Paying with Bitcoin: What You Need to Know
Cryptocurrency, especially Bitcoin, continues to rise in popularity despite its value’s volatility recently; and if you are looking to use bitcoin to pay for things, you have to take due diligence in knowing how to do it, where you can spend, buy cryptocurrencies, or earn bitcoins, the best trading platform, and what the risks and advantages are.
How do you pay with Bitcoin (or other Cryptocurrencies)?
First, you need a cryptocurrency wallet. There are free wallets available for smartphones and all major operating systems) Please read this post for a primer on the different cryptocurrency wallet types). Just like with a physical wallet, you must always secure it – this means being careful with online services, putting backup and encryption, and putting just small amounts in it for everyday use.
A very common use for Bitcoin (and other cryptocurrencies) is for online purchases. Today, there are hundreds of retailers and online shops – even local businesses – that accept bitcoins. Bitcoin can be used to purchase gift cards, videogames, household items; you can also use it in tipping and donating to charity. There are different ways to pay using your bitcoin. You can pay using your wallet or app, via QR code, or pay directly to a bitcoin address. Making a blockchain payment is fast and convenient – and you do not need to key in sensitive information when making a payment.
What are the advantages?
- Anonymity. Your purchases are discrete with bitcoin, which means they are never associated with your personal identity. In fact, the bitcoin address generated is different for every purchase you make.
- Low Transaction Fees. Since there is still no government involvement in bitcoin transactions at this point, the costs of transacting are very low.
- Mobile. Since paying with bitcoin can be done using an app on your mobile phone, you can pay for our purchases anywhere you are as long as you have internet access.
- No interruptions. Since the bitcoin system is purely peer-to-peer, it is void of involvement of banks, financial institutions, and the government.
- No Sales Taxes. One major advantage of paying with bitcoin is that no sales taxes are added in your purchases since there are no third parties identify or track them.
What are the risks?
One thing that you need to understand is that bitcoin, no matter how popular it has become at this point, is still experimental. Getting into Bitcoin now can mean that you have to deal with the growing pains as it still at the stage in which it is still improving and such improvements may bring about new challenges.
Bitcoin price very volatile. You should look at bitcoin as a high risk asset and you must not keep your savings with bitcoin at this point.
You must adopt good practices in protecting your privacy as bitcoin is not entirely anonymous. Your identity behind the bitcoin address you’re using may be anonymous, but transactions and balances in your address can be seen by anyone.
Mining is also a very high risk bitcoin feature. See here how mining has only left one guy with huge losses.
Moreover, Bitcoin purchases are not taxed at the moment since there is no way for third parties to identify, track, or intercept transactions that use bitcoins.
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