Cryptocurrency is a digital asset that allows people to send, receive and store value. It’s backed by technology called blockchain, which establishes and verifies transactions without any central authority like a bank or government. The result is an innovative new way to make payments, buy products and services and manage investments.
Most of the crypto use cases focus on supplanting or facilitating traditional banking and financial transaction functions, but others have emerged that are native to crypto-based environments. Some of these are highly efficient, while others can provide powerful new kinds of empowerment and efficiency to individuals and businesses.
Paying with Crypto
In addition to its investment value, crypto can be used to pay for goods and services in a growing list of online stores and brick-and-mortar shops. Some retailers are early adopters, and some are even offering Bitcoin payment options to all of their customers. In fact, you can use your Bitcoin wallet to buy just about anything online from groceries to flights to furniture. In addition, many companies are starting to pay their employees in crypto, particularly those with global workforces.
Some companies also offer payroll services to help employers manage the tax challenges that come with paying workers in crypto. Whether your company is already doing this or considering it, it’s important to seek out independent articles and research on crypto before making any decisions about how to use it in your business.
There are thousands of different cryptocurrencies, and more are constantly being created. Most of these have been designed to perform specific functions on their respective blockchains. Some are stablecoins, which aim to reduce volatility by pegging their value to existing currencies, like the US dollar. Stablecoins often keep a US dollar in reserve for every coin they issue, and are audited by reputable third parties to ensure consistency.
The values of most cryptocurrencies are determined by supply and demand. The former refers to how much of the currency is available to buy, and the latter is a measure of how strongly people want to own it. This can lead to rapid price changes, and makes cryptos more volatile than assets backed by real estate or stocks.
It’s worth noting that crypto investments don’t benefit from the same federal protections as securities, and they can be more vulnerable to hacking and market manipulation. Because of these risks, it’s important to only invest money that you can afford to lose. You can also lose money if the platforms where you hold your cryptos fail or get hacked. Finally, remember that crypto prices can be extremely volatile and you may not be able to sell your investments for what you paid for them. Be sure to consult with a tax advisor and other professionals before making any financial decisions.