How to Pay With Cryptocurrency: A Beginner's Guide

How to Pay with Crypto

Cryptocurrencies have yet to replace cash at most checkout counters, but more businesses are opening up to the idea of accepting digital assets. In fact, more than 75% of global merchants want to leverage the advantages of cryptocurrency payments, including their lower transaction costs, lack of a third party, and ability to draw in younger customers.

Some nations, like El Salvador, even recognize Bitcoin (BTC) as legal tender, facilitating the use of digital currency for purchasing daily-life goods and services. Plus, payment giants like MasterCard and Visa are feverishly working on crypto-friendly integrations, potentially making crypto payments even more accessible.

Although paying with crypto may seem more complicated than swiping a card or tapping a fintech app (considering their complex storing procedure), there are more ways than ever for people to use virtual currencies. So here’s all about how to pay with cryptocurrency, including the big companies already accepting Bitcoin (BTC). 

How Does Paying With Cryptocurrency Work? 

Every cryptocurrency payment uses a decentralized peer-to-peer (P2P) network called blockchain technology to transfer and record payments. Although each digital asset has a distinctive software architecture, all these virtual currencies use algorithms called consensus mechanisms to set and enforce the rules on their networks without resorting to third parties.

Computers on blockchains (aka nodes) follow the consensus protocol to verify transactions and post them on a virtual payment ledger. Typically, blockchains charge transaction fees whenever people send crypto across the network and redistribute these fees to node operators as compensation for their service.

While cryptocurrencies exist on their respective blockchain networks, cryptocurrency wallets are necessary for storing and sending digital assets. These wallets contain two keys—private and public—which serve as a user's digital address on a blockchain.

When paying with crypto, people copy the public key for the cryptocurrency they want to send to their recipient. The private key, on the other hand, functions as a master password for a wallet because it gives a crypto wallet holder exclusive access to the crypto assets in their account. Thanks to advanced cryptographic technology, people can't see the private key with a public key address, making it possible to securely pay using digital assets. 

How to Pay With Cryptocurrency

The most direct way to pay with crypto is through P2P swaps on private wallets, but there are a few fiat-friendly payment rails for merchants who aren't crazy about crypto. So even if a company doesn't accept cryptocurrencies, you have alternative methods to use your digital assets to make daily purchases. 

Payments Between Crypto Wallets

If a business lets people pay in cryptocurrency to a wallet address, it often posts the public key for the cryptocurrency it accepts as a QR code. In this case, the payee chooses the appropriate cryptocurrency, enters how much to send, and scans the QR code for the recipient's address. After confirming all these details, they approve the transaction and wait for the transfer to clear on the blockchain.

For example, suppose a pizzeria accepts Bitcoin payments. If you want to pay for a pizza with BTC, you would first open your Bitcoin wallet, select how much BTC you need to send, and scan the QR code for the pizzeria’s BTC public key. After confirming the transfer, you and the shop owner monitor the progress on the Bitcoin blockchain using a crypto-specific search engine called a blockchain explorer, such as Blockchain.com.

Blockchain explorers let anyone track the status of a crypto transfer by entering data like the public wallet address or the transaction hash associated with their transfer. Once the BTC payment passes the verification process, the payment will reflect in the shop owner's wallet. 

Fintech App Solutions 

A few fintech companies like Venmo, PayPal, and CashApp now offer crypto transfer services, making it easier to use virtual currencies daily. For instance, PayPal has a "Checkout with Crypto" function that lets you use the crypto in your PayPal and pay for goods to merchants accepting PayPal. However, note that while you send the payment with a digital asset like Bitcoin or Ethereum (ETH), the merchant receives a fiat equivalent in their account. 

In contrast, fintech apps like CashApp link directly with a scaling solution on top of Bitcoin's blockchain called the Bitcoin Lightning Network (LN). Transferring BTC on the LN is like sending crypto to another wallet address, but it's faster and cheaper than on the original Bitcoin blockchain. The LN’s developers used an intricate channel system to take the strain off Bitcoin's blockchain, making BTC micropayments more efficient for users. Although the LN is available on other crypto wallets, CashApp's integration makes sending BTC payments to merchants with a CashApp account seamless. 

