Another rookie question. Let’s break it down and find an answer.
Crypto in a nutshell
Cryptos are mostly not a currency as they don’t have a centralized authority. Still, in some countries like Venezuela, Argentina, and Zimbabwe, private currencies have lost their value (they are worth) over time, so people started using alternative currencies instead. Bitcoin was designed to be decentralized and has no central government regulation. It is called “digital gold.”
Cryptos can also be used as a currency for private transactions, as when people want to pay for their apartment expenses in cryptos.
Then some use cryptos as an investment to support the price of cryptos or to increase their value and thus their wealth. Others are just like trading without depositing money into an exchange.
They will only take money out of their wallet like the value is guaranteed by all cryptocurrencies. Cryptocurrencies are inflation-free, and they can be used anywhere in the world without needing any others currencies because they’re decentralized. You can use Bitcoins on online shops and other online services without having a bank account or an ID card (e-ID).
Cryptos are digital assets, and they can be used as a way to buy goods and services, as an alternative form of currency such as for remittances, for payments of utility bills, for gift cards.
To buy something with virtual coins, you have to acquire the cryptocurrency you want. There’s no centralized authority that confirms the transaction. You can’t just pay with cryptos in a shop or online shops like Amazon or eBay.
In the case of cryptos, it’s not the wallet that holds the money – it’s your computer. Hence the volatility. The market decides the price of cryptos. And it can change in a moment or even in a day, much faster than the money supply. You can sell/buy as many or few coins as you want, but you can’t change them into dollars, Euros, etc.
How can crypto be converted into real money?
You can convert your earnings into fiat money using exchanges. You can also buy cryptos and sell them to someone else for real money like you’re a middleman (like any other exchange). Any of the above methods is a form of converting crypto into real money.
What is fiat?
Fiat is a Latin word that means “let it be done,” so when you talk about the “fiat” money, you’re talking about that currency that the government has given value. The purpose of being “fiat” is to serve and protect the people.
Central banks issue fiat currency only in conditions of state’s need and in a way that it would continue to be issued as money, which has inherent value and is accepted in the marketplace.
Whenever you have a central bank, it will always have one power: to create money out of thin air or by printing more of it! This is called “monetary inflation.” These places where the government also regulates banks.
Thus, this type of money has no intrinsic value, and because it doesn’t have any backing from a certain country, it is said to be “fiat money.” When the supply of this type of money increases, its value decreases. The value of fiat money can be known through the growth rate, inflation, and cause of deflation.
To convert your crypto into fiat money, you have to exchange your crypto for fiat money, that is, if you want it converted into cash. At present, crypto is not accepted as a currency by most people and the market, plus most of those who buy it are those who want to invest in it.
There are several conversion methods. If you want to sell your coin directly for fiat money, you can use an exchange such as Bitstamp, and you can then convert your crypto money into Euros or dollars.
Crypto can be converted into real money, but not the way you would expect. Instead, you can convert it into fiat currency and then into cash that you can then use to buy any goods, services, or investments.