Given the distinction between coins and tokens, it shouldn’t be a surprise to learn that most of the cryptocurrency tokens out there aren’t widely used outside of trading or their specific blockchain ecosystem.
Even though cryptocurrencies that are intended to be used as money, they face a challenge in convincing merchants to incorporate them as a payment method.
Merchants will simply base their decision on demand, or where they see a cryptocurrency solving a specific problem for the consumer.
In the case of Bitcoin, which is by far the most popular cryptocurrency, the majority of activity is related to trading, rather than buying goods and services, largely because of how slow the confirmation process can be.
This is why we’ve seen Paypal offer customers the opportunity to buy/sell Bitcoin but not use it as a means of purchasing goods.
Merchants can get around the speed issue by reducing the number of confirmations they require or accepting Lightning Payments, which are instant and low cost. This does however require the consumer to understand Lightning payments and use a Lightning supported wallet. See a separate article on the subject.
Ethereum is the second most popular cryptocurrency after Bitcoin, and though it can be used as a means of buying things online, and is much faster than bitcoin, much of the usage is focused on trading and supporting those systems built on top of it, and Smart Contract execution for Defi and NFTs.
That being said let’s look at some real world examples where cryptocurrency can and is being used, starting with the earliest applications:
The Darknet
One of the first large scale uses of bitcoin was in Darknet markets such as the Silk Road. Used in conjunction with Tor browsers – which hide location – Bitcoin enabled the sale of illicit goods and services.
The original Silk Road was shut down in 2013 and its founder, Ross Ulbricht, given a life sentence with no parole, but several similar sites have replaced it utilising more privacy focused cryptocurrencies like Minero or Zcash.
Learn Crypto doesn’t support the use of Darnket sites, but they represent an important step in the evolution and usage of cryptocurrency. They provided a clear use for a censorship resistant monetary system with in-built privacy.
Gambling
The payment process is one of the biggest choke points for gambling sites, from both the player and provider perspective. Many banks and card services won’t allow use with gambling sites – especially due to geographic restrictions – and those that do are expensive.
Some users of gambling sites don’t want their activity reflected on bank or card statements or find the process of adding payment methods tedious. Cryptocurrency fixes all these problems and was the first use case for Bitcoin through the site Satoshidice.
Gambling with cryptocurrency is arguably one of the largest growth sectors of the ecosystem with sites like Sportsbet.io putting the bitcoin logo in front of a global audience via the shirt sponsorship of Premier League team, Southampton.
Adult Services
In a very similar way to gambling, adult sites pay a premium for payment services, or find them blocked in their jurisdiction, and where available want to avoid the sites appearing on their statements.
As you can see from the early use cases cryptocurrency has been adopted by industries that are considered risky by traditional financial institutions and therefore charge a premium for servicing payments, or are subject to geographic restriction.
Cryptocurrencies like Bitcoin are borderless and permissionless solving the specific payment problem, though this doesn’t mean the user can avoid any relevant laws.
Leave a Reply