How to Make a Cryptocurrency Transaction

Before diving into how to make a cryptocurrency transaction, it’s essential to understand some basics about crypto itself. What gives a cryptocurrency its value? Why use this digital currency instead of transferring cash from your PayPal account?

By the end of this page, you’ll grasp the value of crypto. You’ll know what a cryptocurrency is, how to make a transaction, and why you might want a crypto wallet sooner rather than later.

But first, let’s break it down.

What is Cryptocurrency?

A cryptocurrency combines two beneficial technologies: money and cryptography.

Have you ever encountered a CAPTCHA? You know, those tests asking you to click on pictures with motorcycles to prove you’re not a bot? That’s cryptography in action, ensuring our messaging apps are secure against third-party snooping.

Cryptocurrencies are digital or virtual currencies secured by similar privacy and security protocols, essentially applying cryptography to money and exchange.

But how do you create money from nothing, even if that “nothing” is computer code? Why do cryptocurrencies have value?

This page explains how to make a cryptocurrency transaction. But first, we’ll provide some background on the technology itself. If you want to skip ahead, use the subheadings to find your specific concern.

Key Takeaways

Cryptocurrency is a digital asset on a distributed network: Similar to P2P file-sharing sites like Napster.

Decentralization: Like Napster’s structure, cryptocurrencies exist outside the control of governments, banks, or other central authorities.

Security: Decentralized systems don’t fall apart at a single point of failure. Cryptocurrencies provide cheaper and faster money transfers without third-party authentication and security fees.

Ease of use: Transacting with cryptos is as easy as downloading an app on your phone.

Why is Cryptocurrency Valuable?

Today, we use bank cards representing paper money. Paper money was once redeemable in gold and silver. Gold and silver were valuable because people used them in jewelry. Whatever people use as money has always had an origin from something worthwhile.

Except for cryptocurrencies, it seems.

Many don’t realize cryptocurrency is both a currency and a payment system. The payment system is the source of its value. Even crypto enthusiasts have trouble with this concept, so let’s dig deeper.

Technological limitations have always separated currencies from their payment systems. When you wire money worldwide, you need to rely on third parties. You must trust those third parties just as they trust you.

That’s why cryptocurrencies were invented – to avoid this reliance on third parties. The mysterious creator of Bitcoin, Satoshi Nakamoto, said of his invention:

“A purely peer-to-peer version of electronic cash would allow online payments to be sent directly from one party to another without going through a financial institution. Digital signatures provide part of the solution, but the main benefits are lost if a trusted third party is still required to prevent double-spending. We propose a solution to the double-spending problem using a peer-to-peer network. The network timestamps transactions by hashing them into an ongoing chain of hash-based proof-of-work, forming a record that cannot be changed without redoing the proof-of-work.”

In other words: the innovation comes from how the payment network works. The coin or digital currency unit only expresses the network’s value. A cryptocurrency coin is an accounting tool. The usefulness of cryptocurrency comes from its payment network, called a blockchain.

What is Blockchain?

Blockchain technology makes cryptocurrencies possible. It is a distributed ledger, essentially a database shared and synchronized across space and accessible by multiple people. It provides transactions with public “witnesses” instead of relying on financial institutions or third parties.

The blockchain ledger lives in the cloud, observed by anyone at any time and monitored by its users. The blockchain allows the transfer of bits of information from one person to another, like digitally-secured property titles. Nakamoto called them “digital signatures.”

The blockchain verifies these digital signatures without depending on a third-party trust agency. An internet ledger everyone has access to is helpful, recording the amounts, time, and public address of every transaction. The blockchain guarantees the system’s integrity, and the currency unit is merely a digital form of a property title. The real star is the blockchain.

The value of cryptocurrencies isn’t embedded in digital coins but in the payment network. If cryptocurrencies abandoned the blockchain, the digital coins’ value would plummet to zero. The blockchain isn’t just about money; it’s a perfect invention for transferring information requiring security, confirmations, or assurances of authenticity, reducing human error.

Who Uses Crypto?

Contrary to some beliefs, cryptocurrency adoption is widespread in developed nations like the United States, the United Kingdom, Canada, and the European Union. Emerging economies in Africa, like Nigeria, have also adopted cryptocurrencies. Residents in India, China, and Brazil use cryptocurrencies for cross-border money transfers without unnecessary expenses.

The United States and Canada have a pro-crypto attitude, with many countries taxing cryptocurrencies as capital gains. Cryptocurrencies are illegal in some countries like Algeria, Egypt, and China, but many places embrace them with varying degrees of regulation.

Who Accepts Crypto?

Cryptocurrencies like Bitcoin are accepted by companies like PayPal, Microsoft, Wikipedia, and even Home Depot. Many other businesses, including us at [Your Brand Name], accept cryptocurrency as payment.

Why Should You Use Crypto?

Protect Your Assets: Crypto’s decentralized structure means your assets aren’t susceptible to third-party trust relationships. There’s no middleman fee.
Protect Against Theft: Transactions are validated and recorded in a public ledger with encrypted identities.
Protect Against Inflation: Despite volatility, cryptos have retained value while inflation reaches record highs. Cryptos can serve as a financial cushion in an uncertain world.
Secure and Transparent: Cryptos are public and private where it counts, ensuring an honest payment network while securing your identity.

How and Where to Buy Crypto?

To buy cryptocurrency, you must find a broker or a crypto exchange. A crypto exchange is a platform where buyers and sellers trade cryptocurrencies, similar to online brokerage platforms. Popular exchanges include Coinbase and Gemini, but many others exist.

A crypto broker simplifies the process, acting as a middleman between you and the cryptocurrency exchange. Brokers like Robinhood and SoFi are well-known.

Once signed up to a brokerage or a crypto exchange, you can deposit money into your account and purchase cryptocurrencies. You can buy fractional amounts if you can’t afford a whole bitcoin.

Where Should I Store My Crypto?

You have a few options: a crypto exchange, a digital wallet, or a physical wallet. For security reasons, we recommend a digital or physical wallet. However, if you’re new to crypto and don’t have a large balance, leaving crypto on the exchange is fine.

How to Make a Cryptocurrency Transaction

Finally, we’ve covered almost everything there is to know about cryptocurrencies. Now, we can get to the crux of the issue. How do you use them?

The simplest transaction is exchanging one cryptocurrency for another, which you can do from the comfort of the crypto exchange or notify your broker.

To buy something with crypto, you can transfer between digital wallets. All you need is the blockchain address for the wallet you’re sending the money to.

If using bitcoin, the address will look something like this: 1FtjAzGKSyAavUkbw5QsyzzNDKdtPXk95D

Each address links to a particular user or wallet location on the blockchain. Crypto addresses are public, but the person or wallet behind the address remains anonymous.

People have adopted QR codes for easy transactions and communication due to the long and randomized nature of crypto addresses. These QR codes representing crypto addresses are safe to advertise as they are protected from theft.

A crypto address is a “public key,” one of two keys used in cryptography. The key used for decryption differs from the one used for encryption. You can send money to a blockchain address but cannot use that address to steal from the digital wallet.

In Summary: How to Make a Cryptocurrency Transaction

If you know how to download an app on your phone, you can get started with cryptocurrency and make a transaction. That’s how easy it is.

Understanding what crypto is and why it has value can be challenging, but we hope you’ve learned something today. For more information on getting a cryptocurrency wallet and transacting with it, please check out [How To Make a Crypto Wallet]. It should answer any other questions you may have.

[Your Brand Name] Team