Cryptocurrency is one of the best innovations of the century which has transformed the way businesses sell their products and procure goods and services. However, over the years many individuals and companies have adopted cryptocurrencies as a means of payment and as an investment class. Currently, the common perception is that cryptocurrencies are useful for speculative purposes. This article explores the other uses of cryptocurrencies, apart from speculation.
What is Cryptocurrency?
Cryptocurrency is a form of digital currency that exists on the blockchain and uses cryptographic technology. It also acts as a decentralized medium of exchange, verifiable on the blockchain. Its unique functions are based on encryption which facilitates its transfer and utility. The main drivers of the value of cryptocurrency are the market forces of demand and supply.
On the other hand, blockchain is the public ledger that records and stores all the transactions that occur on the network. As such, everyone who has the know-how and network can easily track the transactions that take place on the blockchain.
Due to the volatility of cryptocurrencies, some people label them as get-rich schemes or speculative bubbles. For example, over the years many people have viewed Bitcoin as an investment asset that can generate much profit. In the end, they have concluded that cryptocurrencies are for speculative purposes only.
It is true that cryptocurrencies such as Bitcoin are speculative assets because the crypto prices fluctuate constantly which we could check from the Gate.io crypto exchange. Also, most of these cryptocurrencies are not backed by anything. However, certain stablecoins are backed by various assets including precious minerals or fiat currencies.
Bitcoin is probably the most speculative cryptocurrency in the market. This is due to its first-mover advantage in the crypto space and its popularity. In fact, Bitcoin is the number one cryptocurrency based on market capitalization and investors can check the latest price of Bitcoin and its market capitalization on the Gate.io cryptocurrency exchange. Speculation, also called trading, is the process of buying and holding an asset hoping that its crypto value will increase or decrease in the future. If the value rises, the speculators will sell the cryptocurrency. The reason why people mostly use cryptos for speculation instead of buying goods and services is their high volatility.
Crypto and Payments
There are also many people who use cryptocurrencies as means of payment for goods and services. One advantage of using cryptocurrencies to buy goods and services is that many websites accept them. Already, some countries such as El Salvador-in-el-salvador “such as El Salvador “)and the Central African Republic have made cryptocurrencies legal tenders. El Salvador only accepts BTC as a medium of exchange in the country. According to El Salvador President Nayib Bukele, Bitcoin helps over 70% of the country’s population to make easy transactions since they do not have bank accounts.
The other reason cryptocurrencies are popular is that they make it convenient for migrant workers, scattered around the world, to send funds back home. This is because it is cheaper to remit funds using cryptocurrencies than fiat currency. More significantly, Bitcoin is valuable since many people around the world accept it as a means of payment. Now, as more people accept digital currencies as a medium of exchange their values are likely to increase in the future.
Crypto and Charity
The adoption of cryptocurrencies for donations worldwide explains another reason why crypto values continue to increase. Bitcoin and Ether (ETH) are the main cryptocurrencies used for philanthropic purposes. For example, after Russia’s invasion of Ukraine, many people around the world have donated cryptocurrencies to help Ukrainian citizens who are facing a humanitarian crisis.
Cryptocurrencies have also been used to assist refugees in various countries of the world. This is because refugees are poor and lack basic materials. A specific case where people donated cryptocurrencies to help alleviate a humanitarian crisis was in India. When India was affected by the second wave of Covid-19 many individuals and institutions donated funds using cryptocurrencies. For example, the co-founder of Ethereum, Vitalik Buterin donated $1 billion worth of Shiba Inu (SHIB) tokens to this case.
Crypto and NFTs
Non-fungible tokens (NFTs) are an emerging type of digital asset that exists on the blockchain. They are different from cryptocurrencies because each NFT is a one-of-its-kind digital asset. People mostly use NFTs on social media platforms and other virtual communities such as the metaverse.
The emergence of NFTs has helped to increase the utility and value of cryptocurrency. As such, people cannot solely use cryptocurrencies for speculation. For example, individuals and institutions use cryptocurrencies to purchase NFTs. The most popular cryptocurrency for that purpose is ETH. The reason is that most NFTs exist on the Ethereum blockchain.
Likewise, when minting NFTs people need cryptocurrencies to pay gas fees. Similarly, when NFT holders sell their NFTs they get cryptocurrency in return.
How Institutions Can Move from Speculation to Application
There are many companies that have adopted blockchain technology to increase the reach of their products and services. For example, some of these firms have developed applications that enable many people to access their products. Most of these applications make it easy for customers to buy their products using cryptocurrencies.
Some companies have ventured into the decentralized finance (DeFi) sector by establishing digital products and services. For instance, some of these institutions offer crypto lending and borrowing services. Others have developed metaverse platforms that enable brands to be visible on the international stage. Interestingly, it is possible for some brands to establish digital offices using Metaverse technology.
How Companies Can Use Cryptocurrencies
Apart from being directly involved in the decentralized finance sector, many companies can also leverage cryptocurrencies to increase operational efficiency. Let’s look at a few ways that firms can do so.
Paying employee salaries using cryptocurrency: Businesses can pay their employees using cryptocurrencies, especially stablecoins such as Tether USDT. Of course, they can have the arrangement to pay part of the salaries in fiat currency.
Integrating cryptocurrencies into the website: If you integrate cryptocurrencies into your website it allows the customers to make payments using them.
As we discussed above, cryptocurrencies have other uses beyond speculation. That is why Bitcoin is valuable. People use it as a medium of exchange. Individuals and firms can make donations, make payments for goods and services as well as mint or buy NFTs using cryptocurrencies. On the other hand, companies can integrate cryptocurrencies on their websites to enable their customers to use them for making payments.
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