If you are a regular on social media or are involved in any type of cross-border payments, then you’d most likely have encountered the word: cryptocurrency.
Cryptocurrency has continued to grow in adoption, acceptance, and popularity; people all over the world now trade crypto as a commodity, use it as a store of value, or as a medium of exchange for goods and services.
While it might be tempting to start this conversation with cryptocurrency, you first have to understand some fundamentals.
So we´ll start by explaining the origin of money and why it was necessary in the first place.
Ready?
The origin of money
Long before money was invented, people were quite happy exchanging things they grew on their farms. But as the communities grew, it became difficult to keep records of who exchanged what and for what.
People started to use objects such as barley, whale teeth, feathers, and cowry shells as tradeable IOU tokens.
However, these objects didn´t have the properties of money. Whale’s teeth weren’t divisible, and barely could get spoiled, so it wasn´t durable. You could stumble on shells at any beach so it wasn’t exactly scarce, feathers also didn’t have any value in themselves.
Precious metals
Enter gold and silver; precious metals as a form of money. Unlike barley, these were durable, had intrinsic value, could be made into smaller coins, and were also hard to forge.
Eventually, people got tired of carrying huge bags of metal coins around. It was about this time Chinese emperors brought the idea of keeping metal money back in the palace while issuing papers worth the exact amount for long-distance trading.
Paper money
Although the paper had no intrinsic value, people trusted they could always exchange it for the gold or silver it represented.
This practice of pegging paper money to a fixed gold standard continued for many centuries until the 1970s. After that the only difference between a valuable banknote and an ordinary paper was trust.
This quality of trust and how it matters in the history of money is better demonstrated in the story of the Rai stones below.
Rai stones
Years ago on the island of Yap, the nearest thing they had to gold was the Rai stone. The stones were enormous and heavy, breaking the portable property of money, so how were the Yapese able to transact with it?
Simple: they kept the stones in a place. Instead, the Yapese “exchanged” the stones entirely through oral agreement.
When both parties agree to perform a transaction with a Rai stone (or a fraction of one), the Rai stone is considered transferred. The physical location of each stone is not considered meaningful. This transaction is recorded solely via oral history.
This story of the Rai stones illustrates an important lesson: anything can serve as money, so long as all the parties involved agree about its value. While it’s nice for money to have some intrinsic value, it’s not strictly necessary.
From everything we’ve listed above, you can see what properties an entity must have to qualify as money:
Properties of money
- Easily divisible
- Scarce
- Intrinsic value
- Medium of exchange
- Unit of account
Amongst the several limitations of other forms of money is that of cross-border commerce and international payments.
Cryptocurrencies with their wide acceptance and decentralized backing solve that. But what exactly is cryptocurrency?
What is cryptocurrency?
Cryptocurrency is any form of digital currency in which transactions are verified and records maintained by a decentralized system, rather than by a centralized authority.
It is monitored and organized by a peer-to-peer network called a blockchain, which also serves as a secure ledger of transactions, e.g. buying, selling, and transferring.
How does cryptocurrency work?
Cryptocurrencies run on a distributed public ledger called a blockchain. Blockchain is a record of all transactions updated and held by cryptocurrency holders.
Units of cryptocurrency are created through a process called mining, which involves using computer power to solve complicated mathematical problems that generate these coins as rewards.
Although cryptocurrency has been around for more than a decade, the adoption of cryptocurrencies and applications of blockchain technology is still emerging in financial terms, and more uses are expected in the future. Bitcoin, Ethereum, BNB, ADA, XRP, Solana, AVAX, SOL, and LZR (coming soon) are some examples of cryptocurrencies.
How to buy cryptocurrency
There are various ways to buy crypto but the most popular ones are via Peer-to-Peer network (P2P) or via direct bank payment. The first is in tune with the essence of blockchain – decentralization.
While the second still has to interact directly with a centralized body – your bank. We will be going through the steps to buying your first crypto using P2P in this article.
How to buy Crypto via P2P
P2P is a decentralized and secure way of buying and selling cryptocurrencies and other digital assets without intermediaries. A peer-to-peer (P2P) exchange connects buyers to sellers to execute trades without third-party intervention.
P2P trading is somewhat similar to the barter system as it is simple, has no complications, and can easily be done especially in a country with a ban on financial institutions dealing in cryptocurrencies.
- Step 1: Select Cryptocurrency Exchange
The first thing to do is to choose a trustworthy cryptocurrency exchange to use. There are many cryptocurrency exchanges to choose from, each offering different cryptocurrencies, wallet storage, interest-bearing account options, and more.
- Step 2: Fund your wallet
The next step is to fund your cryptocurrency exchange wallet so you can start buying and selling cryptocurrencies.
There are various ways to fund your wallet, most crypto exchanges allow users to purchase crypto using fiats (i.e., government-issued) currencies such as the Naira, US Dollar, the British Pound, or the Euro using their debit or credit cards – although this varies by platform.
However, due to some media and individuals pushing FUD (fear, uncertainty, and doubt) about cryptocurrencies, banks and other financial institutions are banned by the government from any crypto-related activities in some countries including Nigeria.
This means funding a wallet via direct crypto purchase using fiat is impossible. A peer-to-peer service is used to solve this problem.
How to buy or sell crypto using P2P
- Go to the P2P platform on your exchange (check FAQs for inquiry if you are not sure of how to get there)
- Click Buy or Sell on P2P
- Select the cryptocurrency you want to buy/sell
- Input amount and send
- A seller/buyer will be connected to you
- Confirm receipt of crypto/fiats
- Conclude transaction.
SAFETY TIPS:
- Pick a reputable platform to use
- When selling, make sure to confirm funds receipt before you release your crypto assets.
- Use 2 Factor Authenticator (2FA) for extra security.
- In countries where crypto is banned; do not add crypto-related words to your transaction narration when sending funds
Cryptocurrency and Payments
Crypto payments solve cross-border payments since they are valid anywhere.
According to Emmanuel Njoku, the CEO at Lazerpay,
“Africa has an issue with interoperability of currencies. In Europe, you can easily send money from country to country.
The same can’t be said for Africa; Kenyans can’t spend their shillings in Nigeria, and Nigerians need to buy cedis if they want to spend in Ghana.
With crypto, you don’t have this problem, the currency is valid wherever you are.”
Many businesses worldwide now accept stablecoins, a non-volatile form of cryptocurrency as a payment method. For example, Nguvu Health is a mental health company that accepts payments in stablecoins using Lazerpay’s API.
Another good example is Oreks Jerseys, a small business owner that receives stablecoins payments from his customers using the Lazerpay payment link.
To learn more about how you can start accepting crypto payments as a business owner, read this blog post on How to Accept Crypto Payments as a Business.
As you begin your crypto journey, be sure to visit the Lazerpay blog for more materials to help you along this journey.
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