Cryptocurrency payments what does this mean
Cryptocurrency payments do not come with legal protections. Credit cards and debit cards have · Only scammers demand payment in cryptocurrency. · A scammer. Cryptos are digital balances managed with cryptographic algorithms. This means a crypto has no physical appearance. Rather, it is an encrypted code similar to a. Cryptocurrency is considered more secure than credit and debit card payments. This is because cryptocurrencies do not need third-party. MONEYSENSE MAGAZINE COUCH POTATO INVESTING
It is the most popular cryptocurrency after Bitcoin. Litecoin: This currency is most similar to bitcoin but has moved more quickly to develop new innovations, including faster payments and processes to allow more transactions. Ripple: Ripple is a distributed ledger system that was founded in Ripple can be used to track different kinds of transactions, not just cryptocurrency.
The company behind it has worked with various banks and financial institutions. How to buy cryptocurrency You may be wondering how to buy cryptocurrency safely. There are typically three steps involved. These are: Step 1: Choosing a platform The first step is deciding which platform to use. Generally, you can choose between a traditional broker or dedicated cryptocurrency exchange: Traditional brokers. These are online brokers who offer ways to buy and sell cryptocurrency, as well as other financial assets like stocks, bonds, and ETFs.
These platforms tend to offer lower trading costs but fewer crypto features. Cryptocurrency exchanges. There are many cryptocurrency exchanges to choose from, each offering different cryptocurrencies, wallet storage, interest-bearing account options, and more.
Many exchanges charge asset-based fees. When comparing different platforms, consider which cryptocurrencies are on offer, what fees they charge, their security features, storage and withdrawal options, and any educational resources. Step 2: Funding your account Once you have chosen your platform, the next step is to fund your account so you can begin trading.
Most crypto exchanges allow users to purchase crypto using fiat i. Crypto purchases with credit cards are considered risky, and some exchanges don't support them. Some credit card companies don't allow crypto transactions either. This is because cryptocurrencies are highly volatile, and it is not advisable to risk going into debt — or potentially paying high credit card transaction fees — for certain assets. Some platforms will also accept ACH transfers and wire transfers. The accepted payment methods and time taken for deposits or withdrawals differ per platform.
Equally, the time taken for deposits to clear varies by payment method. An important factor to consider is fees. These include potential deposit and withdrawal transaction fees plus trading fees. Fees will vary by payment method and platform, which is something to research at the outset.
Step 3: Placing an order You can place an order via your broker's or exchange's web or mobile platform. If you are planning to buy cryptocurrencies, you can do so by selecting "buy," choosing the order type, entering the amount of cryptocurrencies you want to purchase, and confirming the order.
The same process applies to "sell" orders. There are also other ways to invest in crypto. These include payment services like PayPal, Cash App, and Venmo, which allow users to buy, sell, or hold cryptocurrencies. In addition, there are the following investment vehicles: Bitcoin trusts: You can buy shares of Bitcoin trusts with a regular brokerage account. These vehicles give retail investors exposure to crypto through the stock market.
Blockchain stocks or ETFs: You can also indirectly invest in crypto through blockchain companies that specialize in the technology behind crypto and crypto transactions. Alternatively, you can buy stocks or ETFs of companies that use blockchain technology. The best option for you will depend on your investment goals and risk appetite. How to store cryptocurrency Once you have purchased cryptocurrency, you need to store it safely to protect it from hacks or theft.
Usually, cryptocurrency is stored in crypto wallets, which are physical devices or online software used to store the private keys to your cryptocurrencies securely. Some exchanges provide wallet services, making it easy for you to store directly through the platform. However, not all exchanges or brokers automatically provide wallet services for you. There are different wallet providers to choose from. Cold wallet storage: Unlike hot wallets, cold wallets also known as hardware wallets rely on offline electronic devices to securely store your private keys.
Typically, cold wallets tend to charge fees, while hot wallets don't. What can you buy with cryptocurrency? When it was first launched, Bitcoin was intended to be a medium for daily transactions, making it possible to buy everything from a cup of coffee to a computer or even big-ticket items like real estate. Even so, it is possible to buy a wide variety of products from e-commerce websites using crypto. Here are some examples: Technology and e-commerce sites: Several companies that sell tech products accept crypto on their websites, such as newegg.
Overstock, an e-commerce platform, was among the first sites to accept Bitcoin. Shopify, Rakuten, and Home Depot also accept it. Luxury goods: Some luxury retailers accept crypto as a form of payment. For example, online luxury retailer Bitdials offers Rolex, Patek Philippe, and other high-end watches in return for Bitcoin. Cars: Some car dealers — from mass-market brands to high-end luxury dealers — already accept cryptocurrency as payment.
Insurance: In April , Swiss insurer AXA announced that it had begun accepting Bitcoin as a mode of payment for all its lines of insurance except life insurance due to regulatory issues. Premier Shield Insurance, which sells home and auto insurance policies in the US, also accepts Bitcoin for premium payments. Cryptocurrency fraud and cryptocurrency scams Unfortunately, cryptocurrency crime is on the rise.
