What Is Cryptocurrency Used For? A Guide to Real Life Crypto Applications
Mark Cuban has said the advent of crypto feels like the early days of the Internet. Jack Dorsey says there’s nothing more important for him to work on than Bitcoin. Bill Gates believes digital currencies can open the doors to financial stability for the poor. What does this all mean? Cryptocurrency is the future, and the future is now.
We’ve all heard about the hype around crypto ‘going to the moon.’ Still, there hasn’t been very much conversation around what cryptocurrencies can actually do. If we don’t uncover the world of potential applications that cryptocurrencies offer, we could miss out on billions in wealth and progress.
Luckily for you, I’ve aggregated some of the most exciting applications of cryptocurrency today. Everything from payments, new asset classes, crowdfunding — by the end of this guide, you’ll even learn how to turn crypto into a passive income machine.
What is cryptocurrency?
Put simply, cryptocurrency is a digital currency. Unlike traditional currencies, they aren’t backed or monitored by a central authority like the government or national bank. Crypto runs on blockchain technology, a distributed ledger network that records all the transactions made with that currency and secures it using high-level cryptography.
Applications of Crypto and Blockchain Technology
Just like other currencies, you can use crypto to buy and sell goods and services online. But cryptocurrencies, and the blockchain technology that underlies them all, have various applications beyond just commerce.
Traditionally, sending money overseas and around the world was a lengthy, costly, and complicated process. But cryptocurrency can solve all of those problems. Since Bitcoin is more of a store of value than actual currency, we’ll use Ethereum as an example:
- Speed. An international money transfer done with Western Union can take up to 24 hours. With Ethereum, a transaction of any size can take as little as under 20 seconds. Since the blockchain doesn’t have to abide by international time zones or the lethargy of legacy financial institutions, transactions are much faster.
- Expenses. Regular money transfers can rack up costs quickly since those fees are used to pay intermediaries, cover exchange rates, and comply with specific regulations. But cryptocurrencies are global, and the only middlemen are validators, resulting in lower fees.
- Simplicity. With crypto, both parties in the transaction need a wallet of some kind. That’s it! Sending money becomes far more accessible for the unbanked.
Lending and borrowing money
In the past, borrowing money was a long and painful process—credit checks, waiting for approval, high fees. With crypto lending, you can avoid the pitfalls of the current financial system and borrow money peer-to-peer. Cryptocurrency lending platforms have three stakeholders:
- Borrowers. These folks are looking for funds for their projects, business, etc. They can put up their own crypto assets as collateral.
- The lending platform. Companies that facilitate these agreements.
- Lenders. People who already own significant amounts of crypto (Bitcoin, Ethereum) and are looking to generate passive income on their assets.
Crypto loans don’t require the oversight of a central bank. They are made secure through smart contracts—self-executing contracts that automatically enforce the terms of the loan.
This leads very well onto our next application of cryptocurrency: high-yield savings accounts. Typically, the savings accounts provided by your bank offer meagre yields that just barely save your money from inflation. Conversely, crypto savings accounts make use of the asset class’ booming nature to make you more money. Many providers offer crypto savings accounts, including cryptocurrency exchanges like Coinbase. These providers will lend out your cryptocurrencies to other people and give you a cut of the interest.
Non-fungible tokens, or NFTs, are the hottest talk in town. Tokens, like cryptocurrencies, are a kind of application built on top of the blockchain. Unlike coins, they’re generally not used as money for transactions. Although cryptocurrency tokens can be used as a form of payment, they can also represent equity or an asset. When that asset is one of a kind and unique, it’s called non-fungible.
NFTs have revolutionized the world of art, bringing fine art collection into the digital age. Any form of media — music, videos, images — can be turned into an NFT. Although the media itself can be replicated, the NFT represents its unique ownership. It’s very similar to owning an actual Renoir painting vs a Renoir print.
For artists, NFTs have offered a way to turn their passions into their retirement funds. For buyers, NFTs represent a very profitable (if highly speculative) investment opportunity.
Speaking of investment opportunities, cryptocurrencies also serve as a new way of generating wealth and passive income:
- Bitcoin is up over 8,000% from 5 years ago.
- Ethereum is up 30,000% over the same period.
- Cardano is up 1,400% from a year ago.
These returns don’t exist anywhere else for the public investor. Wealth creation has never been more democratic than it is with cryptocurrency trading.
Even if the volatile nature of cryptocurrency puts you off, there are still ways to profit every day from the “wiggle” of a coin. Dan Hollings’ “The Plan” has figured out how to leverage cryptocurrency bots to generate income on every trade!
Decentralized project funding
One of the most socially exciting applications of cryptocurrency is the advent of decentralized crowdfunding. Traditional crowdfunding generally involves high fees, long wait times, and donors aren’t engaged with the process after their donation.
With cryptocurrency-based crowdfunding, you can make individual, organizational, and community projects more transparent and democratic. By tokenizing your project, donors become investors who can keep up with your progress, provide suggestions, and form a community around your idea. Moreover, it leaves the door open to future funding if you need it!
How You Fit Into The Future of Cryptocurrency
Let’s quickly recap. Cryptocurrency can:
- Make sending money affordable, rapid, and accessible.
- Make borrowing and lending money approachable and secure.
- Generate higher returns on savings accounts.
- Fuel next-generation asset classes like NFTs.
- Be a highly profitable investment vehicle.
- Facilitate more transparent and democratic project crowdfunding.
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Frequently Asked Questions
What is cryptocurrency actually used for?
Cryptocurrency is digital money that can be used to buy and sell goods and services. Cryptocurrencies like Bitcoin are typically used as investment vehicles or a store of value, like gold. Others, like $ETH, are more suited to handling day-to-day cryptocurrency transactions.
Can cryptocurrency be converted to cash?
Yes, you can convert cryptocurrencies into fiat currency. To do this, you’ll need to use a cryptocurrency exchange like Coinbase, Binance, or Kucoin.
What are the benefits of cryptocurrency?
Cryptocurrencies are borderless, transparent, and publicly regulated. Transactions made using cryptocurrencies are fast, affordable, and reliable when compared to traditional financial institutions. Since anyone with an internet connection can use them, cryptocurrencies have made personal finance and banking services accessible to millions of unbanked people.