Crypto currency or Bitcoin?
Crypto currencies such as Bitcoin or Ethereum are not only gaining masses within the “scene”, but are also becoming a topic of discussion among the general population. Despite doubts whether the crypto currency is a .COM bubble, the brief rise in the bitcoin price at the end of 2017 drew the attention of many people to the currency.
First of all, Bitcoin is probably the most popular crypto currency, but not the only one. There are many crypto currencies that are technologically similar to bitcoin, for example, to enable cheaper transactions. Other crypto currencies such as Monero or ZCash focus on the anonymity of senders, recipients and transactions. There are over 1000+ crypto currencies of which you don’t even need to know 5%. If you want to know which coins have the largest market share, take a look at the Top100 coins here.
We are not talking about bitcoin as an object of speculation, but crypto currency in general as a feasable payment method. Let’s start with the question:
Why should I as a retailer, online shop or service provider enable my customers to pay via crypto currency?
An online merchant must ask himself a similar question before registering with the credit card provider of his choice or opening an account with PayPal.
- The most common reason is: Because your customers want to pay with it!
Crypto currencies are becoming more common and especially those who hold a lot of crypto currency or earn money with it want to use it for payment.
- Crypto currency payments cannot be revoked!
There is no chargeback of direct debits, burst credit card charges or payments revised by PayPal buyer protection. A crypto currency payment is completed after confirmation X.
- The fees are much lower and are paid by the buyer.
Instant payment systems such as PayPal, credit card or SOFORT® bank transfer cost considerable fees. PayPal usually charges 1.95% plus 0.35 € transaction fees. For a 50 € shopping cart this corresponds to 1,32 €. Sending crypto currency is – provided that the correct crypto currency is used – much cheaper. In addition, the fee for sending must always be paid by the buyer.
So far thats fine for you as the dealer. But why should your customer pay in crypto currency?
- Payment is immediate.
Your customer sends crypto currency from his wallet to your address. Its recorded immediately in the blockchain. Further confirmations of the payment will be made for verification purposes.
- The fees are much lower.
Your customer will pay less for PayPal or credit card, making you more competitive and interesting for the buyer and saving money on both sides. A transaction with Litecoin today is around €0.08. If a crypto payment provider is interposed, usually 0.50% – 1.00% fees will be charged (thats of course much more).
How can I integrate crypto currency as a payment option?
In principle, you do not need a third party for crypto currency. The concept is based on a peer-to-peer network (p2p), where each participant can store, view and instruct the transactions.
- Set up your own node and synchronize the blockchain (decentralized)
To receive crypto currency completely independently, download the software (e.g. the Bitcoin Client). You synchronize the blockchain (the type of database in which all transactions are stored) and can then create wallets (digital mail exchanges). Then you can generate addresses, give the address of the public key to the customer, and send it on using the private key Crypto currency. The system is completely decentralized. For a technical layman, however, this requires some training!
- Use a third party provider that provides node, wallet and interfaces (Centralized)
Various providers allow you to create only one account and process the receipt of crypto currency there. But be aware that this centrality carries risks: you have to trust the provider completely. Unless in FIAT world, its more risky in the crypto currency space.
The integration in your shop is possible by free plugins. These are configured so that they manage the addresses and check the payment for you. If you choose a third party provider, they often provide their own modules.
Always make sure that you use a new address for each customer or even each order, which you consider a “sub-account”. With a crypto currency payment as with Bitcoin it is usually not possible to read out a “transfer subject”, which is why assigning a payment clearly to one customer is only possible via payment to a dedicated address. However, within the Bitcoin network you can create as many addresses as you like. The address space of the Bitcoin network is 2^160 possible addresses. This corresponds approximately to the number of atoms on Earth, to give you an imagationation.
Payment service provider
We name just a few that we are aware of. BitPay and CoinPayments have got some reputation.
- BitPay [USA] (Bitcoin and Bitcoin Cash)
- CoinPayments [Canada] (Besides Bitcoin also payment in over 775 Altcoins possible)
- CoinToPay [Netherlands] (Bitcoin and Forks)
- PayBear (beta) [UK] (Ethereum and Bitcoin and forks like Bitcoin Cash)
What do I do with crypto currency after my customer has paid me with it?
This is probably the most painy question in the process that you should also consider in your process. You can hold the crypto currency, e.g. Bitcoins, and wait for an increase in value. You can also use them to pay with Bitcoins at different merchants or shops. Unfortunately, there is no representative list or map.
You can also convert crypto currency to Euro or Dollar. This can be done manually via exchanges like Coinbase or Kraken or peer to peer via localbitcoins.com. Time elapses from the time of receipt and actual conversion, which can have a negative effect on sensitive margins. Then we would recommend a service like BitPay or Coinmotion. BitPay allows you to receive Bitcoins and converts it directly to Euro. Alternatively you can use CoinPayments and forward the coins to Coinmotion, who will pay you Euro. How you implement the construct depends on your concept or received coins.