How to Pay With Cryptocurrency

Do you know how to install software on your desktop or laptop? Have you ever installed an app on your phone? If so, then creating a crypto wallet will be easy.

When buying cryptocurrency, you have to store them somewhere. Cryptocurrency is, after all, completely digital. You can keep crypto on a cryptocurrency exchange which comes with its pros and cons. Or you can choose a self-custody or non-custodial wallet. We’ll explain what it all means on this page.

First, you should check out “How to Make A Cryptocurrency Transaction,” for some background. However, if you’re already familiar with crypto, and are looking for information on how to make a cryptocurrency wallet, then you’ve come to the right place.

Hosted wallets are the most popular and straightforward way to set up a crypto wallet. It is essentially keeping your crypto on whatever exchange platform you want. For example, you can download an app like Coinbase, register and verify, then start buying cryptocurrencies. Coinbase will then hold these coins in a hosted wallet.

It’s called hosted because a third party keeps or “hosts” your wallet on the blockchain. This is similar to how banks keep your money in a savings account.

However, there are plenty of pros and cons with hosted wallets.

PROS:

You can start trading right away
It doesn’t require a lot of research or any extra hardware
If you forget your password, you can still recover your crypto

CONS:

Limited with what you can do with your crypto
You might not technically own the crypto (this depends on the platform)
Vulnerable to hacks
Not regulated by any government body or organization
Not insured, so if the platform goes bankrupt or is hacked, you’re out of luck (and crypto)

It is generally not recommended not to store a lot of crypto on an exchange. Aside from hacking, there is the problem of custody. Like a traditional bank where you don’t have a legal claim to the money in your account. When you withdraw, you’re asking permission from the bank. Similarly, depending on the terms and conditions of the platform, you may not outright own these cryptocurrencies.

Web wallets are good for getting your toes wet, but there are better options for those serious about transacting in crypto.

Non-custodial or self-custody wallets (or software wallets) don’t rely on a third party to keep your crypto safe. A non-custodial wallet is software that you can use to store your crypto. It’s as easy as downloading an app.

Safeguarding and managing your password is entirely your responsibility. In crypto, passwords are called a “private key” or “seed phrase.” You need this to access your crypto. With self-custody wallets, the responsibility is yours and yours alone.

The benefits of added responsibility go beyond completely controlling your crypto’s security. You can also participate in more advanced crypto activities like lending and borrowing.

Here’s how to make a non-custodial wallet.

1. Download a wallet app like Coinbase, Ledger Nano X, Electrum, or Mycelium. There are plenty more, so be sure to research which best suits your needs. Some wallets are made for mobile, while some work better on a desktop. Many regard Coinbase as the best wallet for beginners.

2. Unlike a hosted wallet, you don’t have to share your personal information with a self-custody wallet. You can even create an account without an email address.

3. Write down your private key. Keys are what make cryptocurrencies superior to traditional financial institutions. Your private key is a random 12-word phrase. Keep it in a secure location. If you lose this key, it will be impossible to get your crypto back. There’s no higher authority in a decentralized blockchain.

4. Depending on which wallet app you choose, you may be unable to buy crypto directly using traditional currencies like dollars or euros. If this is the case, you’ll have to transfer your crypto from another location, like a hosted wallet.

If you use this type of wallet, ensure it is fully non-custodial. This means you control 100% of the assets in your wallet. However, because these wallets are stored online, they face the same vulnerabilities as crypto exchanges.

A hardware wallet (or cold wallet) is a physical device that stores your crypto. Cryptocurrencies don’t get any more secure than this. A hardware wallet holds your private keys, so your crypto is offline. After all, hackers can’t hack what’s not online.

Most casual crypto users don’t bother with hardware wallets. They can be costly (up to $100) and a little complex to set up. But they are highly beneficial when it comes to keeping your crypto secure. Hardware wallets are essential if you have thousands of dollars worth of crypto.

If someone hacks your computer, your crypto is safe. Even if someone breaks into your home and steals your physical hardware wallet – without the private key, they’re not getting access to your crypto.

