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Cryptocurrency payments: pros and cons in 2022

Introduction

Cryptocurrency is a digital payment system that does not involve banks when verifying transactions. It is a system with equal participants that allows any user located anywhere to send and receive payments. Cryptocurrency payments exist exclusively in digital form in an online database describing specific transactions. They do not imply transactions with physical currency that have circulation and exchange opportunities in the real world. When transferring funds in cryptocurrency, transactions are recorded in the public register. Cryptocurrency is stored in digital wallets.

Today cryptocurrency is accepted by many retailers. So, everyone can buy different services and goods with cryptocurrencies.

Payment Features

The first cryptocurrency, Bitcoin, appeared in 2009. Nowadays, there are lots of other similar payment systems, such as Ethereum, Litecoin, Tether and more. What differs the cryptocurrency from physical currencies? Cryptocurrency has a number of advantages that put it ahead of other payment methods. It offers

  • * better privacy;

  • * better payment security;

  • * lower fees;

  • * irreversible transactions.

You can pay using your wallet. Payments are made through cryptocurrency payment gateway as well. It accepts cryptocurrencies from customers as a payment for goods and services. Cryptocurrency gateway allows customers to accept digital payments and get fiat currency immediately in exchange.

Fees are lower

Fees for transactions in the cryptocurrency network and the speed of a transaction do not depend on the distance to which the transfer needs to be made. If you use any payment service to transfer funds to other customers, you have to pay certain fees. Being a merchant, you should pay fees for a transaction. Some payment services take fees for even opening an account. As a rule, the fees are 3% - 4%. It takes you several days to get funds onto your account, while, for example, bitcoin will cope with this task in an hour on average. The commission will be incommensurable with the amount sent.

Irreversible Cryptocurrency Transactions

Unfortunately, all transactions once made can’t be changed, or cancelled. In fact, it is impossible to cancel a confirmed transaction. This property of the cryptocurrency is one of the key ones. On this occasion, S. Nakamoto wrote that the absence of irreversible transactions increases the cost of services whose services are irrevocable. Since the payment can be canceled, the seller has to be on guard, demanding more information from the buyer than necessary.

Many people say that it is inconvenient because there were cases when a user checked all transaction data carefully, but accidentally sent assets to a wrong recipient. Unfortunately, in such a situation they cannot be possible to return their money.

The bitcoin system doesn’t have central management. There are only two parties that take part in the process: the sender and the recipient. There is no need to involve the third party to make a transfer. Moreover, neither the movement of assets in the blockchain, nor the names of the wallet owner are possible to track.

Pros and cons of cryptocurrency payment

Many advantages of virtual assets are based on comparison with fiat. So far, digital coins cannot displace traditional money from circulation and replace them as the main means of payment. However, in some areas they have already proved themselves better than Fiat. Like any other currency, cryptocurrency has both advantages and drawbacks.

Advantages

Disadvantages

  • Anonymity of transactions. There is no information about the owner of the crypto wallet (there is only the wallet number).

  • Direct transfers between two parties; there is no point in presence of the third party as is the case with traditional currencies.

  • The absence of a single digital bank. Cryptocurrencies are controlled by the developers. The decentralization keeps it monopoly free, so no company can determine the flow, the cost of currency, which, in turn, will keep it stable and secure.

  • Lack of control over transactions and payments.

  • Money is stored in a decentralized way, that is, on the wallets of millions of users around the world.

  • The open code of the algorithm allows everyone to mine cryptocurrency.

  • Cryptocurrency is not subject to inflation (a limited number of coins are issued).

  • Cryptocurrency security: Cryptocurrency cannot be copied.

  • Low fees of transactions (fees are reduced to a non-significant and small to nil amount).

  • A means for investment and capital savings.

  • Cryptocurrency can be purchased for lots of currencies.

  • Security is guaranteed. Blockchains are based on various mathematical puzzles that are difficult to decode.

  • Irreversible transactions are good for merchants. They can be sure that no one wants to return money for once purchased goods.

  • Due to the lack of regulatory mechanisms, there are no guarantees of the safety of crypto wallets.

  • High volatility of cryptocurrencies due to the specifics of use.

  • There may be negative actions on the part of national regulators in relation to it.

  • The loss of the password to the electronic crypto wallet leads to the irretrievable loss of all funds in it.

  • With an increase in the level of complexity, it becomes unprofitable to mine cryptocurrency on the equipment of individual users. Mining today requires lots of efforts. It is impossible to do on a single computer and wants certain skills.

  • Illegal transactions are difficult to track. Thus, criminals may use it for their deals.

  • Cryptocurrency is decentralized, however there is some risk that flow and amount of some currencies within the market are controlled by their developers and some companies.

  • Some cryptocurrencies are sold in a limited number of traditional currencies. It makes purchasers to convert their money into other currencies, therefore spending extra money on this.

  • There is no possibility to cancel a confirmed transaction. So, if you made a mistake, you won’t be able to return your money.

  • Most exchanges keep their customers’ wallet data. This data may be stolen by hackers, giving them access to lots of accounts.

The Nuances of Cryptocurrency Wallets

To operate cryptocurrency, you need to open a crypto wallet that is special software for “storing” digital coins. In fact, cryptocurrency is stored on blockchains, peer-to-peer connected computers, where everyone can get an address to send and receive crypto. Thus, a crypto wallet is like a UI portal in a blockchain.

Types of Crypto Wallets

The crypto wallet is an integral component of a blockchain and the most important part of the process of buying and selling, stacking, mining cryptocurrencies. You can use it to make transactions and receive funds. According to the mechanism of operation, it is possible to distinguish

  • * A cold wallet (not connected to the internet, while it is more secure, it's less convenient.)

