In the past half a decade, cryptocurrency’s value grew multiple times, pushing people to invest in it. These investments gave crypto the power to work as an alternate form of payment for goods and services. For those building on long-term crypto investments, crypto payments make sense.
Even then, how do crypto payments work? How can you take advantage of crypto payments for your business? Here’s everything you need to know.
What is Cryptocurrency?
To start, you need to understand what cryptocurrencies are. Simply put, cryptocurrencies are digital money that runs on a decentralized network. Governments or banks do not create these systems. Instead, they are driven by an open-source community built on blockchain technology.
These communities focus on building peer-to-peer networks that verify transactions. These transactions are confirmed when other computing devices validate each transaction. Because of the blockchain
This validation can be done in a couple of ways. For one, cryptography is used to generate unique digital signatures. These tie to a public address or private key and validate through their peers on the network. Another method involves using public-key algorithms, also known as asymmetric encryption, and elliptic curve-based signature schemes.
What’s essential is that cryptocurrency can replace fiat-based currency, but its value tends to fluctuate a lot. This makes it work more like a stock or forex that you can trade. Regardless, it’s a fantastic alternative to paying for goods and services.
How Do Crypto Payments Work?
Crypto payments work through a transfer of cryptocurrency from one account to another. The process is a real-time exchange, which resolves payments instantly. This fast processing speed is great for businesses that need immediate payment. Real-time exchanges also allow users to trade anonymously.
You can do this in two ways. Alternatively, you may be able to set it up on your own without using a third-party processor, or you may sign up with a payment provider who handles the conversion of currencies for you. Either have their pros and cons.
You will need to set up a wallet and an exchange account to receive payments manually. Your wallet of choice will determine the type of currency you can accept. The challenging part is programming everything needed to implement the payment: addresses, transfers, security, and an interface to make the payment.
You can sign up with a payment provider if you do not feel comfortable doing the programming required to set up the payment. These providers deal with all the billing and processing for you, but service charges may apply. Depending on the company, you may be charged per transaction or you may be charged when you cash out your coins.
You can use a wallet app to send and receive coins to a recipient. These wallets are apps that run on your phone, tablet, or computer for a fee.
What Are The Advantages of Crypto Payments?
There are several advantages that crypto payments afford their users. Much of this is the flexibility of payments and services where you can use cryptocurrency.
1.Pay for Goods or Services with Faster Processing Speed
When compared to traditional payment methods, digital currency payments are faster. This is a result of the fact that you don’t need a bank to process the transaction. Payment processors handle all the heavy lifting, such as sending and verifying a transaction. As a result, you won’t be slowed down by bank regulations.
2. Use an Anonymous Form of Currency
A top benefit of using a coin as a mode of purchase is anonymity. Unlike a credit card, your identity is stored on the retailer or merchant side. This means that your credit card information can’t be stolen. With digital currencies, your payment information is not stored or exchanged.
While a digital breadcrumb points at your wallet, no personal information comes out. Whatever you want to buy, you can do so with anonymity as a priority.
3.No Transaction Fees
Some credit cards charge a transaction fee or charge an interest every month through your credit card. This can be a dealbreaker for individuals or businesses that make many small purchases. Some payment processors even charge a fee for withdrawals.
With crypto payments, transaction fees are non-existent. Crypto payment processors mostly don’t charge an extra fee for transactions. Instead, these wallets charge for crypto conversions to fiat money. Unless you exchange crypto to fiat and vice versa, you can enjoy zero transaction fees throughout.
4.Value Grows Over Time
Because of the volatile nature of some digital assets, their price can increase or decrease quickly. This makes them a high-risk investment. However, the similar growing power of equities provides the long-term growth of a digital asset.
If you take crypto payments for your business, you can keep the coins now and wait for their value to grow. This gives you better buying power if you hold onto it for a while.
What Are The Disadvantages of Crypto Payment?
There are downsides when investing in or using crypto exchanges to make payments. Here are some of them.
For starters, cryptocurrencies can be a highly speculative asset. Because of this, their value is prone to rapid changes that can affect the buying power of your coins. This unpredictability of the value of a virtual currency means that it may be harder to use it as a replacement for fiat currency.
Converting your local currency to whichever altcoin you want to use can be a hassle. Transfers can be slow, which means you can’t make large orders. Some countries aren’t allowed to make or hold any virtual currency. Real money conversion from crypto can cost you hefty fees, whether you buy or sell.
The value of some virtual currencies is not guaranteed. Some countries do not have a legal or regulatory framework to support the use of these tokens. This makes it difficult to implement them for tax purposes. Companies that accept crypto payments are still limited in nature too.
As you can see, using crypto payments can offer many advantages, but it also has its fair share of issues. There is a lot to consider, such as volatility, transaction costs, and regulation. There are good reasons to start accepting cryptocurrencies in exchange for products and services today.
Author: Regi Publico