Here’s how to make a hardware wallet.

1. Buy the physical device. Ledger and Trezor are reputable brands.

2. Install the software that comes with the hardware. Instructions will come with the device, but if not, both Ledger and Trezor have their manuals online.

3. Transfer crypto to your wallet. Like most self-custody wallets, the hardware wallet typically doesn’t allow you to buy crypto using dollars and euros.

Are all crypto wallets non-custodial?

No, absolutely not. Cryptocurrency exchanges like Coinbase provide custodial wallets. These are useful for basic activities like buying, selling and trading. But your crypto is held in trust by the exchange.

Is hacking a severe risk for crypto wallets?

Not particularly. All online finances are fundamentally risky. But mainstream platforms like Coinbase are as safe as traditional outlets like PayPal. There is no risk to a hardware wallet.

How Do I Know if My Wallet is Custodial?

Non-custodial wallets require you (and only you) to possess the private key associated with your wallet’s public address.

What is a Crypto Address?

It’s like an address in real life. A crypto address is a string of text signifying the location of a specific wallet on the blockchain. An address can send or receive crypto coins. It can also be called a blockchain address.

How Do I Send Crypto with My Wallet?

Get the address of the wallet you want to send crypto to. Often, to make matters simpler, the address will be in the form of a QR code. Otherwise, it a string of text.

Are all crypto wallets non-custodial?

No, absolutely not. Cryptocurrency exchanges like Coinbase provide custodial wallets. These are useful for basic activities like buying, selling and trading. But your crypto is held in trust by the exchange.

Is hacking a severe risk for crypto wallets?

Not particularly. All online finances are fundamentally risky. But mainstream platforms like Coinbase are as safe as traditional outlets like PayPal. There is no risk to a hardware wallet.

How Do I Know if My Wallet is Custodial?

Non-custodial wallets require you (and only you) to possess the private key associated with your wallet’s public address.

What is a Crypto Address?

It’s like an address in real life. A crypto address is a string of text signifying the location of a specific wallet on the blockchain. An address can send or receive crypto coins. It can also be called a blockchain address.

How Do I Send Crypto with My Wallet?

Get the address of the wallet you want to send crypto to. Often, to make matters simpler, the address will be in the form of a QR code. Otherwise, it a string of text.

• A cryptocurrency is a digital asset on a network distributed across millions of computers. Similar to “Napster” or other P2P file-sharing sites.
• Governments and music labels couldn’t stop people from downloading music because the app structure was too decentralized. They would have had to purge the world of computers to prevent people from sharing music. Likewise, cryptocurrencies can exist outside the control of governments and banks or other central authorities.
• Decentralized systems don’t fall apart at a single point of failure. Cryptocurrencies can provide cheaper and faster money transfers, especially without third-party authentication and security fees. Security is built right into the system.
• Transacting with cryptos is as easy as downloading an app on your phone.
• If you’re just looking to make a few transactions, nothing huge, then start by opening an account on a platform like Coinbase. Verify your identity, and you’re off to the races! No need for a digital wallet or any prior crypto knowledge!

Today, we have bank cards that represent paper money. Paper money used to be redeemable in gold and silver. Gold and silver were valuable because people valued using them in jewelry. Whatever people use as money has always had an origin from something worthwhile.

Except for cryptocurrencies… or so it seems.

Many don’t realize cryptocurrency is both a currency and a payment system. The payment system is the source of its value. But even crypto enthusiasts have trouble with this concept so let’s dig in a little deeper.

Technological limitations have always separated currencies from their payment systems. When you wire money worldwide, you need to rely on third parties. And you have to trust those third parties just as they have to trust you.

That’s why cryptocurrencies were invented – to get around this reliance on third parties. The mysterious creator of Bitcoin, Satoshi Nakamoto, said of his invention:

“A purely peer-to-peer version of electronic cash would allow online payments to be sent directly from one party to another without going through a financial institution. Digital signatures provide part of the solution, but the main benefits are lost if a trusted third party is still required to prevent double-spending. We propose a solution to the double-spending problem using a peer-to-peer network. The network timestamps transactions by hashing them into an ongoing chain of hash-based proof-of-work, forming a record that cannot be changed without redoing the proof-of-work.”

