Bitcoin Payments – How Does It Work?
Cryptocurrencies are now an extremely popular investment asset. But what about their practical use, for example, as a means of payment? Bitcoin payments – How does it work? The process is not complicated at all.. Check out our article to find out!
Bitcoin in practice, or cryptocurrencies as money
Cryptocurrencies led by Bitcoin are seen primarily as a means of storing value, especially attractive in an era of high inflation. Meanwhile, standard, everyday transactions can also be made with them, something that is often forgotten. Owning bitcoin allows you to pay for services and goods virtually anywhere in the world. It is estimated that cryptocurrency payments are currently accepted by several thousand companies operating mainly in Europe, the Americas, East Asia and Australia with New Zealand. This group includes dozens of companies from Poland. Most often, however, owners of cryptocurrencies do not take full advantage of their capabilities. Most crypto holders are limited to passively storing tokens in a wallet while waiting for a convenient moment to resell them.
The vision of cashing in a sizable profit in traditional currency seems to overshadow Bitcoin’s many virtues. It is worth noting that digital money has much greater potential, far beyond acting as an investment or speculative tool. The number of outlets accepting payment using cryptocurrencies is growing every year. You can follow the development of this trend on a regular basis at coinmap.org, founded by crypto enthusiasts from the Czech Republic. It includes a map of the world, which marks newly emerging commercial and service outlets that recognize cryptocurrencies, as well as stationary crypto exchange offices and bitcoin ATMs.
How to pay with bitcoin?
What does payment using Bitcoin look like? Transactions using crypto can be made both in stationary stores and online. The process takes place in a few simple steps:
- Download the cryptocurrency wallet to your smartphone or laptop. It comes in the form of a mobile or desktop application. If you want to pay exclusively with Bitcoin, the recommended apps are Electrum (for Android) and Blue Wallet (for iOS). Are you also interested in altcoin payments? Try the Exodus app, Meta Mask, Trust Wallet or Coinomi. Do you mainly use stablecoin? In this case, the favorite will be TronLink.
- After installing the app, create your private cryptocurrency wallet. In the course of configuration, the application will generate a seed phrase, which must be written down on a piece of paper and hidden in a safe place. Soon a panel with your wallet balance will be displayed.
- Make a purchase of cryptocurrencies via bank transfer on an exchange (e.g. Binance, Kraken, Kucoin) or for cash at a bitcoin ATM or stationary exchange.
- Transfer the purchased crypto to your private wallet. How? In the vast majority of applications, you will find the public address in the form of a string of alphanumeric characters and a QR code when you click on the arrow icon with the caption “receive”. Copy the address and then paste it in the appropriate place in the withdrawal panel of your exchange account, and then confirm the withdrawal order. On the other hand, if you buy crypto with cash, simply show the cashier at the exchange office the QR code of your wallet.
- The app displays your wallet balance. You already have crypto to make payments. In order to pay for the product or service you are purchasing, click the arrow icon with the word “send”. You will go to a panel where you need to enter the amount of the transaction and the address of the seller. As with getting crypto, you can do it in two ways. Option one is to transcribe/paste the address in the form of characters, option number two would be to scan the QR code with the smartphone camera. Approve the transfer of funds by clicking on the “send” button.
- After sending the crypto, you have the ability to view the current status of your payment on the blockchain. In the block explorer linked in the application, you can check whether the transaction has already been completed. Shortly after its automatic confirmation, the vendor will proceed to process the order. Congratulations, it’s all about cryptocurrency payments via apps!
The described procedure applies to the situation when you are just starting out with crypto. Subsequent transactions are, of course, less complex, consisting of steps 5 and 6 and occasionally 3 and 4. More detailed information and advice on paying with cryptocurrencies can be found on the well-designed BTC Payments page.
An alternative to mobile apps, or cryptocurrency payment cards
Cryptocurrency payment apps are intuitive to use, in terms of ease of use they are very similar to mobile apps offered by regular commercial banks. Nevertheless, some cryptocurrency holders, for various reasons, do not want to install another app on their smartphones in order to “play” with pasting and scanning codes in every shopping situation. It is for users demanding even greater convenience and efficiency in performing transactions that special payment cards have been created, allowing express payments with cryptocurrency funds. It is still little known, so we will devote more attention to it than to mobile applications.
The palette of crypto debit and credit cards is quite substantial, with at least a dozen offerings to choose from. They differ in a number of features – the range of tokens supported, the rate at which they convert cryptocurrency values into fiat currency units, the amount of cashback and transaction fees, and additional options such as integration with a private wallet or bank account. Almost all cards offer cash withdrawals at ATMs. They come in the form of both physical chip cards and virtual cards installed on a smartphone.
The very existence of cryptocurrency cards puts the lie to the popular misconception that “crypto is only used to pay for shady deals.” If this were in fact the case, these cards would be unlikely to be issued and supported by such reputable institutions operating within traditional finance as Visa or MasterCard….