Crypto Debit Cards 

Some centralized crypto exchanges (CEXs) like Coinbase and Crypto.com offer crypto debit cards, which link with your crypto account. Instead of directly withdrawing money from your checking account, these exchange-issued debit cards use whatever cryptocurrency you want to spend from trading platforms. The card provider typically handles the crypto-to-fiat transfers whenever you use one of these debit accounts. So although you deduct crypto from your exchange account, the merchant usually receives an equivalent amount of fiat currency such as USD. 

Since crypto debit cards work similarly to other Visa or MasterCard products, they're one of the most accessible ways to pay with cryptocurrency. 

Pros and Cons of Crypto Payments 

Cryptocurrency has unique value propositions for customers and merchants, but it's not a payment panacea. Whether you’re an individual or a business looking to make transactions in crypto, you should evaluate the pros and cons of crypto payments before hitting send. 

Pros of Crypto Payments

  • Censorship-resistant: Since blockchains are decentralized, there are no gatekeepers to ban crypto payments. Consumers and businesses using crypto don't need to fear payment restrictions from a counterparty like a fintech app, bank, or credit card issuer. 

  • Low transfer fees: Each cryptocurrency has a different fee structure, but many altcoins like Solana (SOL) and Polygon (MATIC) are well-known for average transfer fees below a penny. New protocols like the Bitcoin LN also make it possible to send BTC without paying a cent in fees. 

  • Instant settlements: Many blockchains and scaling solutions like the Bitcoin LN approve transfers in a few seconds. Even if transactions aren't instantaneous, it's possible to monitor a cryptocurrency's progress on blockchain explorers. 

  • Better addressable market: Another advantage of cryptocurrency payments is it opens up more business opportunities, particularly with younger customers. Surveys suggest as many as 40% of millennials and Gen Zs want more opportunities to use crypto for payments. 

Cons of Crypto Payments

  • Price volatility: Besides stablecoins like USDC, cryptocurrencies have unpredictable price swings each day. Customers and companies accepting crypto need to feel comfortable with daily fluctuations in their purchasing power.  

  • Steep learning curve: Despite advancements in the user interface for crypto wallets, understanding how to properly download a wallet and safely transfer cryptocurrencies takes time. If people aren't already tech-savvy, it may take a few weeks to fully figure out the intricacies of P2P crypto payments. 

  • No client support: Because there are no banks in crypto (and to an extent, this is an advantage), there are no customer service reps to call when there's an issue with a payment. Customers or merchants who make a mistake or want a refund can't ask a card company or bank for reimbursement. 

  • Prone to hacks and glitches: There are countless stories in cryptocurrency history of hackers breaking into blockchains or crypto wallets and stealing user funds. Although tools like two-factor authentication and biometric login improve safety, hacks are an ever-present threat. 

What are a Few Companies That Accept Cryptocurrency? 

Paying with crypto isn't as widespread as using cash and credit cards, but a few big brands already accept most crypto assets. For instance, movie theater chain AMC Theatres accepts Bitcoin and a few altcoins like Litecoin (LTC), Bitcoin Cash (BCH), and Dogecoin (DOGE) from American customers on its mobile app. Also, furniture retailer Overstock.com lets users pay with dozens of cryptocurrencies in its online checkout portal. 

Even if companies don't accept crypto payments directly, they may offer ways to use digital assets to convert to fiat or gift cards. For example, coffee retailer Starbucks lets users pay for gift cards with Bitcoin, software giant Microsoft accepts Bitcoin transactions in its Microsoft Store, and restaurant chain Chipotle allows customers to pay with more than 90 different cryptocurrencies through its partnership with the Flexa network. 

Other prominent companies tinkering with crypto transactions include:

  • McDonald's

  • AT&T

  • Whole Foods 

  • Burger King

  • GameStop

  • Shopify 

Learn More About Safely Trading Crypto on dYdX Academy 

At dYdX, we aim to help everyone feel confident about stepping into the digital assets economy. For more safety tips on trading, transferring, and transacting with cryptocurrencies, check out the dozens of beginner-friendly articles on dYdX Academy.

Also, remember dYdX offers eligible traders low-fee perpetuals trading for anyone interested in swapping crypto derivatives. For more details on dYdX's latest upgrades and features, swing by our official blog, and eligible traders can start trading on dYdX today. 


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