Crypto Finance

Paying for Goods Using Ethereum

With over 15,000 businesses across the globe now accepting crypto payments, many traders and investors are finding themselves better off by paying using Ethereum or Bitcoin as opposed to traditional cash.

Because of the flexibility of cryptocurrencies, as well as the potential for their value to greatly increase as time goes by, many companies are happy to provide lower costs for their transactions than when paying with regular money as they know that the tokens may end up being more valuable in the future. As it's now possible to pay with crypto, it's a good idea to understand how this process works and which types of currencies are compatible.

How The Process Works

Just like when paying with regular cash, a trader can instead use their wallet to deposit a specific amount into a recipient's wallet. This transaction will be calculated based on the value of crypto, such as the current Ethereum price and so a set amount will be removed to cover the cost of the purchase. Although there are many currencies available, not all of them are accepted, but most leading retailers will accept payment as Bitcoin and Ethereum as these are two of the largest types in the world.

It is worth noting that other types of crypto can be used, but as most sellers will rely on their own dedicated wallet to receive payment - the currency must be compatible with the fiat system, although there are two ways that this can work.

Scenario 1 - the seller will want to instantly exchange the crypto into a currency that is more convenient for them. This means that the cryptocurrency used must be eligible for transactions with the fiat system. If it isn’t, as can be the case with smaller or lesser-known types, then the sale cannot be completed. If on the other hand, it is compatible, such as with Bitcoin and Ethereum, then the transaction can go ahead as intended.

Scenario 2 - the seller may not want to transfer the crypto into a cash currency and may instead opt to retain the tokens themselves. In these instances and when an exact amount can be agreed upon by the buyer and seller, it can be as simple as transferring one or more tokens from the sender’s account to the recipient's wallet. This can also be done by using dedicated ATMs that allow transfers directly from one wallet to another, although not all machines provide this option and most only do so when using Bitcoin as a payment method.

Fiat services were only introduced to crypto payments in an effort to make it easier for transactions to take place. Before then, the vast majority (up to 95%) of traders were only given the option to transfer tokens from their wallet to a recipient. These days, the equivalent value of crypto can be exchanged using fiat services, allowing the buyer to avoid the need to use traditional cash, whilst the seller can receive their payment in a currency that they prefer based on the current rate of exchange.

Date: 18.07.2023