Interest in cryptocurrencies has been steadily increasing over the past few years. The number of crypto users reached nearly 300 million in 2021 and is projected to grow to 1 billion by the end of 2022. Statistics show that 1 out of 6 Americans have already engaged in crypto trading and investing.
With proper regulation and guidelines, cryptocurrencies have the potential to become widely accepted and used as mainstream currencies, similar to the US dollar. Now, let’s explore how cryptocurrencies can be utilized.
For readers from India, there is also an Indian version of this article available.
So, what exactly is cryptocurrency? In simple terms, it is a digital currency that can be held like an asset or used to exchange goods and services. While similar to regular currencies like the US dollar or Swiss Franc, cryptocurrencies differ in that they have no physical form.
Furthermore, all cryptocurrencies operate in a decentralized manner, meaning they are not controlled or regulated by any central bank or government agency like the US Federal Reserve. Individuals and businesses can own cryptocurrencies and use them for payments without the need for intermediaries such as banks or financial institutions.
It’s important to note that Bitcoin is the most widely recognized cryptocurrency, but there are other significant ones like Ethereum, Cardano, XRP, and Tether (a stablecoin).
Cryptocurrency differs from fiat currency, such as the US dollar, which is a physical currency regulated and issued by the Central Bank. The value of fiat currency can decrease as more notes are in circulation, but the total amount remains fixed. On the other hand, cryptocurrency is a virtual currency not regulated by any central authority. Crypto transactions can be conducted without intermediaries, eliminating transaction costs and offering several advantages.
Stablecoins are a type of cryptocurrency whose value is tied to another currency or commodity, such as gold, precious metals, or fiat currencies like the US dollar. They provide stability and can be used for conversions on exchanges.
Advantages of stablecoins include lower volatility compared to other cryptocurrencies, safety as they are backed by fixed assets, and ease of international payments.
To start using cryptocurrencies, follow these three steps:
- 1. Buy cryptocurrency by converting your fiat money (like the US dollar) into crypto.
- 2. Hold your cryptocurrencies in a crypto wallet. Cold wallets are offline and stored in hardware devices, while hot wallets are connected to the internet and often found in mobile applications.
- 3. Use your cryptocurrencies for various purposes, such as making payments, exchanging for fiat currency, or trading between different cryptocurrencies.
Popular crypto exchanges and wallets like Binance, Coinbase, Ledger, and KuCoin enable users to buy, hold, and manage their cryptocurrencies conveniently.
Feel free to refer to the provided image for a visual representation of these steps.
In summary, cryptocurrencies have gained significant popularity, and their usage is expected to grow even further. Understanding the basics of cryptocurrency and following the necessary steps can help individuals worldwide engage with this digital form of currency.
Top crypto exchanges in 2022
| Wallet name | Number of supported currencies | Fees | Minimum buy and sell amounts | Advantages | Disadvantages | Accessibility |
Coinbase | 200+ | From 0.5% to 4.5% | $2 | 1. One of the most established and trusted crypto exchanges.2. High level of security.3. Low minimum buy and sell amounts. | 1. Higher transaction fees. | Website and mobile app for iOS and Android |
| Binance | 350+ | From 0,02% to 0,10% for instant buy/sell | $10 | 1. A large number of cryptocurrencies.2. Established crypto exchange.3. Low fees. | 1. Less user-friendly.2. Complex verification.3. Frequent technical glitches. | Website and mobile app for iOS and Android |
| CoinMarketCap | 9,000+ | 1. Website interface and navigation can be a little bit complicated for beginners. | Website and mobile app for iOS and Android | |||
| KuCoin | 700+ | From 0,0125% to 0,1% | $1 | 1. A large number of cryptocurrencies.2. Low fees.3. P2P transactions. 4. Advanced features.5. Users can earn interest on their crypto balance. | 1. Limited payment methods.2. Not suitable for new users. | Website and mobile app for iOS and Android |
You can use cryptocurrencies to buy and hold them. ERC20 token transfers usually have high fees. Do you have to pay TDS tax? The CBDT clarified that the tax can be deducted by the exchange when buying crypto. So as a buyer, you don’t have to pay it. There are two ways to hold crypto coins. You can buy from a crypto exchange and keep the coins in their wallet. Or you can buy from platforms like Metamask and make P2P transfers. P2P is a method where people directly exchange cryptocurrencies with each other. To use cryptocurrency, choose a wallet and sign up on their website. Provide your details and set a strong password. Most exchanges require identity verification and bank account details. After verification, you can buy crypto and make transfers. Convert your fiat for crypto and vice versa. You can deposit, withdraw, and sell cryptos through exchanges. You can also pay for goods and services with cryptocurrency. Big companies like Microsoft, Burger King, AT&T, KFC, and Subway accept crypto as payment. As more users, exchanges, and merchants accept cryptos, it will become a significant alternate currency in the digital economy.
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