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How to pay with Bitcoin: a short guide by CoinsPaid

More and more people are switching to Bitcoin payments. For example, CoinsPaid processed 1.8 billion euro's worth of crypto transfers in the first 6 months of 2021 – twice more than in all of 2020. Knowing how to transfer Bitcoin is a valuable skill – and in this concise guide we'll explain all the basics.

Before you make a Bitcoin transfer: get a wallet or an exchange account

Before you can send BTC to someone, you need to get some bitcoins – and for that, you'll need a blockchain address. There are two main options: a standalone wallet or an account on a crypto exchange.

Option 1: exchange

When you register on an exchange like Binance, KuCoin, or FTX, you'll be automatically assigned blockchain addresses for all the cryptos supported by the exchange – including BTC, ETH, LTC, BCH, XRP. Essentially you get a wallet within the exchange, and you can use it to make a Bitcoin money transfer to any other address.

However, it's a good idea not to keep too much crypto on an exchange, because trading platforms get hacked and exploited quite often. An exchange account is a good starting point if you just want to learn how to pay using Bitcoin, but if you get serious about crypto, make sure to store most of your funds off exchanges.

Registering an exchange account is easy: usually you need to provide an email and set a password. Next, you'll be asked to set up 2FA verification – usually using Google Authenticator. This is a crucial step, because even if someone gets hold of your exchange password, they won't be able to withdraw the funds without entering a 2FA code.

If you don't have any BTC yet, choose an exchange that lets you buy crypto with a credit card: OKex, Binance, CEX.io, FTX, Poloniex, etc.

Option 2: standalone wallet

There are many good wallets on the market, and they fall into three main types: software-based, mobile, and web-based. A software or desktop wallet is a program that you install on a computer, while a mobile wallet is a regular smartphone app. A web wallet can be the most convenient choice for a beginner, since you don't have to install anything: simply visit the wallet's web page from any device and log in to get access to your funds.

Here are a few quality examples from each category – note that some wallets have several interfaces, such as software and mobile.

How to get an XRP address: wallet vs. exchange
Before you can send or receive XRP, you'll need a blockchain wallet that supports it. Note that XRP uses a completely different blockchain from Bitcoin (XRP Ledger), so you can't use your BTC addresses for this purpose. However, the majority of popular wallets (and virtually all crypto exchanges) support both these coins. Popular wallets for XRP (and other cryptos) include Abra, Atomic Wallet, Edge, and Guarda Wallet.

About the 20 XRP unspendable reserve

Every account on XRP Ledger must hold at least 20 XRP (around $22 as of the time of writing) as an unspendable reserve. This is done so that people don't create too many XRP addresses, which would put a strain on the blockchain. If you use a non-custodial wallet like Atomic, you'll have to buy at least 20 XRP on an exchange using a card or other crypto first. These 20 XRP can never be withdrawn.

By contrast, crypto exchanges don't have the 20 XRP requirement, because they use shared addresses. So when you register, you'll be assigned a Ripple address automatically, but the same address is used for many exchange customers: only the destination tags are different (see below). In this sense, storing XRP on an exchange is more convenient, as long as you want to experiment with small transactions. However, don't keep large amounts of crypto on exchanges, since hacks and thefts are quite common.
Buying XRP with a bank card
If you don't have any cryptocurrency yet, you can buy XRP with a credit card. Several exchanges and wallets offer this option: Binance, Coinbase, KuCoin, CEX.io, Trust Wallet, LOBSTR, and Freewallet, among others. The upcoming CoinsPaid wallet will also have this feature.
You'll need to pass an identity verification (KYC) before you can buy crypto with a bank card. Usually exchanges require a picture of your ID and a selfie with it. Such KYC checks have become ubiquitous nowadays, so it's difficult to find a place where you can buy XRP without verification.

Compare the fees before buying: sometimes they can reach 5%. If you already have BTC, ETH, or other cryptocurrency in your exchange account, it's better to purchase XRP through the trading interface. In this case you'll pay just the trading commission (usually below 0.5%).
XRP address format and Ripple destination tag
A standard Ripple wallet address (so-called r-address) looks like this: rl1ziGeXwwQoiDZ2ueFYTEXSwuJYfV2Jpn. It's an alphanumeric string beginning with an 'r', and it's all you need to send XRP to yourself or to someone if they are using a non-custodial wallet like Atomic or Edge, i.e. if they have an on-ledger account.

