Cryptocurrencies were designed to be an alternative method of payment. While today they may be more popular as speculative investment instruments, the fact is that Satoshi Nakamoto, the creator of Bitcoin intended cryptocurrencies to be a revolutionary method of sending and receiving payments without the interference of the government.
While cryptocurrency may itself be a complicated and intimidating topic, making payments with it is relatively simple. You can easily pay someone with Bitcoin in a matter of a few minutes. These days, many cryptocurrency exchanges such as Binance and Crypto.com enable users to pay with crypto using their apps.
In a sort of a TradFi and DeFi hybridization, crypto debit cards are also available with which you can make payments with your cryptocurrency at merchant outlets just like a normal debit card. In this way, you can pay with crypto online as well as offline
However, just like other digital payment options, you need to be careful while making crypto payments. In fact, you need to be more vigilant because cryptocurrency transactions are irreversible and there are no legal protections in case of payments made with cryptocurrency.
How to Pay Someone with Cryptocurrency
To make payments with cryptocurrency, you obviously first of all need some cryptocurrency. The easiest way to acquire crypto coins is to buy them with fiat currency via a cryptocurrency exchange like Binance or Coinbase. Such platforms often have extensive tutorials and walk you through the whole crypto-buying process.
Next, you need a wallet to store said cryptocurrency. These are digital wallets that store your public and private keys on your behalf. Public keys are like an email address that enables you to send and receive payments while private keys are needed to actually access the crypto assets.
After acquiring the basic(and most important) tools for making crypto payments, we can now move on to discuss the actual steps involved in paying someone with Bitcoin.
How to Pay with Crypto Wallet
As mentioned above, you can simply use your crypto wallet to send and receive payments. Your public key would act as the address where the amount is sent while the private key is used for digital signature or approval after which the transaction finally goes through.
Step 1: Open the crypto wallet app on your desktop or mobile phone. You will be able to see the Send Payment or equivalent option on the home screen.
Step 2: Click on the Send Payment button and select the asset you want to send. Also, enter the amount of the cryptocurrency you are transferring.
Step 3: Scan the QR code for the recipient’s wallet or manually enter the wallet address. This is the most important step as crypto transactions once confirmed cannot be reversed. Therefore, you should always double-check the wallet address before sending the payment.
Step 4: Review the details of the transaction once and then click on Send. The cryptocurrency would then be transferred to the recipient’s wallet.
How to Pay with a Crypto Debit Card
Just like you use a debit card to make payments directly from your bank account, you can apply for and get a crypto debit card that can be used to make merchant payments with your crypto assets. Many cryptocurrency exchanges such as Crypto.com and Binance offer such cards. Cashbacks and additional rewards may also be associated with crypto debit cards.
Step 1: Make sure you have an active crypto wallet and it is adequately funded with some cryptocurrency.
Step 2: Next, you need to apply for a crypto debit card. You can research and choose one that suits your needs. Carefully read the terms and conditions and the eligibility criteria to get a card. KYC verification is almost always mandatory and some places such as Crypto.com require that you lockup its native CRO token for a certain period.
Step 3: Once you are approved, you can go to the exchange’s app and tap on the Card tab. Tap on top-up or similar option to load your card with cryptocurrency.
Step 4: Now, your crypto debit card is ready to be used for merchant transactions. You can use it like a conventional debit card at Bitcoin ATMs, to pay someone online or swipe it at a PoS at a merchant outlet.
How to Make P2P Crypto Payments
At its heart, cryptocurrency is supposed to be an alternate payment method that is used for P2P transactions. Here, you just directly send the money to the recipient without involving any third party.
Step 1: Go to a P2P marketplace and browse the listings. Bisq is one example of a P2P exchange that provides a place for crypto buyers and sellers to interact and trade.
Step 2: After confirming the terms of the trade, you need to send the payment to the recipient.
Step 3: Some platforms may have their own wallets where you can deposit Bitcoin for payments but at other places, you can manually send crypto from your own crypto wallet. For this, you need to first open the crypto app on your desktop or mobile.
Step 4: Tap on the Send button on the home screen.
Step 5: Select the asset that you want to send and enter the amount required for the transaction.
Step 6: Next, enter the recipient’s wallet address. This is the most important step and you need to double and triple-check the address before you finally hit the send button.
