Bitcoin has come a long way from an asset that would lay the background for a “trust-less” monetary system, as Bitcoin’s creator Satoshi Nakamoto intended it to be, to a contender for mass adoption that rivals traditional financial assets.
Despite having endured some difficult times throughout its history, orders to buy Bitcoin with debit card, among other methods, have continued on cryptocurrency platforms. It is the cryptocurrency of choice for those looking for investments with a fixed supply, built with the scarcity principle in mind, that have the potential to be massively adopted and sought-after in the future.
However, Bitcoin serves several use cases that extend beyond an investment venture and portfolio diversification tool. Here are some of the primary cryptocurrency’s most prominent alternative use cases and the revolutionary technology underpinning it.
Remittances
Remittances hold and have always played a pivotal role in households worldwide, serving as a vital source of income, with precedence in more fragile countries. The remittance industry faces numerous challenges, such as massive fees for making cross-border transactions. According to the World Bank, the average cost of sending remittances is around 6.25% of the amount sent, varying wildly depending on the channel, region, and other essential factors.
This is a massive impediment for those working abroad to support their families. However, while cryptocurrencies like Bitcoin don’t promise to fix these problems altogether, they do have the power to reduce these challenges.
Unlike conventional remittance service providers, Bitcoin is a cost-effective alternative that eliminates some of the limitations in the traditional financial system. For instance, it is accessible to anyone with a mobile device and internet connection since it was created for online transactions. This enables individuals to receive money right away, without relying on third-party providers, banks, and other traditional financial services.
Furthermore, transactions are faster than traditional methods, even when network congestion is significant. This happens because the blockchain supports the Bitcoin network, and there are no middlemen involved in the action.
Another hurdle in the conventional financial sector is the high transaction fee. Bitcoin resolves this impediment by charging users lower transaction fees, which are generally cheaper than those imposed by banks.
Last but not least, Bitcoin has made transaction sending possible in unbanked or underbanked countries. This emerging technology has dramatically benefited African countries such as Nigeria and Kenya. Challenges in the remittance sector are continuously addressed, but until security, clarity, and accessibility are improved, Bitcoin secures its place as an essential and cost-effective cross-border solution.
Donations
Philanthropic activities take all sorts of types and forms, so it shouldn’t be surprising that Bitcoin reached this sector, too. Cryptocurrencies like Bitcoin added a new dimension to charitable giving, going beyond high-net-worth people making donations in digital money and reaching the average, tech-savvy individuals. Charitable organizations enable crypto contributions to reach a new category of potential donors by expanding their donation streams.
To better understand how Bitcoin provided a new approach to donations is enough to look at statistics. At the beginning of 2022, more than 1,000 nonprofit organizations were already taking cryptocurrency, with Bitcoin accounting for most contributions. That year, donations escalated to a notable total value of $69.6 million, marking an increase of $62.2 million compared to the preceding year’s valuation of $4.2 million. While a big chunk of the total accumulated accounted for high-net-worth individuals and mass affluent investors, donations were registered from more wealthy segments.
One of the biggest appeals to donations from Bitcoin or other potential cryptocurrencies is that they’re often tax-deductible. Crypto donations sent directly to charitable organizations don’t trigger capital gains taxes. However, if you’re willing to approach this endeavour, it’s recommended to deeply research how crypto donations are treated in your country and consider the volatile nature of prices. Furthermore, only some nonprofit organizations support this type of contribution, so you’ll likely be limited in terms of choice variety.
Retirement plans
Cryptocurrency owners often take a long-term approach to investing, considering their future financial rewards. Some of them are also developing retirement plans where Bitcoin is involved. You can invest in the reigning cryptocurrency and store it in a retirement account. However, you must pay attention to the special considerations involved, such as the taxing system and the IRS regulations.
You also have two options: a Roth investment retirement account (a Roth IRA) or a traditional investment retirement account (a traditional IRA). Several other considerations include the choice of crypto exchange, the bank or other custodian involved, and your asset storage option.
A study conducted in 2022 by Charles Schwab found that almost half of the members of Gen Z and Gen Y would have invested in digital currency should their 401(k)-retirement plan permit it. For some investors, however, this option is already made possible by several service providers.
Considering this retirement plan, ensure you’re comfortable with the cryptocurrency’s massive price fluctuations. Bitcoin and its contenders are known for being volatile assets, meaning that your portfolio may grow or drop in value in a relatively short timeframe and depending on the percentage invested in digital currency.
Asset tokenization
Out of all the use cases enabled by blockchain technology, asset tokenization is revolutionary and has left its mark on the real estate sector. It allows users to tokenize different assets like real estate properties, commodities, and stocks, making them easier to trade, sell, buy, and store. It works similarly to initial coin offerings (ICOs), meaning that tokens are generated through a security token offering (STO) process.
Asset tokenization has the power to assist conventional financing services in eliminating some of the obstacles related to infrastructure possibilities, ultimately improving efficiency in the financial system.
Final words
As the blockchain gained traction and enabled different possibilities to emerge, Bitcoin also rose to fame as an effective financial method, changing different industries and sectors. The first wave of use cases may have broadly pointed to transactions or other conventional banking functions, but they have expanded in that nowadays, Bitcoin is used as a remittance and as a venture for asset tokenization, among other potential use cases.
Technological innovation will likely unlock more potential in it and other digital currencies.
