When you hear “crypto,” where does your mind go? Maybe you picture wealthy tech entrepreneurs or coders working in dark basements. Maybe it makes you think of scams, hacks, memes, or even Elon Musk. These are the stereotypes that mainstream media has ingrained in many of us as cryptocurrency becomes increasingly mainstream.
Believe it or not, early impressions of the internet weren’t much different. In 1995, American magazine Newsweek predicted that “no online database will replace your daily newspaper, no CD-ROM can take the place of a competent teacher and no computer network will change the way the government works.” The inventor of Ethernet, Robert Metcalfe, even claimed the Internet would “catastrophically collapse” by 1996. Now, Newsweek is published exclusively online, and the Internet has changed the lives of over 5 billion people on a daily basis.
Clearly, everybody can be mistaken. Below, you’ll find a few important things to know about crypto, including some that you may not know and will surprise you, in less than 1,000 words.
I Need to Be Crypto Savvy to Invest in Crypto
A common and understandable concern is that investing in crypto requires years of knowledge about finance, economics, and cryptocurrencies. While it can feel daunting to start learning about the technology, there are many resources available to easily explain a few of the basics. Online education platform Coderhouse is among many leaders bringing education to the masses. Listening to podcasts, watching YouTube videos, and reading explanatory articles can help paint a clear picture of how the industry works.
Crypto Can Only Be Used for Trading
Many assume that crypto is only good for trading. They don’t immediately recognize the countless added benefits crypto can bring; Crypto can be a great source of passive income, help citizens in countries with poor monetary policies to hedge against inflation, and offer a faster, safer, more affordable option for cross-border payments. Yield staking, for example, allows for investors to earn returns on invested capital with no prohibitive minimums, just by holding or staking their assets in a particular protocol. Individuals can stake common assets such as ETH (the token of the Ethereum ecosystem), or even stablecoins (cryptocurrencies tied to fiat currencies like the U.S. dollar).
As a savings tool, crypto offers unique advantages such as no minimum balances, immediate liquidity, and competitive returns when compared with traditional investments. The option to save in stablecoins tied to government-issued currencies such as the U.S. dollar also offers many individuals a hedge against inflation for their savings. The average savings rate paid to depositors is a measly .05% according to S&P Global, not even close to beating inflation.Traditional financial institutions take on high returns by lending out deposited funds while not distributing the gains to its depositors. Crypto can solve for that.
Crypto Cannot Be Sent Across Borders
Traditional cross-border payments, or remittances, sent through services such as Western Union or traditional banks come with massive added costs. In fact, the cost of sending $200 cash-to-cash globally was a whopping 6% ($12) in 2021. Additionally, there is limited transparency on processing times and fees. Among the many benefits of crypto as a payment method, fees incurred from cross-border crypto payments are significantly less. Crypto also operates much faster, with funds reaching the recipient’s wallets in up to an hour, depending on the protocol used, whereas traditional remittances can take up to 5 business days.
There hasn’t been cross-industry crypto adoption
Now you can have access to credit and debit cards issued from all sorts of respected institutions, including Mastercard and Visa, that operate on top of blockchain and crypto. You can save in the currency of your choice and earn rewards in crypto as you spend. Well-established sports teams such as São Paulo Futebol Clube and Tigres also have entered the industry, using crypto for ticketing, merchandising, and the payment of player transfers.
There’s Little to No Regulation on Crypto
Crypto regulation is a prominent topic of conversation, with many citing a lack of regulation as a reason they do not use the technology. While there is undoubtedly room for increased regulatory coverage that doesn’t limit the intrinsic benefits of crypto, there is far more regulation than many are aware of. Regulation is intended to protect users, which is aligned with the steps platforms are making independently. Regulators and organizations alike are focused on increased Know-Your-Customer and Anti-Money Laundering compliance protocols, protecting users by carefully verifying identities to prevent bad actors from infiltrating the ecosystem to hack, steal, or use the services to fund illicit activities. Worth noting, criminal activity accounted for a mere 0.34% of cryptocurrency transactions in 2020, whereas the UN estimates 2% – 5% of gross domestic product globally is made up of money laundering and illicit services.
There’s No Way I Can Get Paid or Pay for Services in Crypto
As mentioned above, cryptocurrency is a faster and less expensive mode of cross-border payments. In addition to remittances, cross-border payments position cryptocurrency as a useful replacement for traditional payment methods used for employees working in countries outside of their companies’ headquarters. This is also applicable to students receiving stipends for their studies outside of their home country.
Not only can individuals receive paychecks via crypto, but they can also make payments in crypto. For instance, universities are increasingly accepting cryptocurrency for tuition, a trend that increases accessibility to education globally. Additionally, businesses of all sizes can start exporting their services abroad without dealing with bureaucratic and expensive financial institutions.
When the internet first emerged, many of the brightest minds were skeptical. The same has been true of cryptocurrency. And, much like the internet, cryptocurrency is proving to have quite the impact on our everyday lives. It has been more than 30 years since the internet was invented and most of us can’t picture life without it.
The same will be true of crypto, this is just the beginning.
Santiago Alvarado – Senior Vice President of Product at Bitso. As Senior Vice President of Product at Bitso, Santiago oversees Bitso’s aggressive strategy of new products for Consumers and Institutions. He holds an MBA degree from Harvard Business School and has been working in the fintech industry in Latin America for the past two years. Prior to joining Bitso, Santiago led the launch of the first neobank in Chile.