Step 7: You will be shown a preview before the payment goes through. Review all the details and tap on Send if everything seems to be in order. The cryptocurrency will then be transferred from your wallet to the recipient’s wallet.
Advantages of Cryptocurrency Payments
Now, you may be wondering about the pros of crypto payments. Hence, let us discuss some advantages of making payments with cryptocurrency.
Anonymity
Cryptocurrency payments are anonymous to a large extent because they do not require personal information to process transactions. You can protect your privacy when you pay using cryptocurrency with no one prying into the reasons for your transactions.
However, remember that crypto payments are not completely anonymous as you can be identified using your wallet address if that information is accessible.
Peer-to-Peer Transactions
Cryptocurrencies are decentralized and you can deal directly with other crypto buyers or sellers directly on a peer-to-peer network. No third parties are involved in such networks and you can send or receive money from anyone without needing a middleman to broker the deal.
Lower Costs
You may often be charged a convenience fee or other charges when using other modes such as a payment gateway to send or receive money. While network fees also have to be paid for crypto transactions, the overall transaction cost still comes out to be lower for payments made with cryptocurrencies.
Payment Across Borders
Transferring money from one country to another via banks can often be expensive. Administrative fees can be exorbitant while transferring money internationally. Cryptocurrencies have a huge advantage here as they can be used for cross-border money transfers without having a big chunk of the money going towards administrative fees and other such charges.
Financially Inclusive
There are many people who do not have access to banking services. There are large unbanked populations in many developing countries for whom it is difficult to access traditional sources of finance. Cryptocurrencies, however, require only a mobile phone and internet connection. Therefore, anyone can send or receive money from anywhere with cryptocurrency.
Disadvantages of Cryptocurrency Payments
Like everything, crypto payments have some cons too. While cryptocurrencies may seem like a fast and efficient way of paying for things, all is not hunky-dory with cryptocurrency payments. To understand this better, let us discuss some of the major disadvantages of cryptocurrency payments.
Transaction or Gas Fees
While it is true that cryptocurrency transactions are often cheaper than other modes of payment, you still have to pay network fees for your crypto payments. Depending on the market conditions, you may end up paying a huge amount in simple network fees.
Take for example Ethereum, which is notorious for gas prices rising prohibitively high whenever its network gets congested.
Price Volatility
It is no secret that cryptocurrencies are extremely volatile price-wise. It is possible for your crypto assets to lose value at the drop of a hat. The value of your cryptocurrency can change even while the transaction is still in process. This makes cryptocurrency payments as you may end up sending too much or too little money.
Limited Legal Protections
As discussed above, cryptocurrencies are an alternative method of payment that is not regulated by any authority. Therefore, crypto payments do not have the same level of protection that bank transfers or debit or credit card payments may have. There is no legal recourse for you if your cryptocurrency ever ends up in the hands of a scammer.
Irreversible Transactions
Once a cryptocurrency transaction is recorded on the blockchain, it cannot be reversed. Your crypto may be lost forever if you accidentally send it to the wrong wallet address. The only way to recover funds in such a situation is to get the recipient to voluntarily send back the cryptocurrency.
In another situation, you can also lose your crypto assets if your private keys are stolen. Again, there is no way to recover the lost cryptocurrency in such a situation.
Frequently Asked Questions(FAQs)
Does Amazon Accept Crypto?
No, Amazon does not accept Bitcoin or any other cryptocurrency. If you want to shop on Amazon using your crypto, a roundabout way to do so is to buy Amazon gift cards using cryptocurrency and then use them to order the product you want. You can also convert your cryptocurrency to fiat currency to shop on Amazon.
Is Paying with Crypto Safe?
You have to be extra careful while paying with crypto because cryptocurrency if sent to the wrong wallet address cannot be recovered. Further, you have limited legal protections when making payments with cryptocurrency as compared to say, while using debit or credit cards. Therefore, there is no way to recover your crypto assets if a scammer gets their hands on them.
Can I Pay with Crypto on PayPal?
Yes, you can use crypto on PayPal. You can buy, sell and transfer cryptocurrencies like Bitcoin, Bitcoin Cash, Ethereum and Litecoin on PayPal. It also supports peer-to-peer(P2P) cryptocurrency transfers between personal PayPal accounts.