Should You Accept Bitcoin as a Payment Method?

Bitcoin, the mysterious and (currently) volatile decentralized virtual currency that relies on cryptographic mathematics to determine its creation and trade has managed to makes its way into a number of ecommerce sites’ shopping carts as an alternative payment option alongside PayPal and credit cards.

Opinions vary whether the novelty may wear off, the bubble burst or if it will truly disrupt the international banking system as we know it. But the question for ecommerce professionals is whether or not Bitcoin should be considered as a payment option today.

What is Bitcoin?

Bitcoin (BTC) is a peer-to-peer digital dollar that was created by an individual or collective by the pseudonym of Satoshi Nakamoto. Any computer can run a free application called a Bitcoin miner that performs the necessary calculations to create the coin, storing BTC in a free, open source digital wallet of your choice. All churn-and-burn activities are broadcast across the public Bitcoin network and permanently recorded, and it claims to be anonymous and untraceable to any individual (though a core developer told Gawkerlaw enforcement could apply network analysis to track down individuals if need be).

Bitcoin’s both a currency and a commodity — speculators have sent BTC’s value soaring and crashing. Despite this, Bitcoin is being taken seriously by Web properties like WordPress, Reddit and Wikileaks, physical businesses like bars and restaurants, and several small-business ecommerce software platforms now have plug-ins that support BitPay (a Bitcoin payment processor that performs exchange into local currency at its daily rate). Bitcoin claims over 4,500 digital and physical companies use its service.

Why Bitcoin for Commerce?

Bitcoin charges no transaction fees for consumers. From a merchant perspective, Bitcoin’s lower transaction fees (1-2%) and protection against any type of reversal or chargeback makes it attractive. BTC also opens up business to customers in countries unsupported by PayPal and other credit issuers, as well as minors. Unlike bank transfers through PayPal, payment clears instantly, a benefit for both business and customer.

Bitcoin for digital products

Digital goods publishers and online service providers like Web hosts have much to gain from access to a truly global market — physical shipping is moot. While other virtual currencies like the defunct Facebook Credits are limited to a closed platform and typically siphon a large chunk of revenue (Facebook Credits was 30%, for example), Bitcoin’s universal, making it appealing to developers and publishers who want to maximize content monetization and use a standard virtual currency that’s platform agnostic.

Is there demand for Bitcoin as a payment method?

Those in the know about Bitcoin tend to lean on the techie side, so your target customer may still be blissfully ignorant about it. In fact, offering it as a payment option to those who don’t recognize its branding can lower conversion by introducing confusion. On the other hand, if you’re a small business with a tech-geared customer, riding the wave and getting listed in shopping directories for BTC holders could build awareness of your site and be a value proposition to this customer segment. Web host Namecheap’s web site claims customer demand fueled its decision to include the payment option. “For months, Bitcoin has been requested of Namecheap among the tech audience. We’re pleased to announce that we’ve listened to your feedback.

Risky Bitness

As a digital currency, Bitcoin’s potentially vulnerable to hacking, the public losing interest or the bubble popping. And while it’s a proof-of-concept that shows promise for decentralized money, it’s yet to be proven. There remains enough FUD (fear, uncertainty and doubt) to keep customers from demanding it as a payment option. And to become truly disruptive requires a critical mass of trusting users. For now, only businesses with customer demand for Bitcoin should add it to checkout. The rest can sit back and wait to see whether this turns out to be a disruptor or just a digital pipe dream. Image credit: PeaceNewsNow

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4 Responses to “Should You Accept Bitcoin as a Payment Method?”

  1. Jill says:

    One should read up on how and what cryptocurrencies are before they say that they are hackable.

    I’d say look up and check for yourself but no one ever does, let alone the common lay person to understand how it works other than “its computer stuff, all computer stuff is hackable”. I do agree with businesses accepting bitcoin though. You have a couple of options as a merchant/retailer when it comes to accepting bitcoins:

    -You can take it, sit on the coins and consider it as an investment compared to fiat prices

    -Use services/set up your own cart in a way that when you accept bitcoin, it’s turned into cash near instantly/end of the day. (Think bitpay, more and more businesses are using it, it’s probably the best idea there is right now)

    Not all people want certain things shown up on reports, bills, reciepts, etc. This allows for more opportunity for more businesses.

    Just my .02 bitcents.

  2. I think that accepting bitcoin as a payment option would not be a practical solution for store owners since they want real money for the products they sell, but not payments in a digital currency. Yes, they can later buy some other services or maybe products using bitcoins, but the number of services and products available to be bought by bitcoin is very limited, this is why store owners prefer to be paid in real money. This is like a vicious circle – few store accept bitcoin and because of this few people accept to be paid with it, since they do not have what to do with it. The main purpose of money is to be a medium of exchange, a value exchange mechanism, that is universally accepted by everyone (or the most part of people). While bitcoi is also a medium of exchange, it is not popular, meaning it is not accepted by the majority of people, meaning that it is not a medium of exchange and nor people, nor online store use it. A true vicious circle.

  3. Without going back to boring monetary theory, I would just add that I agree with ‘Ecommerce Store’ about it not being practical, at this point, as a ‘medium of exchange’. If not universally accepted, its appeal is significantly diminished. Not saying it won’t get there and is not worth keeping an eye on – if you are in ecommerce at all, you should try to be on the forefront of innovation and provide useful service to your end users. However, I agree with your statement, that only those (like NameCheap) that have customers specifically requesting the service need stick their toe in the water yet. Interesting post.

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