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How to Spend Bitcoin

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Exit strategies of cryptocurrency

So you’ve owned bitcoin for a while and have even made a little money on it. It has been fun watching the market value of bitcoin go up, but now you need to buy a few things and don’t have any fiat currency. This means it’s time to spend your bitcoin.

There are major paths to spending your bitcoin. You can either find a place that directly accepts cryptocurrency, use a wallet that converts the cryptocurrency to fiat currency before paying, or convert your cryptocurrency back to fiat currency yourself before paying.

Find a Place that Accepts Bitcoin

As simple as this sounds, bitcoin is still not widely accepted by merchants, online or brick-and-mortar, in the world. You will have to seek out merchants who accept bitcoin and then hope they have what you’re looking for.

In addition to simply paying for a good or service, you could trying gambling or donating your bitcoin. Casinos have started permitting deposits using bitcoin, and the result has worked out relatively well so far, so this is expected to continue. Donations are possible for certain charities,

Paying Online

Merchants such as Microsoft, Overstock, Newegg, and Dell are probably the largest companies who work with bitcoin. The hope is Amazon will begin to accept it in the future, but for now this is a great start and opens up a lot of options for users looking to spend their bitcoin.

The biggest reason why these companies are willing to accept it is it is an appreciating good and there are lower fees than if a user buys something with a credit card. Credit card companies take a percentage cut which hurts the company in the long-run. In this sense, bitcoin is disrupting those companies as well.

In terms of large platforms, PayPal and Shopify both have an integrated bitcoin payment capability. This will have an even larger effect than the previously mentioned merchants accepting bitcoin because of the scalability of the use. It will allow a large percentage of merchants to accept the cryptocurrency with little to no work, and will therefore greatly increase the utility of bitcoin.

Paying in Person

It is rare you will find a store that accepts bitcoin by happenstance. Right now, this occurs more often as a form of gimmick or promotion that will get a store or restaurant publicity. Some places have put out QR codes for tips or donations, but this is the exception and shouldn’t be counted on.

If you are intent on spending your bitcoin in person – meaning you transfer the money directly from your wallet to the merchant’s wallet, then do your research ahead of time. Coinmap.com is a service which provides an aggregation of all the known stores who accept bitcoin.

Use a Wallet

Now that cryptocurrencies have reached somewhat of a critical mass, we are seeing a lot more businesses pop up with the goal of making it easier to spend your bitcoin. There is a huge opportunity in being able to unlock the utility of bitcoin as a medium of transfer, and these businesses are working on doing just that.

Companies like TenX and Monaco whose sole goal is unlocking the spending power of bitcoin. These companies work to integrate their platform so when you use their version of a credit card, it converts your cryptocurrency into the appropriate currency and spends it. Their product depends on cheap conversion fees and maximum convenience.

Even if you had never held bitcoin before, having a credit card that could spend your money in the appropriate fiat currency and minimize your fees would be a superior value proposition. These companies know what ails most consumers and want to make it easier to manage all your finances in a centralized manner.

Basically, they are using the opportunity afforded by cryptocurrency’s inconvenience to leverage their platform so they can replace the service offering of big banks. By providing flawless currency management, helping to manage spending, and enabling frictionless instant payments, they become the best option in the market.

Convert it Yourself

Sometimes the easiest way to spend your bitcoin is to just convert it back to fiat currency and spend it yourself. This would be done over an online exchange, but requires less of a time investment and is more convenient. You will have enjoyed an increase in the market value of your investment, and even though this might be the most inefficient in terms of transaction fees, it gives you the most freedom to spend your cryptocurrency on whatever you wish.

Conclusion

Every day it becomes slightly easier for you to spend bitcoin. Businesses want to make it as easy as possible for people to pay with it, not to mention the fact that it doesn’t cost them as much as if you were to use credit cards. Online payment processors and wallet start-ups are both working to make it a simpler process to utilize bitcoin freely. As a result, a few years from now you will probably find there is minimal friction when you go to spend bitcoin. In a way, this is what technologists mean when they talk about bitcoin being widely adopted.

Featured image courtesy of Shutterstock.

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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1 Comment

  1. topsytervy

    February 22, 2018 at 9:39 pm

    Hi i have commented on a different post on hacked as well, I am unsure why ten X and monaco are being brought up as industry leaders in this area. Considering wavecrest has made the VISA partnerships useless to current card holders. STK token has a beta version available and you will be able to spend crypto via their app in Canada(card or tech similar to apple pay) in June and then in the US after the Canada launch.(5 year mastercard partnership already in place) I believe they will be first to market but METAL seems to be close behind.Thanks for the article, will be great when this gap is merged.

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How Do BTC Transactions Actually Work?

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The advent of bitcoin has revolutionized the payment arena by removing centralized systems and the need for expensive and often convoluted intermediaries. To illustrate, let’s take a look at payments via traditional centralized systems and contrast them to bitcoin.

Centralized Payments

Payments via traditional finance channels are done though the help of intermediaries (financial institutions with certain roles and level of trust).

