The interest in cryptocurrencies has been steadily rising in the last several years. There were nearly 300 million crypto users in 2021, and this number is expected to grow to 1 billion by the end of 2022. According to statistics, 1 out of 6 Americans has already used crypto for trading and investing.
With proper regulation and guidelines, cryptocurrencies have the potential to become legitimate and mainstream currencies like the US dollar.
Let’s see how cryptocurrencies can be used.
If you're from India, you can also refer to the Indian version of this article.
So, first of all, what is cryptocurrency?
In simple words, cryptocurrency is a digital currency that can be held like an asset or exchanged for goods and services. It’s quite similar to the regular currencies in circulation, like the US Dollar or the Swiss Franc. However, one important difference is that cryptocurrencies do not exist in physical forms.
Also, all cryptocurrencies are decentralized, which means they are not controlled or regulated by any central bank or government agency like the US Fed.
Individuals and businesses can hold cryptocurrencies and use them for making payments without intervention by any government agency. So, cryptocurrencies do not need intermediaries like banks or financial institutions.
Note. The most common cryptocurrency is Bitcoin. Some other important cryptocurrencies are Ethereum, Cardano, XRP, and Tether (stablecoin).
Cryptocurrency vs. fiat currency
Fiat is the general currency in circulation, like the US dollar. It is a paper currency, the value of which is guaranteed by the US government. Fiat currencies are issued and controlled by the Central Bank. The value of a fiat currency falls when more and more notes are in circulation. However, the total amount of a currency is fixed.
Cryptocurrency is a virtual currency that is not regulated or controlled by any central bank or government agencies. Cryptocurrencies don’t need any intermediaries, crypto transactions can eliminate transaction costs. This is a big advantage of cryptocurrencies.
Stablecoins are cryptocurrencies whose value is tied to the value of another currency or commodity. For example, USDT is considered to be the least risky coin. Stablecoins are pegged to real assets like gold, precious metals, US dollars, and other fiat currencies. Stablecoins can be used for conversion on exchanges instead of dollars.
Advantages of stablecoins:
- Stablecoins are less volatile compared to other cryptocurrencies.
- Stablecoins are safe to invest as they are backed by fixed assets.
- Stablecoins make payments abroad a lot easier.
How to start using cryptocurrencies?
Here are the 3 steps to becoming a crypto owner:
Let’s see how these steps are done.
Buying, holding, and using cryptocurrencies
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Buying cryptocurrency
You can buy cryptocurrencies with the US dollar or the pound, your fiat money. In this process, you are basically converting your fiat currency to cryptocurrencies.
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Holding cryptocurrency
Once you have bought cryptocurrencies, you can hold them in a crypto wallet.
A cold wallet is an offline wallet that is stored in a hardware device, like a flash drive. A cold wallet is not connected to the Internet, for example, Ledger Nano, Trezor Model, and CoolWallet Pro.
A hot wallet is a wallet that is connected to the Internet, for example, a crypto wallet in a mobile application. A hot wallet is extremely convenient and easy to use as you can easily make payments, exchange your cryptos for fiat, or exchange one crypto with another. The most popular hot wallets are MetaMask, Coinbase Wallet, and Edge Wallet.
Therefore, hot wallets are the most convenient way to hold and use crypto coins.
There are many crypto exchanges (wallets) like Binance, Coinbase, Ledger, KuCoin, etc. through which you can buy and hold cryptocurrencies.
A good crypto exchange has the following features:
- Number of supported coins
- Low or no fees
- Easy to use interface
- Trustworthiness and reputation
- Large user base
- Advanced trading and investment features
- Customer support
- Data security
Let’s explore the most popular worldwide wallets in detail and compare.
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 |
|
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 |
All of these wallets can be used to buy and hold cryptocurrencies.
Note. ERC20 token transfers usually have the highest fees.
Do I have to pay the TDS tax?
The central board of direct taxes (CBDT) has clarified that when someone is buying crypto via an exchange (P2P transactions count as well), the tax can be deducted under section 194S by the exchange. So as a buyer, you won’t have to pay it. Learn more.
There are two ways to hold crypto coins:
- You can buy from a crypto exchange like Binance and Coinbase and then keep crypto coins there. In this case, the cryptos are stored in the exchange’s wallet, and when you make a transfer to someone, it goes through the exchange.
- You can buy cryptos from a platform like Metamask, which will give you a digital wallet address through which you can make P2P transfers (person-to-person).
|
What is P2P? P2P is a cryptocurrency exchange method in which people can directly exchange cryptocurrencies with each other and receive payments. |
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Using cryptocurrency
Choose a wallet you prefer and go to its website. Sign up to convert fiat into crypto coins (buy cryptocurrency). Here is KuCoin’s sign-up page:
The sign-up process is straightforward. In most cases, you only need to provide your name (make sure it matches your ID card), email address, mobile number, etc. Also, remember to set a strong password to secure your account.
Identity verification and bank account details
After you have registered with a crypto exchange, you are just a few steps away from buying cryptocurrency. Please note that most crypto exchanges require identity verification.
After creating an account, you will see a page similar to this (Coinbase verification page).
Note. Most crypto exchanges take around 24 hours to verify the documents. After verification of your identity, you will be able to add your bank account details.
After your account is ready, you can use it to buy cryptocurrency. You can later send those coins to others using P2P, sell for fiat, and withdraw fiat to your bank account.
How to convert your fiat for crypto and crypto for fiat and make deposits and withdrawals?
- Make a deposit with your fiat (USD, euro, etc.) via a bank card or other payment method and buy cryptocurrency.
-
You can also convert one crypto into another through exchanges.
-
You can check your balance and withdraw your fiat whenever you like.
Note. Via exchanges, you can convert and sell cryptos to get fiat. P2P exchanges allow selling cryptos directly to buyers.
How to pay with cryptocurrency?
Cryptocurrency is increasingly becoming a legitimate means of paying for real goods and services.
You can transfer your cryptocurrency to companies and sellers. Here are a few big companies that accept cryptocurrency:
- Microsoft
- Burger King
- AT&T
- KFC
- Subway
As we have more crypto users, exchanges, and merchants accepting cryptos for real goods and services, crypto will play an important role as an alternate currency in the digital economy.
Here’s the instruction on how to deposit with crypto on Binomo.