However, there is another element to a Ripple account: an XRP tag. This creates a lot of confusion: in fact, the most common question asked online by people who are new to XRP is 'What is a destination tag in Ripple?'

A Ripple wallet destination tag is a string of numbers, like 154746925. When sending XRP to an exchange or an app like Coinbase or Wirex, you'll need to attach the tag, because exchange addresses don't uniquely identify users. As we've said above, many customers share the same XRP address on such platforms – only the tags are different.

About the new X-address format

Ripple recently introduced a new address format, called an X-address. It looks just like a regular XRP address, only instead of an 'r' it starts with an 'X'. The advantage is that it wraps the address and the destination tag into one, so you don't have to attach the tag separately anymore.

So far only some exchanges support the new format, but that should change in the future. If someone provides you with an X-address but you find you can't send XRP to it directly from your exchange account or custodial wallet, you can decode it to find out what its XRP destination tag is. Use the service https://xrpaddress.info/ - simply paste an address and click on the button.
Sending XRP to someone else
Now that you have an XRP address with some coins in it and understand how tags work, sending XRP to another person should be really easy.
Ask the recipient for their address and destination tag.
If you are using a non-custodial wallet, make sure you have enough XRP above the unspendable reserve of 20 XRP to make the transfer and pay the fee.
Copy and paste these data into the Send or Withdraw section of your wallet or exchange account.
If the recipient has an on-ledger account (such as Atomic or Guarda wallet) and no destination tag, insert 0 in the tag field.
Hit Send and confirm if needed. The transaction should be confirmed within seconds.
Paying online with Ripple
Thousands of online merchants accept XRP: e-Commerce platforms, casinos and betting platforms, even travel booking sites. The advantage of paying for goods and services with XRP as opposed to a bank card is that the payment acceptance rate for crypto is almost 100%, no matter where you live. A card can get refused, and sometimes banks even block cards if you perform certain types of transactions; but if you pay with Ripple, this won't happen.

Merchants use the services of crypto processing gateways like CoinsPaid, which process all transactions for them. A processor will have a solid security and transaction tracking system, so you can be sure that the payment will be completed successfully, the merchant will get the money, and you'll receive your purchase.

Paying online with XRP is even easier than sending it to another person. If the merchant uses a major processing provider like CoinsPaid, you should be able to complete the transaction without leaving the website. Upon clicking on 'Pay with crypto' (or something similar) or on the XRP icon, you'll get several choices:

  • A Ripple wallet address that you can copy and paste into your wallet, plus a tag;
  • A payment link that you can click to open your wallet (on both desktop and mobile). The amount to be paid, address, and XRP destination tag will be pre-filled already, so that you'll just need to hit 'Pay';
  • A QR code – very convenient if you have a mobile XRP wallet. Scan the code, and all payment data should be filled in automatically.

Is there a risk that Ripple will fail?
You can find a lot of articles on the internet with titles like 'Why Ripple will fail'. There are several potential reasons cited for why this could happen:
1
Ripple (the company) owns most of the XRP supply, which goes against the principles of decentralization. Centralized supply is considered a negative sign, because if something happens to the issuing company, the coin's price can collapse.
2
Ripple has a long-going court battle with the SEC (U.S. Securities and Exchange Commission), which claims that the original sale of XRP in 2013 was an unregistered security offering.
3
If (or, rather, when) governments start issuing their own centralized digital currencies, many cryptos can become obsolete, especially for cross-border transfers.
In spite of all this, regular XRP users don't have to be concerned for the time being. Ripple recently scored a minor victory in its legal struggle with the SEC, so the company's position seems stable for the moment. Moreover, XRP developers revealed that they are looking to add smart contract support to the ledger using a system of sidechains, which is a very bullish fundamental sign for XRP. As for official digital currencies issued by countries, so far there's just the digital yuan in China, which is in a testing phase – and no sign that the US or EU countries will issue similar assets in the next couple of years.

XRP is a great way to pay online and send money anywhere in the world. It can seem more complex than ETH or BTC at first because of the destination tags and the unspendable reserve, but do give it a try – and it can easily become your favorite crypto for payments.