Cryptocurrencies have been hailed as the future of money yet they struggle to get mainstream adoption. Recent developments suggest a keen interest from big financial institutions as well as governments, pointing towards a trend of acceptance from a wider community, but a breakdown of the crypto transactions in terms of volume shows that a majority of them are not legal transactions. Here are the top six categories of transactions that take place using cryptocurrencies in no specific order.
1. Speculation
Even though the prices of most crypto have tanked dramatically, they are still a big hit among speculators. Most still believe that the price will rise and the current lower prices present a good deal, even though there is no evidence to suggest that the price of cryptocurrencies will rise back anytime soon. In the past, Bitcoin has always recovered from price crashes.
2. Darknet transaction
Cryptocurrencies are the perfect form of money for darknet transaction. They can be transferred to anyone in the world without been traced back to. Everyone remembers silk road, the darknet equivalent of Amazon where everything from drugs to guns could be purchased. It was made possible due to Bitcoin. In fact, even today, there have been many drug sales reportedly happening in the darknet through Bitcoin.
3. Money laundering
The ability to transfer cryptocurrencies anywhere in the world without much hassle and their anonymous nature aid in making it a perfect tool for money laundering. Money to be laundered is converted to cryptocurrencies and then they are transferred to countries with weaker money laundering laws and from there it is used at will. Some people in China even use it to evade capital controls, as it is hard to catch the users making it a popular choice among those who want to evade capital controls placed by the Chinese government.
4. Ransomware
Ransomware is a piece of software which takes control of a computer or a computer network, and demand payment in return to restore control to the owner. Since the hackers who demands the ransom don’t want to get caught, they almost always demand payment in cryptocurrencies. WannaCry is one of the most widespread ransomware attacks to date, affecting more than 200,000 computers across 150 countries. One of the common tactics employed by ransomware is to encrypt the hardware of a computer since personal files are valuable to the person they will have no option but to pay to get the data back.
5. Evading sanction
Recently, cryptocurrencies have emerged as a tool to evade sanctions by countries like North Korea. The unregulated and decentralized nature of the industry helps evade sanctions very easily. There are two ways in which North Korea earns money from cryptocurrencies. First is to mine them, the easiest method. The second is hacking. In fact, South Korea suspects that almost all major attacks on its cryptocurrency exchanges have originated from North Korea. Due to the increased security at exchanges and other financial institutions North Korean hackers have started targeting wealthy South Korean individuals. The fact that cryptocurrencies can be used anywhere in the world to purchase almost anything has made cryptocurrencies as good as US dollars for North Koreans.
6. Legal transactions
These transactions are where crypto is used as real money, in exchange for goods and services. There are only a few vendors who at this time accept cryptocurrencies in exchange for services but that number is steadily growing. But in theory, anybody can buy almost anything with digital currencies, all one has to do is change it into US dollars in exchange and spend it. Some websites offer gift vouchers in exchange for cryptocurrencies which can then be used for buying goods on Amazon. Even though these kinds of transactions represent a small fraction of the total, it is said to change in the future as cryptocurrencies get more acceptability.
Currently, there are not many venues where one can spend cryptocurrencies, and until there is a sizable number of people using cryptocurrencies merchants won’t accept it as a payment. It’s a catch 22 situation. It is a fact that most of the transactions that happen through cryptocurrencies are not legal, but this will soon be reversed as the push for making crypto mainstream is gaining momentum.
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