The world has witnessed a gradual shift in the mode of payments. People have started to use payment options that no longer involve hard cash. Amongst such payment modes, the one that has taken the market by storm is cryptocurrency. Since it may be the future of money, let us discuss what crypto is and how the future of payments – that’s crypto – might affect you.
Cryptocurrency – An overview
A cryptocurrency is a digital form of payment used in place of hard cash. It uses cryptography to encrypt a given data for security purposes.
Amongst the most famous cryptocurrencies are Bitcoin and Ethereum. Since Bitcoin is so famous, many people wrongly consider Bitcoin as the first and only successful cryptocurrency. However, several cryptocurrencies existed towards the end of the 20th century, such as Hashcash, Bit Gold, etc. Even though these virtual currencies could not flourish much, they set up a concrete base for the present-day cryptocurrencies.
Now, should you try crypto? Well, yes! As per a source, over 79 million people signed up for Bitcoin wallets in November 2021! Therefore, the future of payment in crypto is a bright one!
Misconceptions associated with the usage of Cryptocurrencies
Though crypto payments can be the future of transactions, many still misunderstand them and fall prey to certain myths. Here are a few myths that get circulated among people.
- The usage of Cryptocurrencies is anonymous
Many people believe that cryptocurrencies are somewhat anonymous. They think that while making transactions between the merchant and consumer through crypto, the end-user data is 100% anonymous.
Well, this could be true for some cryptocurrencies. But it is true at certain levels only. Many cryptocurrency companies work with the government to monitor illegal transactions. So, crypto is not as anonymous as some people might think. Yet, it is better that way because the government will ensure that the future of payment in crypto does not stay dark. For instance, El Salvador accepts Bitcoin as a legal currency. Someday, the future of cryptocurrency in India might be the same!
- The usage of Cryptocurrencies is unregulated
No universal rules govern cryptocurrency usage. However, different countries regulate it differently. If we consider countries like Japan, the US, and South Korea, it is clear that they want people to use cryptocurrency. But, they demand that people follow cryptocurrency-related guidelines effectively. In India, post the budget of 2022, we can hope that the future of crypto might change in India.
- One doesn’t have to pay taxes on Cryptocurrencies
Well, cryptocurrencies are not entirely tax-free. Some countries do not tax their people on cryptocurrencies, such as the Netherlands, Italy, etc. However, others, like Germany, India, tax crypto payments.
Some countries do not tax people on cryptocurrencies because they do not have a coherent system to deal with them. And when they do, the future in crypto may outshine that of the other currencies.
What does the lag between crypto and a system to deal with it tell us? It tells us that although we are moving into a cryptocurrency-specific future, financial systems are yet to match the pace. The lag compels one to think about the future of payments in crypto. Yet, research suggests that the value of the global blockchain market will hit USD 23.3 million by 2023, which is a good sign.
- People use it to make illegal transactions
Well, according to a research study, almost a quarter of all Bitcoin users indulge in illicit activities. But that is true for all payments. Be it hard cash or other online payment methods – one cannot say that those are devoid of illegal transactions. Shockingly, the most popular currency worldwide, the US dollar, remains the most employed currency for money laundering! But, with evolving security features and government involvement, the crypto market may see a decline in illicit transactions.
- Cryptocurrency is a plot to replace the traditional hard currency
Many people believe that cryptocurrency will one day replace hard currency. However, cryptocurrencies merely add to the existing payments system. Therefore, digital currencies do not necessarily mean that the cash currency is at risk! It is far-fetched that financial institutions will let something like that happen. On the bright side, crypto might show a new way for cash and digital currencies to go hand in hand.
- Cryptocurrencies do not involve the use of Blockchain
Blockchain is a database technology that records data related to crypto transactions. It also makes it difficult for hackers to access data related to cryptocurrencies.
If anyone says that cryptocurrencies can function independently of blockchains, that cannot be so. Cryptocurrencies essentially rely on blockchain-based technology.
The reason behind this myth might be that blockchain technology has applications other than cryptocurrencies as well. Thus, making some people question the inherent connection between cryptocurrencies and blockchain. Awareness of crypto may help people see the future of payment in crypto better.
- Cryptocurrency is nothing but a scam
Not all cryptocurrencies are a scam. The Bitcoin price indeed fell sharply from its peak value of about $16,000 (in January 2018) to about $8200 (in September 2019). But, that is insufficient for calling cryptocurrencies a scam.
The value of every currency – dollars, euros, or pounds – is variable; it depends upon many factors related to the market. Hence, the view that cryptocurrencies are a scam reflects improper and biased research. The future of payments via crypto is as bright as we want it to be – we only have to research the facts.
- Cryptocurrencies are not worth it
Believing that cryptocurrencies are not beneficial might be wrong. Cryptocurrencies are as handy as hard currency. One can use a cryptocurrency for purposes, such as buying products and services, making trades, etc.
If you are wondering which well-established platforms accept cryptocurrency, here are a few of them: Microsoft (for Windows as well as Xbox stores), Tesla, Subway (some stores), Wikipedia (accepts donations in the form of cryptocurrencies), etc.
- Cryptocurrencies involve a lot of technical details; not easy to use
There indeed are many internal processes in the background of cryptocurrency transactions. Yet, you don’t necessarily have to learn about those workings.
You can use cryptocurrencies with minimal knowledge, like knowing how to make transactions with them, when and where to trade, etc.
Is it safe to use Cryptocurrency?
It would be wrong to say that cryptocurrencies are 100% safe. There is always some risk associated with the use of cryptocurrencies. Here are some risk factors and tips on how to avoid them:
- Cryptocurrencies are generally stored online, making them prone to hacking. Experts suggest using cold wallets (i.e., keeping your cryptocurrencies on an offline device, such as a USB drive) will be helpful.
- Many scammers dupe people by making them invest in fake cryptocurrencies. One can avoid the risk by going for well-established cryptocurrencies. DYOR is the key.
- Some fraudsters might ask you to buy or sell your cryptocurrencies. It is always advisable to transact in cryptocurrencies via credible exchanges only.
Some Bitcoin market capitalization facts might strengthen your trust in crypto. Statistics show that the Bitcoin market capitalization was USD 1 billion in 2013; the factor had reached USD 600 billion in June 2021! That is probably one advantage of cryptocurrency; it is highly dynamic! The volatile nature of cryptocurrency might push it towards a rewarding future of payments in crypto.
The final take
Cryptocurrencies come along with certain risks, but so do other currencies. For example, a person carrying hard cash might lose it to a robber. The point here is that – there are always risks attached to all kinds of payment modes – debit/credit cards, digital payment methods like net banking, etc.
Therefore, one needs to research well about cryptocurrencies to avoid risks. If one takes all the necessary precautions and practices safe transactions, the risk factor reduces significantly! Undertaking such measures enables you to see the bright future of crypto!Disclaimer: Cryptocurrency is not a legal tender and is currently unregulated. Kindly ensure that you undertake sufficient risk assessment when trading cryptocurrencies as they are often subject to high price volatility. The information provided in this section doesn't represent any investment advice or WazirX's official position. WazirX reserves the right in its sole discretion to amend or change this blog post at any time and for any reasons without prior notice.