Crypto Use Cases: 9 Ways to Manage Money With Cryptocurrency
Cryptocurrency is evolving beyond speculation, offering diverse applications in personal and professional finance. However, it’s crucial to approach this technology with caution and a clear understanding of its inherent risks.
The Big Crypto Caveat
Before exploring the various ways cryptocurrency can be used, it’s important to acknowledge that we’re currently operating in a ‘what if’ scenario. While these applications have the potential to revolutionize finance, widespread adoption is key to their success.
Adoption drives ‘use value,’ which in turn supports market value and, ideally, stable monetary value. When this happens, cryptocurrencies could significantly change the global financial structure. Now, let’s examine nine potential use cases for crypto:
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Send money across borders efficiently
Cryptocurrencies are accessible to anyone, making them ideal for supporting family members abroad. Blockchain technology streamlines cross-border payments, making them quicker, simpler, and often cheaper. Companies like Circle and other P2P payment platforms facilitate blockchain-based remittances by allowing recipients to receive cryptocurrency and convert it to local currency.
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Tip your favorite creators directly
Cryptocurrency allows you to directly support online creators through micro-payments. Many blockchains offer low transaction fees, making direct tipping practical without excessive costs. For instance, Brave, a blockchain-based browser, enables creators to receive compensation directly from their audience, and Gitcoin allows developers to earn tips for open-source contributions.
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Go shopping
Cryptocurrency can be used for e-commerce, often through digital wallets. Merchants may choose to accept crypto directly or use a service provider. Companies that accept crypto gain access to a global customer base and potentially reduce transaction fees. They can also offer crypto rewards to boost customer loyalty.
Some companies that accept cryptocurrency include Microsoft (MSFT), PayPal (PYPL), Starbucks (SBUX), Overstock (OSTK), and AT&T (T).
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Transact directly with peers
A significant use case for cryptocurrency is decentralizing the traditional financial system. Blockchain technology supports Decentralized Finance (DeFi) by enabling peer-to-peer financial transactions. This includes direct transactions, borrowing, and lending among peers, bypassing intermediaries. However, this also introduces unique risks not always present with traditional investments.
Proponents see this as a way to democratize money, while critics point out the potential for fraud and platform failures. DeFi initiatives are often structured as DAOs (Decentralized Autonomous Organizations) that use consensus-based decision-making.
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Spend and earn digital currency
Cryptocurrency can be earned and used within a blockchain ecosystem. Each autonomous blockchain has its cryptocurrency, and many projects built on other blockchains such as Ethereum support their own. Decentraland is a prime example, with its native crypto, MANA, used for virtual land, goods, and services. Similarly, gamers can often earn and use in-game cryptocurrency, with assets sometimes transferable across different games.
Other examples of blockchains enabling this include:
- Filecoin: Users can provide or use decentralized data storage with FIL.
- Axie Infinity: Players earn and spend AXIE crypto by collecting and trading in-game creatures.
- Helium: Users earn crypto by providing IoT network coverage.
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Support a blockchain network
Crypto holders have many ways to participate in a blockchain beyond transactions. They can participate in governance, help secure the network, and validate transactions. This participation level often depends on the number of tokens held. Another popular method is staking, where users lock their crypto holdings in exchange for interest, although price fluctuations and platform liquidity pose risks.
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Keep transactions private
While many blockchains emphasize transparency, cryptocurrency can also increase transaction privacy, reducing risks of fraud and identity theft, and protecting activists and journalists. Dash, Monero, and Zcash are cryptocurrencies that prioritize user privacy. However, enhanced privacy can also make it harder to trace illicit transactions.
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Maximize your earnings with yield farming
Yield farming, or liquidity mining, is a high-risk DeFi strategy to maximize interest income from crypto holdings. Yield farmers use smart contracts to move their crypto assets across blockchain networks with the highest interest rates. This is risky due to potential smart contract errors, liquidity risks, and crypto price volatility. Platforms for yield farming include SushiSwap, Aave, Yearn.Finance, Harvest Finance, and Alpaca Finance.
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Pay your team
Companies can use cryptocurrency to pay employees and contractors, which is attractive for global teams or those holding large crypto amounts. Employees can use or convert crypto payments into their local currencies. Note that employees who receive cryptocurrency as wages may need to seek guidance on the tax consequences.
This method is more common among blockchain-native companies. BitPay is an example of a payroll service provider that facilitates crypto payments.
Cryptocurrency’s applications appear to be expanding
The Bottom Line
The initial wave of crypto use cases focused on facilitating financial transactions and other traditional banking functions. Although efficiency and individual empowerment are worthwhile goals, any major disruption of the status quo will meet resistance. Nevertheless, technological innovation historically drives global growth.
