How to Pay With Cryptocurrency

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.