Crypto and NFTs have seen a surge in popularity during recent years. This all began with the launch of Bitcoin in 2009, the first ever cryptocurrency created by none other than Satoshi Nakaomoto — an anonymous figure whose identity is still unknown.
Since then, a variety of web3 projects have entered the space and continue to thrive to this day. There are many questions that concern beginner traders, such as how to spend crypto online, as they’re looking for ways to utilize their cryptocurrency investments across various purchasing domains. Opportunities for this constantly expand, as the biggest retailers tap into crypto as a mode of payment.
However, what use cases exist for this constantly-developing web3 technology, in particular? Let’s find out.
Cryptocurrencies are digital currencies that run on what is called a ‘blockchain’, a public ledger. Depending on the network, there are gas fees that users have to pay per transaction; this is a small fee to cover the computing cost. Transactions recorded on the blockchain are public, hence users can view the transaction history and assets of all wallets.
Non-fungible tokens (NFTs) are digital collectibles tradable on NFT marketplaces. Unlike cryptocurrency tokens, NFTs do not have an inherent value on them, and their prices depend on the project, its utility and more. Each NFT is usually unique and has its own rarity, making some more valuable than others.
Crypto is attractive for payments due to fast speeds. Plus, there is no need for a middleman since you gain full ownership of your funds. Another bonus is that cross-border transfers can be done in a few clicks. This removes a barrier to entry that is present in other payment methods. It is recommended to use the more mainstream cryptocurrencies with large market caps for payments. In fact, cryptocurrency as a whole is becoming more accepted by financial institutions and banks. Never accept custom tokens since those can be created by theoretically anyone since these could have no value at all.
While the concept of crypto may seem complex at first glance, it is extremely simple to set up a wallet and transfer funds to another address in a matter of seconds. However, you must keep in mind the regulations of crypto and NFTs in your country if you want to withdraw your assets to tangible cash. While crypto is known for its transparency and all wallet history being public, there are also privacy cryptocurrencies that hide your transaction history.
Since each NFT has a unique ID and contract address, there is no way to fake ownership of a certain NFT collection. This makes NFTs a compelling solution for ticketing, where holders of a certain NFT can be granted access to events. NFTs are also commonly used in web3 games, where they represent in-game objects or characters that players can own, upgrade and trade.
By using a cold wallet, a huge benefit to crypto is that your assets can never be forcefully taken ‒ given that you avoid clicking on phishing links or interacting with malicious contracts. Make sure you never share your private key or secret backup phrase to anyone. A general rule of thumb is to always store your assets in a cold wallet, rather than an exchange or hot wallet for security reasons. Cold wallets are more secure since they come in physical form (USB sticks). Hot wallets should be used for trading rather than storing assets most of the time.
Crypto and NFTs are also investment opportunities. Due to their volatile nature, there is a chance for great upside and downside. However, it is important to do your due diligence before purchasing anything since there are scams and poorly managed projects in the web3 space. Also never invest money you are not willing to lose. Before you start exploring what projects to invest in, here are some things to look out for:
- Is the project listed on a reputable centralized exchange (CEX)? Any token can be traded on a decentralized exchange, so being on a centralized exchange provides more credibility since it usually requires some form of vetting.
- Does the project have a following and presence on social media? Make sure that this engagement is organic and not generated by bots or fake accounts. It’s important that the project clearly communicates their roadmap and developments to their community. Projects that have been established longer in the space are more credible than newer ones.
- Does the project have a team? Make sure to check their website and the team members’ qualifications. Investing in projects led by anonymous teams yields significantly more risk. It is also recommended to check a project’s partnerships and collaborations to see what kind of connections they have.
Now that you know the most popular use cases of crypto and NFTs, learn how to make money with crypto as a beginner here.