Cryptocurrency scams include: Fake websites: Bogus sites which feature fake testimonials and crypto jargon promising massive, guaranteed returns, provided you keep investing. They may also use messaging apps or chat rooms to start rumours that a famous businessperson is backing a specific cryptocurrency. Once they have encouraged investors to buy and driven up the price, the scammers sell their stake, and the currency reduces in value.
This method of payment is not limited to mobile devices. Some debit cards and credit cards have these chips embedded in them, allowing for contactless payments to occur. For example, if consumers want to make purchases for groceries, they do not have to swipe their debit or credit cards. Peer to peer systems like PayPal facilitate hundreds of millions of payments a year amongst individuals. A company acts as an intermediary to facilitate the transaction between the buyer and the seller.
The buyer sends his or her credit card details to this intermediary, which approves the transaction and notifies the seller. The intermediary will settle its balance with the seller at the end of each day. The advantage is that the buyer does not have to give the seller his or her credit card details, which could be a security risk.
In some instances the buyer does not need to provide the seller with any form of identification, which improves the buyers' privacy. SARB defined electronic money as the monetary value represented by a claim on the issuer and provided that electronic money is not a legal tender in terms of the SARB Act. Electronic fund transfers are a method of payment.
This method of payment does not constitute payment by legal tender. Therefore, payments by electronic fund transfer entail the crediting and debiting of balances on account of the payer and payee. This process is done through trusted intermediaries and financial institutions such as banks. In the context of electronic fund the transfers, the relationship between users and the bank or intermediaries is governed by contract. The role banks play with the advancement of payment systems is vital.
From negotiable instruments to electronic payment systems, banks have always played an active role in facilitating transactions. For example, the bank has a relationship between itself as the card issuer and the account holder, or between itself and the merchant. As a result of the current payment methods being centralised, the legal norms are easily defined to regulate different financial institutions.
This system requires trust in the central authorities in order to have value and to be efficient. It provides a means of payment acceptable to buyers and sellers even of different nationalities. Banks, central banks and other financial institutions are placed in a trusted position. These banks and financial institutions act as trusted intermediaries to update the electronic ledgers, which can be accessed only by trusted intermediaries.
This is a fundamental principle of our double-entry accounting system, in which every debit must be equal to a corresponding credit. Commercially, this is how electronic cash payments occur. Payments are transferred online and offline using cryptographic protocols and blind signatures to protect their users' privacy. The current payment methods available have faults, some of which are discussed in the next section. Cheques took a long time to process and the volume of the paper-flow involved in the cheque collection process was vast.
It could take up to seven to fourteen working days before the banks credited the account, when a cheque was used. This might be an inconvenience if an obligation had to be paid promptly. Further, processing cheques was costly, and these costs had to be passed on to the consumer. Large transactions such as purchasing acres of land for R40 million in cash is not convenient in modern society.
Paper currency is also expensive to produce and the cost of production is increasing due to security risks relating to criminals counterfeiting notes. These payment methods enable payments to facilitate the circulation of money and include any instrument and procedures related to the system. These issues relate to privacy, as credit card details and the details of the users are exposed to facilitate most of these transactions.
High transaction costs and slow transactions, especially when making international transactions, and the high fees charged for such services are problematic. For example, the magnetic strips can be copied and used to make withdrawals. Electronic fund transfer is the next method of payment - more specifically, the transfer of funds from one bank account to another electronically.
Electronic forms of payment have become increasingly popular, and are facilitated by banks and other financial institutions. These faults are related to the fact that intermediaries are involved. When a consumer needs to initiate an electronic fund transfer from one country to another, the money will go through a chain of different banks and services.
For example, in the United States the money a person with a local bank account will go from the local bank account to the national bank's account, and then to the corresponding bank working with the United State market. The process can take up to a few days.
Fees are charged for every step taken in the facilitation of the transfer. Another burden is that the facilitation of international transfers is subject to currency exchange, meaning that the amount sent is not the amount received. When using intermediaries such as Western Union, the company has to develop a global system of physical access points to send and receive money. Supporting such an extensive infrastructure is expensive.
These expenses are passed on to the consumers. South Africa has specific legislation in place to curb the possible use of currency as a medium of exchange for illegal activities, such as the Prevention of Organised Crime Act of , the Financial Intelligence Centre Act 38 of , and the Protection of Constitutional Democracy against Terrorist and Related Activities Act 33 of , and the SARB ensures that the national payment system adheres to the legislation.
The intermediaries and trusted institutions are mandated to fight money laundering and the financing of terrorism. This generally means that trusted institutions and intermediaries must perform certain functions such as additional audits, credit certifications, and identity verifications. The cost of performing such tasks is typically passed on to the participants using the national payment system as a payment method. Society's dependency on trusted institutions such as banks and intermediaries such as Paypal has placed them in a position in which they are too big to fail.