In other words: the innovation stems from how the payment network works. The coin or digital currency unit can only express the network’s value. A cryptocurrency coin is an accounting tool. The usefulness of cryptocurrency comes from its payment network. This is called a blockchain.

Blockchain technology makes cryptocurrencies possible. It is a distributed ledger that is essentially a database shared and synchronized across space and accessible by multiple people. It gives transactions public “witnesses” instead of a centralized ledger that relies on financial institutions or third parties.

The blockchain ledger lives in the cloud. Observed by anyone at any time and monitored by its users, the blockchain allows for the transferring of bits of information from one person to another. These information bits are like digitally-secured property titles. Nakamoto called them “digital signatures.”

The blockchain verifies these digital signatures without depending on a third-party trust agency. An Internet ledger everybody has access to is helpful. It records the amounts, the time, and the public address of every transaction. The blockchain guarantees the integrity of the system. The currency unit is merely a digital form of a property title. The real star of the show is the blockchain.

The value of cryptocurrencies isn’t embedded in digital coins but in the payment network. If somehow cryptocurrencies abandoned the blockchain, the value of the digital coins would plummet to zero. The reason for this is that the blockchain isn’t just about money.

The blockchain is the perfect invention for transferring information that requires security, confirmations, or assurances of authenticity. It diminishes the potential for human error. Hierarchical structures are replaced by peer-to-peer technology. In an economy that runs off contracts and exchanges, having algorithms guarantee trust and security is like… well, it’s like giving up your CDs for a smartphone with an app that streams music for free.

If you listen to those who have the most to lose from cryptocurrencies, only criminals and Silicon Valley entrepreneurs profit from it. But this is patently false. Cryptocurrency adoption is widespread in developed nations like the United States, the United Kingdom, Canada, and the countries of the European Union.

Likewise, emerging economies in Africa have adopted cryptocurrencies. A recent survey suggested that 33 percent of Nigerians owned crypto.

Residents in India, China, and Brazil have all adopted cryptocurrencies to transfer money across borders without unnecessary expenses.

The United States and Canada have a pro-crypto attitude. Many countries sweep cryptos under the regulatory rug when enforcing fraud and anti-money laundering rules. Not so for the Americans and Canadians.

European Union member states have traditionally been less warm in their reception. However, that is changing as the EU governments and parliament have reached an agreement on cryptocurrency regulation.

In most places, governments tax cryptocurrencies as capital gains.

Cryptocurrencies are illegal in Algeria, Egypt, Bangladesh, China (for residents, as of September 2021), and North Macedonia (the only European country with a complete prohibition).

Colombian citizens can own crypto, but the country’s financial institutions are forbidden from involving themselves.

Cryptocurrencies like Bitcoin are accepted by companies like Paypal, Microsoft, Wikipedia, and even Home Depot (America’s largest home improvement retailer).

And, of course, we at Amarel Medical Inc accept cryptocurrency as payment.

There are several benefits to using crypto.

Protect Your Assets – Crypto’s decentralized structure means your assets aren’t susceptible to a third-party trust relationship. When trading, you can keep what you earn. There’s no middleman fee.

Protect Against Theft – Transactions are validated and recorded in a public ledger. Identities are encrypted.

Protect Against Inflation – Despite their volatility, cryptos have retained their value while inflation reaches record highs. Cryptos can serve as a financial cushion in an uncertain world.

Secure and Transparent – Cryptos are public and private where it counts. Public enough to ensure the payment network remains honest. But private enough to secure your identity.

To buy cryptocurrency, you must find a broker or a crypto exchange.

(You can also mine cryptos, but that’ll lead us down a rabbit hole on what “mining” crypto even is. Besides, one needs tremendous computing power and the resources to do it, so it isn’t worth the effort for basic transactions.)