It should be noted that at the current stage of cryptocurrency adoption, cryptocurrency payment cards have one definite advantage over mobile apps. While we still have relatively few points of sale accepting direct payment with Bitcoin, electronic card payments are possible in the vast majority of stores and service companies. In terms of usability, crypto-cards using the Visa/MasterCard infrastructure are virtually no different from cards assigned to bank accounts. Thus, their holders gain enormous freedom to use cryptocurrencies for consumption purposes.
How to get into possession of a cryptocurrency payment card? In most cases, the procedure is limited to creating a user account on the service provider’s website and ordering the card of interest. Depending on which card one chooses, the funds to top up the card are sent to the user’s account set up at the card service, or the card is plugged into a previously created cryptocurrency wallet operated from the mobile app. Cryptocurrency cards are integrated with dedicated applications that, among other things. record transaction history and develop an analysis of spending.
The following is a brief overview of sample crypto payment cards currently available on the market:
- Uphold – a debit card available in physical and virtual form, supported by MasterCard. Funds to perform transactions are sent to the user’s account. The ability to integrate with Google Pay and Apple Pay payment systems. In addition to funding with cryptocurrencies, Uphold also accepts deposits in the form of traditional currencies. No activation or holding fees. Cashback of 4% charged in Ripple XRP token. The most favorable rate of conversion of cryptocurrencies to fiat currencies among the cards available on the market.
- Crypto.com Visa Card – debit card available in physical form in 7 variants. Topping up funds to your account. Support for 100 cryptocurrency tokens. Additional ability to deposit 20 fiat currencies. In order to receive the card, you must go through the full KYC (Know Your Customer) user verification procedure. Cashback of 1-8%, charged in the Cronos CRO token. Ability to set up subscriptions to Netflix, Spotify, Airbnb, Amazon Prime.
- Nexo – a credit card in virtual and physical form, operated by MasterCard. Available in 4 variants. Allows borrowing against the pledge of cryptocurrency funds deposited in the user’s account. The loan amount cannot exceed 50% of the value of the tokens currently held in the account. It supports more than 40 cryptocurrency tokens. The amount of cashback depends on the type of card, at 0.5-2% for charging in NEXO token or at 0.1-0.5% for charging in Bitcoin BTC. In order to order the card, it is required to go through the full KYC procedure and pay the crypto into your account in advance. A crypto top-up worth a minimum of $50 opens up the possibility of activating a virtual card, while a deposit worth a minimum of $500 entitles one to apply for a plastic card.
Our English-speaking readers are invited to the pages of Software Testing Help to read a comprehensive article comparing and ranking the top 10 crypto payment cards.
Is it worth paying with Bitcoin?
Paying with virtual currencies is increasingly popular these days because of the smooth transfer of funds and relatively low transaction fees. The whole process also has several properties that are very beneficial to the user.
One of the key advantages of using Bitcoin as a means of payment is that it provides a high degree of privacy and anonymity. Bitcoin transactions do not require any personal information, such as personal identification, phone number or card number with CVV code, which effectively protects users from the theft of deposited funds due to the interception of sensitive data by a hacker.
Any transactions made with cryptocurrencies are also fully transparent. Interested parties can easily follow the entire process of transferring funds from one wallet to another using the block explorer. Despite this, payments via BTC have much greater anonymity than traditional transfers. Admittedly, the movement of funds between wallets itself is completely public, but the identity of those managing the wallets remains unknown, or at least very difficult to determine.
Another important advantage of the practical use of Bitcoin is its speed and efficiency. Depending on the current load on the blockchain network and the transaction fee setting, payments process in just a few minutes or so. It must be said that this is a much better result compared to traditional bank transfers, for the finalization of which one has to wait not even for hours, but for days, due to the fact that banks love to keep our money in their hands for as long as possible. Besides, payments in Bitcoin are much cheaper than traditional bank transfers for expedited transfers or sending money abroad.
Cryptocurrency payments also feature security, provided by the operation of blockchain technology. Blockchain is a distributed ledger that records all operations on a given crypto network. This solution makes it impossible to change or manipulate any transaction after it has been approved. The guarantee of openness and reliability of blockchain’s work leads into increased confidence in payment processes. The transaction made cannot be undone in any way. Payment with bitcoin can therefore be seen as an expression of trust in a given counterparty.
We can clearly see that Bitcoin is much more than an attractive speculative asset for investors who like the thrill and risk. With the world becoming inexorably digitized, cryptocurrencies, led by Bitcoin, are likely to play a leading role in the payment transaction and financial services space in the near future. It’s quite possible that with the end of cash and the terror of CBDC (central banks’ digital money with a programmed expiration date), cryptocurrencies will become the last bastion of freedom and privacy for our money. Why not take this into consideration and convert to crypto-payments in everyday life today?
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