A Primer on Cryptocurrency
Unless you’ve been living under a rock for the last few years, you’ve heard of cryptocurrency in some capacity. Maybe you don’t know exactly what it is or how to use it, but you know it exists. If this describes you, read on! We’re going to review the basics of cryptocurrency and why you, as a sex worker or client, should use it.
A Brief Introduction
Cryptocurrencies are digital assets that function similar to money in that they have value, can be exchanged for goods and services, and are subject to value fluctuations just like fiat currency. Some examples are Bitcoin, ethereum, and litecoin. (For those of you that have never heard the term fiat, it refers to a currency backed by a government, such as the Canadian dollar. More on that in a bit.)
Cryptocurrencies differ from fiat in that a centralized system or group, such as a bank or government, does not control them. They’re decentralized, meaning they aren’t controlled by a single institution. Instead, groups of nodes (e.g. computers) form a system that validates all transactions and recordings, forming a blockchain. A blockchain is a growing list of records, or blocks, that are securely using cryptography (think WWII’s Enigma Cipher). Once secured, they can’t be tampered with or compromised in any way. This is a good thing when it comes to data that absolutely needs to be secure, such as financial transactions, and it can help prevent fraud.
Cryptocurrencies are unregulated, but that doesn’t make them bad, and in many countries it’s perfectly legal to own and trade cryptocurrencies. Crypto gets a bad rep because it’s associated with drug dealers and other illegal stuff, and that’s unfortunate because it has the potential to do a lot of good for the world. I mentioned above that fiat currency is backed by a government, which essentially dictates what the value of that currency should be. Cryptocurrency has no such governing body, being decentralized and all. The problem with fiat currency is that it actually has no intrinsic value outside of what the government says it’s worth. If the government tanks, the value of its country’s currency subsequently drops (Remember 2008? Yeah…). If you think about it, at any given time the government can come and increase or decrease the value of that currency.
Cryptocurrency doesn’t have a government controlling it; instead its value is derived from its utility, the supply and demand of the currency, its current price, what it costs to mine coins, and the emotions of people trading cryptocurrency. With these factors in mind, cryptocurrency is pretty volatile, which may scare the shit out of you if you’re an investor, but might not ruffle any of your feathers if you’re just using it to pay for things.
So how do I get this magical Internet money?
You can obtain various cryptocurrencies in one of three ways:
1. Mining it.
2. Receiving it from others.
3. Buying it from an exchange or other source.
Since crypto mining is an arduous, and often expensive, process, we won’t discuss it here, but you can take a look at this article if you’re curious.
If you’re being paid in crypto, you’ll need to set up a method of storing your money and cashing out if necessary. To do so, we’re going to get you familiar with wallets and exchanges.
A tale of two wallets
A wallet, like it implies, is a place where you store your digital money. Wallets can be “hot” meaning they’re always connected to a network (such as an app on your phone or computer), or “cold” meaning a physical device that you have to manually plug in to use. Both have advantages and disadvantages.
It’s up to you on how you manage your cryptocurrency wallets. I personally have both, as well as accounts on several exchanges.
Exchanges are places to buy, sell, and trade cryptocurrencies, and I provided information on some of them in my previous article here. Some benefits to using an exchange are:
- Ability to trade fiat for cryptocurrencies, and vice versa.
- Ability to trade many different kinds of cryptocurrencies.
- Transfer fiat to a bank account or as a cash withdrawal.
- If you lose your password, you can contact the exchange to recover your account.
Of course, exchanges have their drawbacks, too:
- They require you to upload an ID or go through a verification process to set up an account, depending on whether it’s a centralized (eg. Coinbase) or decentralized exchange. This isn’t the end of the world, and as mentioned above trading cryptocurrency isn’t illegal. But if you’re absolutely set on not giving up any information about yourself, an exchange might not be for you.
- Some exchanges have been subpoenaed to provide data to the American CFTC and SEC. Both the IRS and CRA require you to declare gains (gainz?) made on cryptocurrency trades, so if you’ve made enough to buy a Lambo but haven’t paid your taxes, you might be in for trouble. (You can check out these guidelines from the IRS and CRA.)
- While centralized exchanges are a bit more user-friendly, decentralized ones can be tricky to navigate.
- Some exchanges will limit how you can fund your account, depending on where you’re located versus the exchange. For example, some exchanges have restrictions on funding through credit card purchases (indeed, many banks do, too).
I’ve recently stumbled upon Shakepay in Canada, and I transacted with them recently, which was easy breezy. They use an instant verification process using your home address, and you don’t need to upload an ID. While you’re limited to using Bitcoin only with Shakepay, you can trade between CAD and BTC easily, and cash out with Interac e-transfer within a few hours (minus a 1.75% fee — which is totally reasonable!). Contrast that to QuadrigaCX, where people have been reporting it’s taking weeks to see funds deposited into accounts, transfers are cancelled or missing, and transferring directly to your bank is now limited to a minimum of $10,000. Their customer service is also awful. No thank you.
If you didn’t want to go through an exchange, and no one is giving you any Bitcoins, you have the option to go through an ATM or the Local Bitcoins site. There are a number of Bitcoin ATMs, each with different steps to take on buying and selling. In either case, the exchange is Bitcoin for cash. (Note: I’m using Bitcoin here instead of cryptocurrency, because that’s typically what people are buying and selling with ATMs).
Bitcoin ATMs are popping up all over the place, so getting to one is becoming more convenient. If you didn’t want to set up an exchange account or a wallet, you could go this route. Buyer beware, though! Sometimes the fees on these machines can be quite high.
Another route is using LocalBitcoins.com. With this method, you can buy and sell directly on their website (you’ll need a verified account), or you can meet up with some random person and do the transaction face to face. I’ve never used this method, because the exchange rate doesn’t tend to be great, and I personally feel better using an actual exchange.
Fun sidenote: This probably won’t apply to most of my readers, but a woman in LA was just sentenced to 30 months in jail for operating an illegal money trading business using local Bitcoins.
I’m always terrible at writing conclusions and summaries. If you read the article, you already know the end. Essentially crypto is good, and you should learn about it.
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