According to a UN Conference on Trade and Development report, Ukraine and Russia have topped the ranking of countries for owning cryptocurrencies in 2022. Venezuela is in third place. Singapore and Kenya round out the top five. Cryptocurrency is most widespread in Africa, Southeast Asia, and Latin America.
Why has the use of cryptocurrency become so popular? What are its distinguishing features, and why is it in demand today? In this article, we will look at what types of cryptocurrency exist and how they can be used.
Concept and Types of Cryptocurrency
Cryptocurrency is a form of electronic money. Unlike other assets, cryptocurrency is stored not in centralized accounts but in a decentralized network. Blockchain technology simplifies the transfer of funds between participants and ensures no malpractice.
In addition to Bitcoin, distinguished separately, there are several types of cryptocurrency:
- altcoins — "alternative coins", each with its blockchain (e.g. Litecoin, Ethereum);
- tokens — represent a digital certificate, do not have a blockchain, are fully issued usually to attract investors to projects;
- stablecoins — coins with a price tied to oil, precious metals, or other tangible assets (e.g., Tether);
- NFTs — tokens that are not fungible and serve to hold unique assets;
- DeFi — decentralized financial services built on blockchain.
Ways of Cryptocurrency Usage
Cryptocurrency is a tool for solving many tasks. The main ones are making financial and household transactions and circumventing restrictions.
These include investing, trading, lending and other activities aimed at making and keeping profits.
Types of financial transactions:
- Investments in cryptocurrencies and tokens. Limited-issue cryptocurrencies increase in value over time. Investors primarily focus on bitcoin. They buy the cryptocurrency with fiat, then wait for the asset's price to rise enough to sell it.
- Smart contracts. These are decentralized protocols whose purpose is to automatically perform actions as a reaction to certain events. For example, it can be a transfer on a particular date, unlocking funds after delivery confirmation, etc. Smart contract principles have nothing to do with a binding legal agreement between the parties.
- Deposits. You can place the available cryptocurrency on the lending platform or freeze the funds in staking. Thus, as the owner of a regular deposit, the cryptocurrency holder will receive periodic interest payments. Both regular cryptocurrencies and stablecoins can be used for this purpose.
- Credits. This is an optimal solution for investors who have invested much money in cryptocurrency and do not want to spend it. To get money, they use their cryptocurrency as a collateral asset.
- Cryptocurrency Trading. It works as follows: buy cheaper, sell more expensive. Cryptocurrencies with high volatility are most suitable as an asset for trading, but the relatively low predictability of the rate makes such investments risky.
- Asset Tokenization. Physical and virtual goods, including items in online games, artwork, copyrights, real estate, etc., are suitable assets that can be turned into a token. Tokenization makes transactions with the asset more transparent and simplifies the buying and selling any goods.
With cryptocurrency, it is possible to store and transfer funds and conduct transactions, in most cases bypassing restrictions imposed by states or certain payment systems.
- Sending money abroad. Usually, banks carefully control the sending of funds to other states. This can lead to the fact that a "suspicious" or simply large transaction can be stopped and blocked. Transfers in cryptocurrency are not subject to the restrictions of states and international payment systems.
- Receiving payments from foreign countries. Regardless of what goods or services the transfer is made for, it becomes much easier to accept it. You can read more in the article «How to start accepting payments on the website in cryptocurrency».
- Safe storage. The bank will not be able to block or freeze funds at the request of regulatory authorities.
- Purchase of goods and services. Many foreign companies that sell airline tickets, register domains, create online stores, etc., and accept cryptocurrency payments. In our article, you can find out which world-famous merchants are currently using Bitcoin as a means of payment.
- Donations. A relevant option for those who want to financially support their favorite foreign cultural figure, fund, or charity organization.
- Wage payment. Some companies already offer to pay salaries to their employees in cryptocurrency.
- Payout of bonuses and winnings. An example is the experience of the Ultimate Fighting Championship (UFC) in paying bonuses to fighters participating in competitions in bitcoins.
Cryptocurrency as a Means of Payment
Unlike fiat, cryptocurrency is much less dependent on political and economic factors. To depend as little as possible on restrictions from states and banks, on instability in the global financial market, you can use cryptocurrency as a means of payment.
If you have any questions about accepting payments in cryptocurrency or connecting crypto acquiring, we recommend you familiarize with our knowledge base. You can connect payment acceptance via CryptoCloud service by registering on our website.