What are the features of such a system? In short:

  • reversible transactions
  • intermediaries take a percentage, which increases the cost of transactions and sets their minimum price, making it impractical to carry out infrequent and small transactions
  • the reversibility of transactions increases the cost of services whose services are irrevocable (the transaction was canceled. but we have already paid% of it)
  • since the payment can be canceled, the seller is insured, requiring more information from the buyer than is necessary
  • a certain percentage of fraud is inevitable

But what if there would be a payment system that allows any two participants to transfer funds directly, without an intermediary? The computational cost of canceling transactions will make fraud unprofitable, and escrow mechanisms will protect customers.

This is exactly what does Bitcoin based on the blockchain technology.

How Does it Work?

Information (block info, counter, and list of transactions) is recorded in blocks. When a block (its size is up to 1 MB) is full, a new block appears. The blocks are interconnected linearly, one after another in order, and each block contains information (hash) about the previous one. Therefore, if you wish, you can see the story down to the very first block.

We define electronic coin as a sequence of digital signatures. Person A sends the coin to person B, signing the hash of the previous transaction and Person B’s public key, attaching this information to the coin. However, how does Person B determine how many times Person A spent this coin? He should know that none of the previous owners signed the transaction before the one that is in the chain of the coin sent to him. For this, a time stamp is written in the block hash. It shows that at the moment specific data existed and therefore fell into the block hash. It turns out that only the first transaction is valid, so you can not worry about late attempts at double spending, the information about the first transaction was already there and, since it is recorded for all system participants, the false (later) will be rejected.

From the user’s side, the operation looks like this: Person A opens his wallet, enters the recipient’s address and the amount of 2.5 (for example) Bitcoin, executes the signature using the private key (the public key or bitcoin address is a unique personal address that is used in the chain, and everyone can see it, and the private key works as a password).

Inside the system, a transaction will have three pieces of information:

  1. Input. Record with details about where Person A has bitcoins.
  2. Amount. The number of transferred coins. In this case, 2.5 BTC.
  3. Output. Person B bitcoin wallet address.

Input and Output

As you probably understand, Bitcoins exist only in the form of transaction records in the electronic repository. For example, Person A’s balance consists of 1 BTC from Person C, and 3 BTC from Person D. All these are different transactions that were carried out at different times. In Person A’s wallet, the records do not merge into a single file with 4 BTC but continue to be stored separately.

For Person A to send Person B 2.5 BTC, the repository is trying to find a file with such a sum or combination of data to make 2.5 BTC. In our example, there is no operation with such amount, and they are not cumulative to get the required amount. Person A cannot break 3 BTC received from Person D (the sum of the input) since the system does not allow such division. Therefore, Person A has to send 3 BTC instead of 2.5 (output amount) for two transactions or two outputs: 2.5 BTC for Person B and 0.5 BTC back in the form of change. Of course, the user won’t see the difference and this is just a way of explaining how this works overall.

Featured image courtesy of Shutterstock. 

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.9 stars on average, based on 42 rated postsVladislav Semjonov has a legal and financial background. He has been involved in crypto space since early 2017 in both ICO advising positions in several ICO consultancy firms, and as an ICO analyst for VC. He began contributing for Hacked.com in April 2017.




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What is a Smart Contract? Here are Practical Examples

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Smart contracts

Even though there are very few newcomers to the crypto market now, I will provide some useful information on smart contracts even for those who have been investing in digital assets for a long time. After all, we all have knowledge gaps, and many definitions are very vague – especially as it pertains to blockchain and smart contracts.

What is a Smart Contract, Anyway?

A smart contract is a program that starts the execution of a specified result only when pre-specified conditions are met. In other words:

  1. The parties have determined the conditions and the result of their execution.
  2. When requirements are met, the smart contract will be automatically executed. This can be either the transfer of assets from one side to the other or the launching of a chain of any operations sequence.

The principle and most apparent advantages of this technology are the elimination of intermediaries and the resolution of the issue of trust which is an achievement of technological trust.

The first and most straightforward application of such a contract is multi-signature contract (i.e., multisig, escrow). Those parties who do not trust one another can freeze a certain amount of assets in the blockchain in such a way that, in order to spend them, a contract would require signatures of more than 50% of stakeholders.

Example 1

The contract execution mechanism is visible in the following example:

Suppose there is a contract for saving money initiated by parents for their children to use when they reach adulthood. Contributions can be made to the account, where funds can be returned strictly after 18 years. This contract accepts transactions, transfers money from the parent’s account and checks the timeline for a specified date (like 18 years). If it does, it transfers money to the child’s account. Miners, seeing the code of this contract, will execute it. If you do not need to do anything, then the state of the account will not change, and no transactions need to be performed. However, as soon as 18 years have passed, the miner will execute the contract code and receive a transaction returning the money to the child’s account – and write it in the blockchain. To avoid contracts that take money from accounts or DoS clients in endless cycles, each instruction of the contract costs a bit of a different currency (i.e., gas), which has a price in the currency of the network. Therefore, the execution of a contract requires money that goes to those who execute them and close the blocks (i.e., to miners themselves).

Example 2

The second example:

Another type of contract could be one that accepts bets on the bitcoin price on a specific date and then transfers the money to the winning party based on the result. How does a contract know a bitcoin rate when the time comes? After all, can’t the data be changed and faked?

