What can you do with cryptocurrency?

In recent years, the total number of cryptocurrency holders worldwide has reportedly exceeded 500 million.

As the number of cryptocurrency users around the world has grown, so too has the number of cryptocurrencies coming to the market.

Since the Bitcoin white paper was published in 2009, thousands of blockchain-based cryptocurrency projects have emerged.

Many of these digital assets offer unique functionalities that expand on the original cryptocurrency’s primary utility as a “peer-to-peer electronic cash system.”

Whether you’re an experienced crypto veteran or completely new to the market, there’s a range of ways to use your cryptocurrencies beyond simply buying and holding them.

Traditional methods of sending money overseas often involve opening a bank account, paying comparatively high fees and waiting up to five business days for payments to process. 

Cryptocurrency can offer a much faster, more cost-effective solution than these traditional methods.

Crypto holders can transfer value over the internet to anyone else in the world quickly, using virtually any cryptocurrency available on the market today.

Certain cryptocurrencies are more efficient than others, with popular options such as Litecoin (LTC) and XRP (XRP) oftentimes costing fractions of a cent to send any amount to another person in seconds.

Sending crypto across international borders can be especially useful when transacting with unbanked people in developing countries.

Today, crypto is helping people all around the world avoid the high costs and inefficiencies that are often associated with global remittance services.

As a globally recognized form of value, crypto can serve as a viable medium of exchange for people looking to transfer value in a more efficient way.

You can check our article What makes crypto borderless? to learn more about how cryptocurrencies allow people to send value around the world quickly, reliably and cost-effectively.

Government-issued currencies rely on a central bank and its governing body to issue and manage the currency.

They also rely on the central bank to set interest rates, which the rest of the economy and financial industry including banking, loans, investments and insurance use as well.

These sectors depend on the decisions of the central bank to facilitate economic activities, manage inflation and regulate the money supply.

In recent times, countries including Argentina and Turkey have experienced significant inflation that has eroded their national currencies’ value and consequently diminishing their citizens’ purchasing power.

In Zimbabwe, inflation rates between 2009 and 2023 averaged at 43%, spiking as high as 786% during the 2020 pandemic.

Crypto assets offer an alternative solution that allows individuals to exit or hedge against the ineffective policies of central banks and the currencies they manage. Within these struggling economies, citizens can choose to hold a less inflationary asset, or they can opt-out of the government-backed currency system entirely with Bitcoin (BTC) or other cryptocurrencies.

Citizens of countries with collapsing currencies have historically had limited options but to hold their currency as it loses value.

Cryptocurrency can offer an alternative means for them to protect their wealth.

Users who value their privacy or are concerned about data breaches in centralized systems can use certain cryptocurrencies to execute financial transactions without forfeiting their personal information.

Most cryptocurrencies operate on the principle of pseudonymity, meaning transactions are linked to a digital address rather than a direct identity.

Anyone may view those transactions on networks with public-facing ledgers, however, tying a real-world identity to a digital address isn’t a straightforward process. 

Ethereum (ETH) and Bitcoin (BTC) have labeling services linking transactions to known entities. So, although cryptocurrencies may offer users a certain degree of anonymity, they by no means guarantee privacy.

Some cryptocurrencies, so-called “privacy coins,” are specifically designed for anonymous transactions.

Zcash (ZEC) and Monero (XMR) are popular privacy coins that use advanced cryptographic techniques to make tracking transactions and their data extremely difficult. 

Users who value a greater degree of privacy than what’s offered by traditional options might choose to use Zcash or Monero.

Privacy-centric cryptocurrencies allow users to send value securely and anonymously to other users around the world.

This functionality can be useful in a variety of scenarios.

Users residing in jurisdictions with strict regulations can use crypto with a higher degree of privacy and safety.

High-profile individuals might also wish to transact across borders with low fees and fast delivery without drawing attention.

To use privacy solutions like Monero or Zcash, a user must have tokens on either blockchain to transact and pay network fees.

Many cryptocurrencies have reward structures that allow users to earn interest.

Users can earn yield in several ways from the tokens they have in their crypto portfolio. On blockchains like Ethereum (ETH), Solana (SOL), Polkadot (DOT) and others, users “stake” the network token to validate transactions and secure the chain. 

