Besides investing in coins, consumers can now use cryptocurrencies to buy NFT art—unique or “nonfungible” tokens that often appear as an image or video, but could also be audio. NFT art is an investment too; until recently, there’s been little one can do with it besides display it as an avatar or deploy it in a video game (now you can also use it to gain access to exclusive crypto communities). Regardless, it has exploded into the zeitgeist. Martha Stewart launched a Christmas collection of NFT photos of her farm, Justin Bieber spent more than a million dollars on a Bored Ape NFT, and Reese Witherspoon’s production company, Hello Sunshine, announced it would adapt NFT collections for movies. NFTs could potentially be used to make secure and traceable digital contracts for real-world assets like cars and houses. But these applications still remain rare apart from a few buzzy experiments; legal requirements make those processes difficult to fully replace.
Crypto can also be used to donate to charities like Save the Children and the United Way (facilitated by third parties like The Giving Block, which charge their own fees), or even to nations; Ukraine received more than $50 million in crypto donations after the country’s official government Twitter account posted its Bitcoin and Ethereum wallet information. And TurboTax recently announced that it will let users automatically reinvest their tax refunds in crypto through a partnership with Coinbase. But it’s important to note that no one’s promising a way to pay those taxes in crypto. In fact, there is little about crypto that resembles a currency today.
When consumers buy crypto, it’s added to their wallet, a word that promises the same kind of everyday spending power of credit cards and cash. But sending crypto from one individual to another, or between individuals and small businesses, is still expensive and unwieldy. Both parties need to have compatible wallets—you can’t send bitcoin from an Ethereum wallet, for example—and the sender must enter the receiver’s wallet ID, which is usually more than 20 characters long. Sending crypto to another wallet can take from a few minutes to hours, depending on how busy the network is, and there are no security measures to ensure you’ve reached the correct person; if you accidentally miss a digit and drop coins in the wrong wallet, you’re out of luck.
And then there are the fees. It costs money to set up a wallet, and more to send crypto or exchange dollars for coins. Ethereum, for example, has “gas fees,” measured in gwei, that users pay to transact and miners collect for adding the transactions to the blockchain. In addition to the differences between cryptocurrencies, fees vary by transaction type, speed and security preferences, wallets, and exchange platforms—and they can fluctuate on the basis of congestion, the price of the currency, and changes to company policies. All this makes costs extremely hard to predict before diving into a transaction. And for smaller transfers, a user could end up spending a huge percentage of the original amount in fees. At the time of writing, moving $5 worth of bitcoin between Coinbase—which hosts a popular wallet—and a traditional US bank account cost about $1; transferring $5.13 worth of ETH (.0017 ETH) from one wallet to another cost a whopping $4.46 in gas fees. Because Ethereum fees can be so high, savvy investors sometimes wait to do transactions in the middle of the night when traffic is sluggish.
Some companies, like the YCombinator startup Paymobil, are working on making small transfers easier and cheaper. Paymobil’s goal is for its users to be able to send any form of currency to a phone number or email address—it would be an international Venmo with crypto running silently under the hood. But that’s not a trivial prospect. When the startup began, in 2020, processing fees for Ethereum—the network the company uses—were about 20 cents on small transfers. But as Ethereum has become more popular, the fees have become prohibitive for what Paymobil wants to do. Founder Daniel Nordh says the company is currently subsidizing the user transaction fees and working out how to move forward. Ethereum is developing more cost-effective tooling that might work, and Bitcoin has a different approach with lower fees but less security. “We’re probably still another generation away from the technology being ready for these kinds of low transaction fees,” he says.
Bigger players haven’t figured out peer-to-peer crypto either. PayPal and Venmo (which PayPal owns) have claimed to support crypto since early 2021. But a closer look at their services reveals that though the platforms allow US customers to buy, sell, or trade crypto—invest, basically—they can’t send crypto to other users or pay directly with coins. PayPal users who qualify can use crypto for purchases only by first converting it to fiat currency. If “the future of money is here,” as Coinbase claims on its website, apparently there’s not much regular people can do with money in the future.
Despite the fact that it’s difficult to spend cryptocurrency, it’s still pretty easy to lose it, and as the industry grows, so do the losses. Without the protections set up in traditional financial systems (such as the Know Your Customer, or KYC, protocols that require identity verification for financial transactions), fraudsters cost crypto investors—mostly individuals like the targets of all those ads—more than $14 billion last year, almost twice the amount lost the previous year. The losses keep mounting. In late March, for example, Sky Mavis reported that a hacker had stolen cryptocurrency then valued at $625 million from the blockchain behind its pay-to-play game AxieInfinity.