How To Spend Bitcoin
With more and more companies now accepting Bitcoin as a method of payment, and more and more banking services offering Bitcoin debit cards, it's becoming increasingly important to know the different ways in which you can spend Bitcoin and how to do it.
There are a few key concepts you must get to know, like wallets, for example, that will allow you to become a Bitcoin spender. That's why we've put together this quick guide on what Bitcoin is, how to spend it and what companies accept it as a method of payment.
What Is Bitcoin?
Bitcoin was created in 2009 shortly after the 2008 economic recession. The seismic events of 2008 had revealed a new concern for centralized financial systems and out of this grew the first truly decentralized peer-2-peer cash system: Bitcoin. This network was supposed to be able to simply send financial transactions and the value they hold to one another without the need for any centralized authority. The Bitcoin network would inherit its infrastructure from the community of miners that ran and verified its transaction, and get its security from cryptographic means.
It was this cryptography element that also interested some users to see Bitcoin as a store of value, as a comparable virtual gold. Today this is how we know Bitcoin; it now sets the bar and trends for the entire cryptocurrency market with a total market capitalization of over $777 trillion. Bitcoin also famously has no leader, instead, it is a mysterious figure known as Sitoshi Nakomoto, a riddle yet to be solved by the community. You can find the Bitcoin white paper online written by Satoshi that sets out the core principle of how this technology works.
How Bitcoin Works
You can imagine the Bitcoin network as a big order book full of transactions, or a ledger. Users can send amounts of Bitcoin to other users on this ledger by using a specific address, just like with a traditional bank transaction. But where a bank transaction is sent to the centralized network of that bank to be verified Bitcoin is sent to the decentralized Bitcoin ledger. This is how funds are sent to users.
Miners are the next crucial part of this puzzle as they provide the physical infrastructure for this platform to be run on. Once they have verified the transactions and sorted them into blocks users know that the funds they are sending and receiving are secure, and this is what creates a functioning financial network. It really is more simple than you may think, at least when we talk about its process in this simplified way. The technology behind this that makes this all possible is truly amazing and has use-cases that we may not have even thought of today, as is the nature of novel technology. But at its core, this is how the Bitcoin machine works.
How Do I Store Bitcoin?
Before you can start to spend your Bitcoin you first need to be able to store it. This can be a little bit confusing for beginners because you will need to use a new tool that you may not be familiar with: a wallet. And no this isn't like the one you put in your pocket, this is a digital wallet that safely holds your Bitcoin or cryptocurrency holdings online.
Before you even choose a wallet you may need to choose a trusted interface to buy your Bitcoin from. For example, this could be an exchange like Binance or a broker like eToro. Some of these platforms have their own wallet built into the platform, so you don't need to go looking for one.
Binance for example has a native wallet that your holdings transfer directly into. This definitely makes things more simple for you but perhaps it's less secure than an external wallet.
External wallets are separate entities to exchanges and brokers. They are an application that you can use to store your Bitcoin online with a pirate third party. For example, meta mask is a very popular wallet because of its high levels of security.
Some wallets will also allow you to hold your Bitcoin offline, which is undoubtedly the most secure, but here you can't spend your Bitcoin, just store it.
How Can I Spend Bitcoin?
There are now a variety of different ways in which to spend Bitcoin. This is a growing phenomenon and we are seeing more and more methods of spending Bitcoin as time passes.
Here are some of the most popular:
Bitcoin Debit Cards
This is perhaps the most straightforward way to spend Bitcoin in your day to day life, and it also highlights the degree of integration Bitcoin now has with today’s financial system.
Users can connect their wallets that hold Bitcoin with a debit card and then use this as you would a normal debit card. There are a huge range of cards out there now to help you spend your Bitcoin in day to day life. Here are a few of some of the most popular you can use to spend your Bitcoin:
CoinsBank: Offering four different cards with different fee structures and features.
Bitpay: Visa branded card you can use just as you can a regular debit card.
Wirex: Offers an online banking app exclusively for Bitcoin.
Bitstamp: Offers a prepaid debit card that you can fund specifically with Bitcoin.
Binance Visa Card: Use the native wallet on the platform to fund this card accepted by over 60 million merchants.
One thing to keep in mind about Bitcoin debit cards is that some will require you to have an external wallet that it is linked to, whereas others that have a platform (like Binance) do not require an external wallet.
Video Games and Gambling
One area of cryptocurrency that is experiencing a huge boom is video games and gambling. Cryptocurrency has quickly found a home on online gambling sites and now there are even Bitcoin specific gambling sites.
Similarly, you can now play online games using cryptocurrencies like Bitcoin as the main currency that is accepted. On platforms like these you can even earn BTC from playing the game also.
Some travel agencies are now accepting Bitcoin for everything from payment for flights to hotels and tours. One example is Expedia who accepts Bitcoin for both.
It's now fast becoming popular to buy cars in BTC too. Many car dealerships are beginning to accept the cryptocurrency, and particularly it is more and more popular for luxury car dealers to accept Bitcoin as payment. Many businesses use this as a marketing strategy to attract the fast-growing cryptocurrency community.
Three are also a host of shops, cafes and restaurants that directly accept Bitcoin as payment for their services. Most of the time you will have to use one of the Bitcoin debit cards, but some places will have alternative ways for you to spend your Bitcoin with them.
Where Can I Spend My Bitcoin?
Spending Bitcoin Online
There are a host of popular platforms that now accept Bitcoin as payment. Here are some of the most popular:
Spending Bitcoin Offline
As said before, you will probably need to have a working Bitcoin debit card to spend your Bitcoin at offline locations like shops and restaurants. But we are seeing more and more locations now accepting this method of payment. Some of the most popular are:
Everyday there are more and more ways being innovated for you to spend your Bitcoin. Currently, there are a range of good options that include popular companies like Starbucks and Tesla. As more and more companies integrate with Bitcoin it makes it more attractive for others to follow suit, so you can expect this to grow.
If you want to spend your Bitcoin in physical places then you will need to get yourself a Bitcoin debit card. There is a wide range of platforms offering this service so be sure to have a good look and get the right deal for you. Also, most Bitcoin debit cards will allow you to use it just as you can any normal debit card.
Other than this, you can find crypto-specific activities online like gambling and gaming theat completely run off of currencies like Bitcoin. It is always worth being cautious when doing things like this, and remember it is always critical that you are aware of the relevant tax information because unlike common belief Bitcoin is not a tax free asset.