In return, stakers receive rewards in the form of the blockchain’s native tokens.

You can learn more about the staking process and how it rewards users who help to secure a blockchain network with our Kraken Learn Center article What is crypto staking?

The challenge with staking is that stakers cannot use their tokens for any other purpose without unstaking them and giving up their ability to earn staking rewards.

Staking can also involve minimum bonding periods, meaning holders may have to wait multiple weeks before they can unstake their assets. 

If a user wishes to transfer or sell their staked tokens, they typically have to wait until the bonding period elapses.

Liquid Staking Tokens (“LSTs”), like Marinade SOL (MSOL), represent staked tokens. These LSTs are freely useable and transferable while allowing users to earn the yield from staking. 

Users can move their LSTs to other DeFi platforms and utilize them as they would any other token. LSTs can be redeemed for the ETH they represent at any time, should the user choose to exit at any point.

Yield farming is another popular strategy for earning crypto and rewards.

This strategy requires individuals to first deposit their assets in a liquidity pool on a decentralized exchange (DEX). In return for making their cryptocurrency available for trading, yield farmers earn liquidity provider (LP) tokens.

Individuals can put their cryptocurrency to work with the goal of earning additional units of crypto by using yield farming DeFi protocols.

Platforms like Aave (AAVE) and Compound (COMP) allow users to access decentralized loans using DeFi.

This means that individuals can more easily utilize credit when developing trying to start a business or capitalize on a market opportunity.

In order to access hese loans, prospective borrowers must put up collateral in the form of any supported token. This collateral covers potential losses for the protocol in the event the borrower does not repay the loan. 

DeFi loans can often be held for as long as the borrower desires.

The loan accrues interest, which the borrower must pay back to reclaim their initial collateral. The interest goes to liquidity providers who act as lenders within this DeFi lending model.

Borrowing cryptocurrency allows a user to access extra liquidity without selling tokens. 

These types of crypto loans are useful when a borrower wants to use cryptocurrency for some other purpose, like yield farming or buying an NFT, but doesn’t want to sell crypto they already own to make the trade.

For lenders, crypto loans allow them to earn interest, sometimes much higher than what they might earn by depositing their money in a traditional bank, by lending out the idle digital assets they hold.

Interested in learning more? Check out our Kraken Learn Center article What is a liquidity pool and how to use one? for a deeper dive.

By lowering the barriers to entry, especially for those who many not have access to the traditional financial system, crypto is simplifying the process of accessing loan agreements for millions of people around the world.

Decentralized applications (dApps) require a decision-making process to manage operations and make changes.

Without any centralized party, this responsibility falls on the dApp’s token holders, who often manage the dApp’s decentralized autonomous organization (DAO). A DAO is similar to a corporation’s executive team, making the high-level strategic decisions necessary to meet its stakeholders’ needs.

Token holders can determine the dApp’s future by proposing and voting on new changes.

Several cryptocurrencies associated with the largest dApps today function as governance tokens. These tokens allow individuals to propose and vote on strategic decisions that will shape the protocol’s future.

Governance tokens allow cryptocurrency holders to participate in developing a crypto platform. DAO operations are transparent and open, meaning any token holder can contribute to the discussion and make changes. These processes are often implemented using a decentralized voting tool known as Snapshot.

For example, dYdX (DYDX) is a decentralized exchange (DEX) that allows users to trade tokens with leverage.

If the dYdX community feels that the DEX’s trading fees are too high, DYDX token holders can propose lowering them. After this proposal undergoes discussion and specification, token holders vote on whether to implement the changes outlined in the proposal.

This allows holders of a particular cryptocurrency to directly impact and drive its future. Any user can propose a new direction or dispute an existing one via a decentralized governance process that is unique to the crypto industry.

You can learn more about governance tokens and how they are democratizing the blockchain ecosystem with our Kraken Learn Center article, What is a governance token?

Play-to-earn (P2E) games offer a way to use cryptocurrency to play games and earn rewards for doing so.

Games like Axie Infinity (AXS), Star Atlas (ATLAS) and Gala Games (GALA) offer different in-game items that are represented as non-fungible tokens (NFTs). 

Buying and selling these NFTs typically requires the user to pay gas fees in the chain's native token. 

