Cryptocurrency was once seen primarily as an investment vehicle, but in recent years its real-world applications have expanded dramatically. If you already hold crypto, you may be curious about the many ways you can put it to use beyond simply trading.
In this article, we introduce seven practical ways to use cryptocurrency and Bitcoin, along with important considerations to keep in mind.
Key takeaways
- Cryptocurrency has moved well beyond investing, with practical uses across payments, transfers, gaming, collectibles, governance, and charitable giving.
- Beyond buying low and selling high, staking and lending let you earn passive income from holdings that would otherwise sit idle.
- Crypto transfers settle in seconds at very low cost regardless of distance, which makes them especially compelling for international remittances compared with bank wires.
- A growing number of online and physical merchants accept crypto payments, and blockchain games, NFT marketplaces, and DAO governance tokens all use crypto as their native medium.
- Nonprofits and content creators accept crypto donations and tips, where low fees make sending small amounts practical.
- Almost any crypto transaction, not just selling for cash, can trigger a tax event, including spending crypto, swapping tokens, and receiving staking or lending rewards.
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Ways to Use Cryptocurrency
Once you have purchased cryptocurrency, what can you actually do with it? Below are seven of the most popular use cases.
Investing and Growing Your Wealth
The most common reason people buy cryptocurrency is to invest. The straightforward approach of buying low and selling high for capital gains is well known, but there are also ways to earn passive income from your holdings.
For example, staking lets you lock up your cryptocurrency to help validate transactions on a blockchain network and earn rewards in return. Lending allows you to lend your crypto to other users through a platform and earn interest. These and other yield-generating strategies have become popular ways to put idle crypto assets to work.
Sending Money
One of the core capabilities built into cryptocurrency is the ability to send value from one person to another. Because blockchain networks operate over the internet, you can transfer crypto to any wallet address worldwide quickly and at low cost, regardless of geographic distance.
For instance, XRP, a cryptocurrency designed for fast transfers, can settle transactions in just a few seconds with fees of only a fraction of a cent.
This is especially powerful for international remittances. Traditional cross-border wire transfers through banks often involve multiple intermediaries and manual processing, resulting in fees of tens of dollars and delivery times of several business days. Cryptocurrency transfers bypass these intermediaries entirely, making global money movement faster and more affordable.
Making Payments
Thanks to the speed and efficiency of blockchain-based transfers, cryptocurrency is increasingly accepted as a form of payment. A growing number of online and brick-and-mortar merchants now accept Bitcoin and other cryptocurrencies for goods and services.
Major payment processors and point-of-sale systems have begun integrating crypto payment options, and some businesses allow customers to pay by scanning a QR code from their mobile wallet, making the experience as seamless as using a contactless card or digital payment services such as Apple Pay, Google Pay, or PayPal.
Playing Blockchain Games
One of the most exciting use cases for cryptocurrency is in blockchain-based gaming. In these games, players can purchase in-game items, trade assets with other players, and even earn cryptocurrency through gameplay.
Popular titles like STEPN and Axie Infinity popularized the concept of Play to Earn, where players can generate real economic value simply by participating in the game. In-game economies are powered by cryptocurrency, making the connection between gaming and digital assets seamless.
Buying NFTs
Cryptocurrency is also widely used to purchase NFTs (Non-Fungible Tokens). NFTs are unique digital items that use blockchain technology to verify ownership and authenticity. They can represent digital artwork, virtual real estate in metaverse environments, collectible items, and much more.
For example, you might buy an NFT of a digital artwork created by an artist and add it to your collection, or sell it later if its value increases. NFT transactions are conducted on blockchain networks, and cryptocurrency is the standard medium of exchange. Well-known marketplaces like OpenSea make it easy to browse, buy, and sell NFTs from creators around the world.
Participating in Decentralized Organizations (DAOs)
Some cryptocurrencies serve a purpose beyond being a medium of exchange. Certain tokens grant holders the right to participate in organizational governance. These are known as governance tokens, and they are commonly issued by DAOs (Decentralized Autonomous Organizations).
Holding a governance token gives you voting rights on proposals that shape how a project or protocol is managed. For instance, holding UNI tokens allows you to vote on decisions related to the Uniswap decentralized exchange.
Governance tokens are often available on cryptocurrency exchanges, making it possible to combine investment with active participation in a project you believe in, similar to shareholder voting in the traditional stock market.
Making Donations
Donating cryptocurrency is another well-established use case. Because crypto can be sent to any wallet address, nonprofit organizations, charities, and disaster relief agencies around the world accept cryptocurrency donations.
Beyond formal charitable giving, cryptocurrency is also used for tipping content creators, streamers, and independent artists. The low cost and ease of sending small amounts of crypto make it ideal for this kind of micropayment.
Important Considerations When Using Cryptocurrency
While cryptocurrency offers many practical uses, there are several important points to keep in mind.
Transactions Beyond Trading Can Trigger Tax Events
If you use cryptocurrency to purchase goods or services, the difference between your original acquisition cost and the fair market value at the time of the transaction may be treated as a taxable gain. The same applies when you swap one cryptocurrency for another.
Additionally, rewards earned through staking or lending are generally considered taxable income at the time they are received, based on their fair market value.
In short, almost any transaction involving cryptocurrency, not just selling for cash, can create a tax obligation. It is important to understand the rules that apply in your jurisdiction.
You May Need to Report Your Gains
If your cryptocurrency activities generate gains above certain thresholds, you may be required to file a tax return and report those gains. Unlike employment income where taxes may be withheld automatically, cryptocurrency gains typically require you to calculate and report them yourself.
Failing to report taxable crypto transactions can lead to penalties, so it is essential to keep accurate records of all your transactions throughout the year.
cryptact can help simplify this process by automatically calculating your gains and losses from your transaction history.
Conclusion
Cryptocurrency has evolved well beyond a simple investment asset. From making payments and sending money globally, to participating in blockchain gaming, collecting NFTs, joining DAOs, and supporting causes through donations, the use cases continue to grow.
However, it is important to remember that many types of crypto transactions can trigger tax events. Keeping careful records and understanding your reporting obligations will help you use cryptocurrency confidently and responsibly.