  • * A hot crypto wallet (connected to the Net. It can be attacked by hackers resulting in loss of funds)

By platform

Crypto wallets can be divided into different types in accordance with the software and the device they use. We can distinguish

  • * Web wallet can be used on your browser, there is no need to install any special software. To prevent your funds from being stolen, you should think about protecting your wallet and before creating it, get well acquainted with the mechanism of operation.

  • * Desktop wallet is software installed on a computer. This type allows the owner to fully control transactions and dispose of data personally.

  • * Mobile wallet works similarly to the desktop one. This is a mobile version with advanced functionality where you can transfer funds using a QR code.

  • * Hardware wallet stores the customer's private keys in a secure hardware device.

You can use different platforms while using crypto wallets.

By Coins Availability

As a rule, crypto wallets do not support all coins because coins exist on different blockchain platforms. Thus, Bitcoin is available on the bitcoin network only, Ether and Litecoin can be bought on the Ethereum blockchain. If you want to have a crypto wallet that works with different cryptocurrencies pay attention to the following

  • * Crypto.com

  • * Trust Wallet

  • * Mycelium

  • * Exodus

By Governance

Crypto wallets can also be

  • * custodial (centralized)

  • * non-custodial (decentralized)

A custodial crypto wallet does not give you full control over private keys, since a third party (an exchange or a custodial service) will store your assets for you. You won't be able to access your private key yourself, but that's not necessarily a bad thing. Due to the decentralization of blockchain technology, if you lose your private key, you may permanently lose access to your funds. However, if there is a custodial wallet, the responsibility for the private key lies with the service itself. Even if you forget the password, you are most likely to restore access to your account with the help of the customer support.

A non-custodial wallet allows users to own and control their private keys. This option is best suited for those who need to manage their funds independently. In this case, the full responsibility for the security of the key lies with the owner of the wallet, therefore, if the keys are lost, the wallet and its funds will be irretrievably lost.

Crypto Wallet Examples

If you want to have a crypto wallet that works with different cryptocurrencies (connect to different blockchain networks) pay attention to the following

  • * Crypto.com

  • * Trust Wallet

  • * Mycelium

  • * Exodus

  • * BRD

  • * Coinbase

  • * Trezor

These apps for storing cryptocurrencies are some of the most popular ones.

What Can I Buy for Cryptocurrency

Cryptocurrencies are now mostly used as an investment tool. But this does not mean that they cannot be used as a means of payment. And with the growth of institutional interest in cryptocurrency, the list of what can be bought for it also increases - literally every month new goods are added to it.

Cars

A large number of bitcoins can be spent on personal transport. For example, for a car. Since 2013, BTC has been hosting a Lamborghini showroom in Newport Beach, California. The company has also entered into an agreement with BitPay to make payments. Subarus and some other cars can also be purchased for bitcoins.

In March 2021, the automaker Tesla was allowed to buy cars for bitcoins directly. But, a few months later, Musk tweeted that Tesla stopped selling cars for bitcoin payment because of environmental concerns in connection with mining.

Technology and Ecommerce Products

A good number of companies that sell tech products accept Bitcoin. Among them there is Newegg, AT&T, and Microsoft. Microsoft accepts Bitcoin on its online store. However, the company doesn't allow ads promoting cryptocurrency on its site.

Overstock, an American internet retailer, was the first site to accept Bitcoin. Everyone can now use the cryptocurrency to buy anything offered by Overstock, from phone accessories to furniture. Patrick Byrne, Overstock founder and CEO, says "As long as you can get on the internet, you can order and pay in bitcoin".

Many other sites, big and small, also allow you to options to purchase products with bitcoin, for example, Shopify and the Japanese ecommerce giant Rakuten.

Media Subscription

Many internet newspapers and magazines accept bitcoin for subscriptions or other services. The Chicago Sun-Times became the first major newspaper to accept bitcoin on its platform in 2014. That year, Time Inc., a mass media corporation, also started to accept cryptocurrency for subscriptions. Now, they strike a partnership with Crypto.com.

Shopping in online stores

One of the first companies that started accepting bitcoins was the American Overstock store. Today a lot of online stores accept cryptocurrency. Clothing stores accept bitcoins for payment without any problems, for example, JensHansen, Real Watches, Girl meets Dress and many others. Most of the fashion businesses whose goods can be paid for with cryptocurrency are small or medium-sized companies headed by crypto enthusiasts.

International Payments

More and more people are turning to cryptocurrencies to make international payments. Peer-to-peer cryptocurrency payments provide lower fees and faster transactions, often favorably differing from traditional payment methods.

The capabilities of cryptocurrency do not depend on the country, distance or other factors. At the same time, the amount of the commission is not determined by the amount of the transfer and other factors that usually affect the cost of traditional cross-border transfers.

Online Entertainment

Virtual gambling is a very popular pastime activity nowadays. It allows placing real money bets for lots of casino games such as roulette, blackjack, baccarat, pokie machines and many others. Today online casinos accept cryptocurrencies for loading players’ accounts. Cryptocurrencies are especially popular in online casinos in Australia. The most popular are

When making a deposit with a cryptocurrency in an Australian casino, you can get different bonuses. There are also special cryptocurrency games where you can quickly increase the amount of cryptocurrency on your account if you are lucky.

Conclusions about Cryptocurrency Payments

All in all, cryptocurrency remains a promising market that allows you to earn more than one fortune. It provides a lot of benefits. However, there are many drawbacks as well. Therefore, be careful, think about security, consider the advantages and disadvantages of cryptocurrencies or exchanges, and always conduct your own research before investing in a particular project.

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