Users can earn or purchase in-game NFT items such as new characters, weapons or armor to enhance their gaming experience.

Users may also receive items as a reward for their achievements, which can then be sold for cash or used in-game.

Certain items may be required to access certain parts of the game or to unlock specific rewards and tasks. 

NFT items enhance P2E games in the same way that in-game items often work in traditional games.

But within the P2E economy, players can trade NFT items in or out of the game, giving users greater control of their in-game items and achievements. 

Cryptocurrencies such as those used in play-to-earn games are allowing individuals to enrich their gaming experiences with economic opportunities never before seen within the gaming industry.

You can learn even more about play-to-earn games and how they are changing the modern gaming industry with our article What are play-to-earn crypto games?

A gaming guild is a group of people who work together to maximize the value of crypto gaming assets.

If a user has in-game NFTs, but doesn't have the time to get the most value out of them, they can lend their assets to a gaming guild.

In return, they can earn a small fee on any rewards other players generate while using their items. 

You can think of this like renting your car to other people willing to pay for it while you are not using it. Although you may not be using your car 24/7, other people may be willing to pay a fee to you in order to use your car for their transportation needs.

Most gaming guilds, like Yield Guild Games (YGG) and Merit Circle (MC), rely on two different types of participants – users who lend their gaming NFTs and gamers who use those NFTs to earn rewards. 

In-game NFTs can become expensive, especially when a game is popular.

Some players may want to gain the benefits of a specific NFT or play a game that requires an NFT. However, they might not have the funds or might not yet be willing to purchae the various items that are needed to take part in the play to earn game just yet.

These players can join gaming guilds, where NFT owners lend their assets to earn rewards without ever having to play the game.

The players can then access NFTs to play P2E games without fear of not having enough capital or committing a large amount of their financial resources to testing out the game.

These guilds often operate as DAOs, so users can also determine the guild's future by holding its token and voting on changes as detailed above.

The metaverse is an online space for users and teams to create games and experiences. 

Assets in the metaverse like land, items, avatars and more often exist on-chain as NFTs. Users can create entire experiences in the metaverse and earn rewards when people engage with them.

The Sandbox (SAND) and Decentraland (MANA) are Ethereum-based protocols allowing users to create their own metaverse experiences.

In The Sandbox, users can use SAND to purchase in-game NFTs like plots of land (LAND), avatars and other items to supplement experiences.

Creators can use plots of land and items to create experiences like concerts, e-commerce stores and more. Creators can profit from these experiences by selling tickets or creating NFT memorabilia associated with the experience.

Blockchains provide artists with a new venue to distribute their work. Traditional methods of art distribution require intermediaries who must be trusted, demand fees and set restrictions. 

Distributing art using cryptocurrency means no intermediaries, so an artist can earn significantly more of the profits without involving a third party.

Artists can put their work on-chain as an NFT or an NFT collection. Doing this requires only a digital file containing the art and some tokens to pay for gas and fees. 

Artists can then sell their art as NFTs via an auction or a mint event, where users can receive the NFTs by submitting a transaction and paying the fee set by the artist. Artists can profit directly from these sales and receive creator earnings, sometimes up to 10%, whenever a buyer resells their art. 

All around the world, artists are using cryptocurrencies to side-step the influence of the traditional art market and take greater ownership over their creations.

Cryptocurrency trading takes place on centralized and decentralized exchanges, each with its own liquidity and pricing mechanism.

These gaps between exchanges lead to price differences that can be significant, especially for newer tokens or in times of extreme market volatility. 

Arbitrage is a way to profit from these price differences. You can learn in the Kraken Learn Center article all about crypto arbitrage trading.

For example, suppose ETH trades at $2,000 on Kraken and $2,100 on Uniswap. 

A user could deposit $2,000 into Kraken, purchase ETH, and then sell it on Uniswap for the higher price. If executed properly, the user will earn $100 profit, minus any trading and withdrawal fees.

Arbitrage opportunities are often small and difficult to capture profitably. Because of this, they can have a high barrier to entry in terms of capital and knowledge.

Cryptocurrency serves a growing variety of purposes.

These services often require holding some amount of cryptocurrency, whether as part of the service or just as fees to conduct on-chain activities.

On Kraken, anyone interested in using cryptocurrency can get started today and buy crypto with as little as $10.