A crypto exchange is a platform where buyers and sellers meet to trade cryptocurrencies. They are similar to online brokerage platforms. The most popular is Coinbase and Gemini, but you can choose from plenty of others.

The problem with cryptocurrency exchanges is that governments don’t regulate them. So, in case of a hack or unforeseen event, people with cryptos in these exchanges could lose their money.

Crypto exchanges tend to market toward beginners and, therefore, charge higher fees than if you went another route.

A crypto broker takes the complexity out of the process. Robinhood and SoFi are two of the most well-known crypto brokers.

Like a “regular” broker, a crypto broker is a middleman between you, the consumer, and the cryptocurrency exchange. If you don’t mind paying a small service fee, using a crypto broker is a great way to enter the field without much prior knowledge.

Once signed up to a brokerage or a crypto exchange, you can deposit money into your account. With money in your account, you can purchase cryptocurrencies. And don’t worry if you can’t afford whatever the price of bitcoin is currently at. You can buy fractional amounts, for example, 1/100 millionth of a bitcoin.

The ten biggest cryptos on the market right now are:

1. Bitcoin (BTC)
2. Ethereum (ETH)
3. Tether (USDT)
4. Binance Coin (BNB)
5. Cardano (ADA)
6. Dogecoin (DOGE)
7. XRP (XRP)
8. Solana (SOL)
9. U.S. Dollar Coin (USDC)
10. Uniswap (UNI)

Some things to keep in mind when buying crypto through a broker or exchange:

You’ll have to verify your identification. This is to prevent fraud and meet government regulatory requirements. A crypto platform may ask for a copy of your driver’s licence or passport.

Some credit card companies process cryptocurrency transactions as cash advances. So if you transfer money from a credit card to a crypto exchange, be wary of higher interest rates and cash advance fees from your bank.

You have a few options: a crypto exchange, a digital wallet, or a physical wallet. We recommend a digital or physical wallet for security reasons. But if you’re dipping your toes in the crypto world and don’t have a large balance, then there’s nothing wrong with leaving crypto on the exchange.

For more information on this, see How To Make a Crypto Wallet.

Finally! We’ve covered almost everything there is to know about cryptocurrencies. Now, we can get to the crux of the issue. How do you use these freaking things!?

Let’s say you’ve got some crypto on an exchange or stored in a wallet. Now what?

The most straightforward transaction is simply exchanging one cryptocurrency for another. You can do this from the comfort of the crypto exchange or notify your broker.

When you’re looking to cash out, you can use an online kiosk designed for converting cryptos into your local currency.

But say you want to buy something with crypto?

You can transfer between digital wallets. All you need to make the transaction is to have the blockchain address for the wallet you’re sending the money to.

If using bitcoin, the address will look something like this: 1FtjAzGKSyAavUkbw5QsyzzNDKdtPXk95D

Each address links to a particular user or the location of a specific wallet. Every crypto address is unique as it represents the location of a wallet on the blockchain.

Crypto addresses are public, but the person or wallet behind the address remains anonymous.

Individuals send cryptocurrency to a crypto address, like how you can send regular currency to email addresses. But first, you need the address of the wallet you’re sending money to. Or, vice-versa, the person trying to send you crypto needs your wallet address (or address on the exchange).

Because crypto addresses are long and randomized, people have adopted QR codes for easy transactions and communication. These QR codes representing crypto addresses are safe to advertise since they are protected from theft.

A crypto address is a “public key.” A public key is one of two keys used in cryptography. The key used for decryption is different from the one used for encryption. Or in other words, I can send you money to your blockchain address, but I cannot use that address to steal from your digital wallet.

If you know how to download an app on your phone, you can get started with cryptocurrency and make a transaction. That’s how easy it is.

The difficulty with crypto comes from understanding what it is and why it has value. We hope you’ve learned something today. And if you’d like more information on getting a cryptocurrency wallet and transacting with it instead of relying on brokerages or coin exchanges, please check out How To Make a Crypto Wallet. It should answer any other questions you may have.