Such problems can be solved with Oracles. An oracle is a conductor program that transfers information from external data sources to the blockchain, providing the necessary data to execute smart contracts. For example, an oracle can tracks stock quotes on the external web and transfer these data to the blockchain.

Oracles in smart contracts are a full-fledged industry in which many startups try to offer their solutions. Hacked covered this industry in the following article: Are Oracles the Ticket to Ethereum’s Next Bull Market?

Now smart contracts are widely used in the field of fundraising, such as in initial coin offerings (ICOs). As many investors know, ICOs have made their presence felt on many industries, such as financial markets (banking services, insurance, derivatives trading), supply chain management and logistics, accounting and auditing, registration of property rights, all sorts of voting, smart transport, digital identity identification and many, many others.

Unconditional advantages of smart contract technology are, of course, savings (due to the absence of intermediaries); immutability (since the prescribed terms of the contract are stored in a distributed registry, and no one can change them) and speed (when conditions are met, the process starts instantly).

The most apparent shortcomings are the susceptibility to bugs and the complexity of writing. Besides, the exchange of confidential data through transparent distributed registries is not suitable for many banks and large corporations. Also, problems of scaling and speed of transaction processing are still relevant.

However, overall, a smart contract is a significant breakthrough and a foundation of broader applications of blockchain technology. Smart contracts have proliferated the market via ICOs but their applicability extends far beyond that. Only time will tell if smart contracts disrupt other core areas of the economy.

Disclaimer: The author owns bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.

Featured image courtesy of Shutterstock.

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.9 stars on average, based on 42 rated postsVladislav Semjonov has a legal and financial background. He has been involved in crypto space since early 2017 in both ICO advising positions in several ICO consultancy firms, and as an ICO analyst for VC. He began contributing for Hacked.com in April 2017.




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Crypto Kingmakers: Evaluating Exchange Listings

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Cryptocurrency exchanges have long been considered potential ‘kingmakers’ for up and coming ICO projects both pre and post launch of crowd-funding rounds owing to reputation, trading volume and community value, as well as prior experience of shrewd coin selection.

Cryptocurrency exchanges are (at a base level) responsible for fostering liquidity in the market whilst providing competitive choices for investment consumers in the market: both with regards to the exchanges themselves as well as the diversity of the coins they offer for trade.

When a new token is announced for listing on popular platforms such as Coinbase or Binance for example: trends show an increase on interest as represented by value and investment potential. Whether this offsets the prohibitively high cost of entry incurred by such service providers however is yet to be proven.

Separating the Kings from Pretenders

2018 has not been a fortuitous year for many start-ups and underdogs.

Whilst data shows an overall increase in investment volume for new ventures, it also shows a significant failure ratio within these same figures. In fact, data published by tracking agency ‘ICORating’ suggests that a majority (55%) of these initial coin offerings have failed within just the second quarter of this current year.

Potential reasons for this include a ‘bubble’ effect resulting from the artificial inflation of token prices which in actuality hold little to no real value, inability to acquire funding or meet expectations, and the difficulty of gaining attention and penetrating a highly competitive space.

Considering the reported failure rate of ICOs at present, it would be reasonable to exercise caution when considering investment in any of the influx of new tokens on the market (no doubt exacerbated by recent decisions made by Coinbase).

A Utilitarian Perspective

This writer reccommends that you apply critical thinking, solicit the advice of experts and knowledgeable friends, do your own research and cross-reference it with those of pundits and your peers, and do not let anybody encourage you to make any premature decisions. This is all simple advice easily taken for granted, but timeless nonetheless.

We host our own series ICO Analysis / review articles at Hacked.com: articles that break down each project into its fundamentals: such as the strength of the team, technical theory and existing products, and other factors. All of these fields can be incorporated into your own research and analyses. Additionally, I myself frequently publish interviews with a wide range of leaders and experts.

If a coin has no real actionable purpose, inexperienced leadership, technical fallacies, poor communication, or any combination of the above plus more – then there is a good chance that said coin holds no real value, beyond they professed by its proponents.

Looking at Trends

We can’t predict the future, however there are some observable indicators and trends which could point towards the next coins to be chosen by top platforms.

After the PR nightmare surrounding Tether of late, there has been something of a rush of new contenders attempting to become the next stable-coin (a fixed-value token used for off-setting bear markets, or to be used as an intermediary. One of the most talked about of these is the Winklevoss twins’ ‘Gemini Token’.

Adjacent to the ‘Gemini Token’ is the unique investment orientated token from BitMart exchange entitled the ‘BMX Token’. Like a stable coin it can be used as an intermediary for exchanges with other forms of cryptocurrency, however it has the added benefits of affording token-holders discount on all on-platform transactions in addition to being able to stake these coins towards potential new coin listings in the future.

I have also frequently borderline evangelised Terra Virtua on this site and beyond.

As a disclaimer I have no holdings or stake in any of the above companies or tokens. Additionally, I possess a small and transient amount of Bitcoin.

Featured image courtesy of Shutterstock.

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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