurrencies, or “crypto”, are a versatile but little understood financial asset.

Below is our simple guide to everything related to cryptocurrency. You will learn how cryptocurrencies work, their pros and cons, and how to use them for your payments.

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What is a cryptocurrency?

Cryptocurrencies are a virtual (non-material) payment instrument that runs on the blockchain, a decentralized public database that is used to record cryptocurrency transactions and issue new monetary units.

The release of new units of cryptocurrency is carried out using a special software process called mining. You can learn more about blockchain and cryptocurrency mining here.

Cryptocurrencies can be purchased from crypto brokers or on cryptocurrency exchanges (Binance is one of the main ones), and you can store and spend using cryptocurrency wallets or crypto cards.

Purchase of goods and services

Although the adoption of cryptocurrencies in the retail sector has not been as successful as expected, today many online stores and brick-and-mortar stores accept payments in cryptocurrencies.

The range of products and services that can be purchased with cryptocurrency is expanding every day, from software and technology products to insurance or luxury goods.

Investment

Each cryptocurrency can only be issued in a limited or sometimes maximum number of units. This supply constraint causes an increase in the demand for that currency and therefore an increase in its value.

And in 2021, the price of bitcoin peaked at over $68,000.

Are cryptocurrency transactions safe?

The name “cryptocurrency” contains a particle from the term “cryptography”, a technique for protecting information and communications in order to prevent fraud and forgery.

This makes cryptocurrencies inherently secure, with no risk of forgery, duplication, or double spending of cryptocurrencies.

Crypto wallet transactions themselves are also protected by two-factor authentication. Frauds such as fake websites, pyramid schemes, etc. are quite common in the world of cryptocurrencies.

That’s why it’s best to only buy, trade, or spend cryptocurrencies at trusted, reputable places. Here’s more information on how to recognize and avoid common online scams.

Pros and cons of cryptocurrencies

Like everything else, cryptocurrency has its advantages and disadvantages.

Benefits of Cryptocurrency

As a decentralized currency, cryptocurrency simplifies and speeds up the transfer of funds without the participation of third parties (banks) or processes (verification, currency exchange, etc.).

It also reduces the cost of transactions, especially in the case of international transfers, which are otherwise subject to significant bank fees and charges.

In addition, crypto transactions are considered more secure than traditional money transfers, as all crypto transactions are accurately recorded on the blockchain, in a safe and secure technology.

Being a decentralized system, cryptocurrencies are not controlled by a single participant, which makes it accessible to anyone who is interested in owning or spending cryptocurrencies.

Cryptocurrencies can also be a profitable way to invest or save if you want to avoid exchange rate fluctuations and inflation.

Disadvantages of Cryptocurrency

While the privacy and security of crypto transactions are a huge benefit, they are not without consequences – cryptocurrencies make it difficult to trace illegal activities such as money laundering.

At the same time, crypto exchanges and crypto wallet applications may not be fully protected from hacking, leakage or data loss. Due diligence must be applied here, as with any other application or service.

In terms of investment, cryptocurrencies are a high-risk asset due to constant price fluctuations. It also makes it difficult to buy a certain currency, as the market is divided among a limited number of organizations and individuals.

Last but not least, the creation of a cryptocurrency requires a lot of computing power, that is, a lot of electricity needs to be spent on the process of generating cryptocurrencies.

How to make a payment in cryptocurrency

The first step to making a payment with a cryptocurrency is owning a certain type of cryptocurrency. You can exchange fiat money for cryptocurrencies through cryptocurrency exchanges (such as Coinbase or Binance), apps like Cash App, or through brokers.

If the seller accepts cryptocurrency, you can usually complete the payment in a few clicks. By obtaining the vendor’s bitcoin address and making a payment using the Wallet app, or by using the app to scan the QR code provided by the vendor. After confirming the payment, the cryptocurrency will be delivered to the recipient’s account in a matter of seconds.

Crypto cards

Cryptocurrency cards are another way to pay with cryptocurrencies.

Crypto cards can be used for payments in the same way as a regular debit card.

Before you can pay with your crypto card, you need to have or add funds to your crypto wallet (similar to the process of using a prepaid card).

Can I transfer cryptocurrency through Fin.do?

Fin.do is a platform for instant money transfers in over 150 countries. We currently accept a wide range of fiat currencies, and you can send any currency to any of the destinations we support.

Fin.do differs from other money transfer services in that you can send any currency from any card – regardless of the currency in which your card was issued.

This means you can send USD from GBP cards, EUR from Zloty cards, and so on. This makes Fin.do a great way to exchange your local currency for an international currency like USD and avoid high exchange rates when placing international cryptocurrency orders.

Summing up

Cryptocurrencies are a digital currency that is becoming more and more popular among both companies and individuals. Cryptocurrencies run on a decentralized public database called a blockchain, unlike fiat currencies, which are issued and controlled by a central authority.

Although cryptocurrencies are still far from mainstream adoption, today they can be used to buy goods and services, settle accounts, make peer-to-peer transfers, and as a means of investment.

Cryptocurrency payments can be made to merchants accepting payments using crypto wallets or crypto cards.

Like other financial instruments, cryptocurrencies have both advantages and disadvantages related to their security, ease of use, access, and volatility.

Fin.do allows you to exchange or transfer any currency to cards in more than 150 countries around the world. You can use Fin.do to reduce the costs of transfers in one or different currencies when placing international orders in cryptocurrency.