The biggest problem facing all cryptocurrencies is the liquidity of the currency as many holders view it as an asset and not a means of exchange like regular fiat currencies. You have to understand that you cannot go to nay shop and hand over BTC as settlement. It is digital.
Cryptocurrencies including Bitcoin are unregulated, deflationary, fixed in supply and not issued from a central body like fiat currencies. As such they cannot completely rely on the fiat currency liquidity systems for the purchase of goods and services. In some jurisdictions, use Bitcoins as a method of settlement is illegal.
Because of this very reason, there is a need to develop systems that can boost Bitcoin liquidity. That can be done by incorporating Bitcoin in payment systems but since they are digital, a facilitator must be availed. Exchanges have done a pretty good job but several companies as Xapo or Shift have seen this gap and are now on the fore front offering card services aimed at interested Bitcoin holders.
When you decide to use BTC debit cards to make transactions, you are effectively boosting the general liquidity within the network. The good thing now is that many merchants are beginning to accept BTC as payment and this is beneficial because irrespective of where you are, you will make payments without conversion as it the case with fiat. Besides, you can store and even withdraw fiat if need be from your Bitcoin debit card. Furthermore, let’s not forget the advantages of sending funds directly associated with these cards.
How Bitcoin Cards work?
Bitcoin cards can be plastic or virtual. Plastic Bitcoin debit cards are physical and look like any other fiat MasterCard or Visa debit or credit card. Bitcoin debit cards are available complete with a computer chip meaning they can operate off line. This makes them more suitable for physical payments besides being used for coin withdrawals from Bitcoin ATMs.
Bitcoin Virtual cards on the other hand can only operate online because there are no chipsets but besides that they pretty much serve the same function as plastic debit cards.
Bitcoin debit cards are prepaid meaning you have to top up your card first before transacting. Some debit cards hold the value in Bitcoin until after the transaction has been executed and Bitcoin converted to fiat (EUR, GBP, USD etc. etc.) at prevailing market rates. Other companies allow the conversion to take place at the instant of the top-up.
Since prepaid cards are common, Bitcoin debit card holder can now link their cards directly to their bank accounts via global Visa and MasterCard. This way, they can easily top up their Bitcoin debit cards via a supported exchange as Bitstamp, as need be and purchase goods or services at outlets supporting settlement in Bitcoin.
Such integration has eased and actually spurred the number of merchants accepting BTC payments.