This sets a low standard of transparency and of holding individuals working at banks accountable when their banks misbehave. For example, the global financial crisis in caused many consumers to distrust not only the government and the banks but also intermediaries in the financial system such as Visa.
The current system is open to the manipulation by high profile bankers and governments of exchange rates and figures. The first and most notable cryptocurrency created was bitcoin. Bitcoin was created by Mr Satoshi Nakamoto in and launched in , based on blockchain technology. The true identity of the creator of Bitcoin is still unknown. Bitcoin is a cryptocurrency which can be used to transfer value or it can even be exchanged into other currencies using the blockchain.
Mr Satoshi Nakamoto's whitepaper 52 provided that "Bitcoin: A Peer-Peer Electronic Cash System" combines advances in computer science, cryptography and game theory to develop blockchain technology. Rather than using a third party to manage the transaction, the necessary record-keeping is decentralised into a virtual ledger known as the blockchain.
In simple terms, a blockchain is a distributed database of records or a public ledger of all transactions or digital events that have been executed and shared among participating parties. Once entered, information can never be erased. The blockchain contains a specific and verifiable record of every single transaction ever made. Bitcoin is a decentralised, partially anonymous currency, not backed by any government or other legal entity, and not redeemable for gold or other commodities.
Users may acquire a bitcoin wallet. A bitcoin wallet is a software programme that includes private keys for each bitcoin address saved in the wallet of the user who owns the balance. Similarly, these wallets contain unique information that confirms the identity of the users. It is well known for its peer-to-peer network, which allows its users to transact instantly between them without the use of intermediaries such as banks. A consumer can make direct payments with bitcoin to a merchant who accepts it as a payment option.
It is noted that the interest in bitcoin is growing at a fast rate, as several retailers around the world are now accepting bitcoins and other cryptocurrencies as a means of payment for goods and services. Bitcoin has a maximum supply of 21 million to prevent inflation. The use of bitcoin as a payment method has certain advantages in comparison with the other methods mentioned earlier.
Bitcoin operates on a peer-to-peer cryptocurrency network. There is no master server responsible for all operations. There is no central control authority in the network and every bitcoin transaction is recorded on the public blockchain ledger, which increases transparency. Bitcoin generally carries lower transaction costs than credit cards. The reason for this is that such transactions are linked to the legal tender of a specific government. There are added costs and other facts to consider such as interest rates, exchange rates, and country-to-country transaction fees, which can slow down the transaction process.
Bitcoin is not bound to the laws or status of any one government currency. As a result, using bitcoin as a payment method for international transactions is faster and more efficient than traditional methods. When purchases are made with credit cards online, the data supplied is not always secure. When filling in forms on websites, customers must enter the following data: the card number, the expiration date and the code.
It is challenging to come up with a less secure way of making payment. Credit card details are therefore very often stolen. With bitcoin transactions, users are not required to disclose any personal data. Instead, the system uses two keys: public and private.
The public key address is available to all, but the private key is known only to the owner. The transaction needs to be signed by interacting with private keys and applying a mathematical function. This creates evidence that it is the owner who is performing the transaction.
There are also risks associated with using bitcoin as a method of payment. Payments made with bitcoin are irreversible as there is no centre point in payment processing. If a user transfers bitcoin to another address incorrectly, the user will not be able to get a refund unless the other wallet owner decides to send back the bitcoin.
Another disadvantage of bitcoin is that it is subject to high volatility. For example, in December the all-time high of bitcoin was estimated to be 19 dollars, as against a value of dollars in February As of April , bitcoin is trading above 50 dollars. Due to bitcoin's volatility, parties to a contract who use bitcoin as a payment method are exposed themselves to additional risk. The bitcoin can either gain a lot in value or lose a lot in value for the while.
This is problematic when performance in terms of a contract needs to occur, as when a refund needs to occur for a defective product. Bitcoin is not the only cryptocurrency. There are other cryptocurrencies that are referred to as "altcoins". Some of these "altcoins" are designed as alternatives to fiat, while others have additional unique functionality.
For example, there are "dividend" bearing altcoins whereby users receive "rewards" in crypto that can be exchanged for fiat, and there are also altcoins that provide certain privileges such as discounts on a platform. Other tokens can be found to provide users the right to participate in the governance of a project which has an influence on the decision-making process of a blockchain-based project. A common feature amongst all cryptocurrencies is that they are not tangible and exist only on the blockchain.
Cryptocurrencies are nothing more than code on a digital ledger. Thus, they exist anywhere and everywhere, and have a global nature. Due to their nature, regulators around the globe are experiencing difficulties in regulating crypto-related activities.
There is no global uniform legal consensus on the regulation of cryptocurrencies. The next section will discuss the regulatory status of cryptocurrencies as a payment method in South Africa. Currently, only the SARB is allowed to issue legal tender.
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