As an ecommerce agency, we’re seeing an increase in queries and requests for Bitcoin payments, and there didn’t seem to be much information online about Bitcoin for merchants.
Here is Peacock Carter’s guide to Bitcoin for ecommerce, designed to give you as an ecommerce business in to the benefits and drawbacks of implementing Bitcoin as a payment method on your store. This guide is based on a talk I made at the Magento North East user group; slides will be online shortly.
What is Bitcoin?
Bitcoin is a cryptocurrency. Essentially, rather than storing your money in a traditional bank, digital currencies such as Bitcoin allow you to trade virtual money. As a consumer, you store your Bitcoin balance in a digital wallet
Rather than have a centralised “repository”, transactions are person-to-person, and transactions are stored in a public ledger known as the block chain. Bitcoin transactions are verified through users called “miners” who process and verify payments; these miners are rewarded with newly “minted” Bitcoins as a reward for their work.
There’s a great description of how Bitcoin works in this video by WeUseCoins on YouTube.
Bitcoin claims to be the first decentralised cryptocurrency (in 2009), though there are many other alternatives using a similar premise these days, such as Dogecoin, Ripple, Litecoin and Mastercoin.
Who is using Bitcoin already?
As of February 2015, The International Business Times reported over 100,000 merchants around the world offering Bitcoin as a payment method, and this number is likely to have grown considerably since then. Merchants accepting Bitcoin include Microsoft, Virgin Galatic and PayPal. Greenpeace, The Wikimedia Foundation and The Mozilla Foundation (behind the Firefox web browser) also accept Bitcoin donations.
Advantages of Bitcoin for merchants
There are a lot of benefits to merchants of accepting Bitcoin for payments on their ecommerce stores:
- Free transactions: Bitcoin to Bitcoin transactions are free of charge
- Low fees: converting Bitcoin to “flat” currencies such as GBP, USD and EUR involves typically very low fees through most contemporary Bitcoin payment providers
- Fast transactions: transactions are instantaneous in Bitcoin; no waiting days to receive your payment (payment provider pending!)
- Convenient for customers: for a growing sector of online consumers, Bitcoin is a very, very convenient way to pay
- No chargebacks: unlike credit cards, there are no chargebacks for Bitcoin payments. This is because payments are not reversible
Potential issues with Bitcoin
Some of the advantages of Bitcoin provide likely downsides for merchants, too:
- Refunds: as described above, a Bitcoin transaction is not reversible. This could be a headache for online retailers and merchants, but most stores accepting Bitcoin offer in store credit rather than refund via Bitcoin itself
- Fluctuating Bitcoin exchange rate: the exchange rate can be quite volatile between Bitcoin and flat currencies. This is not so much of an issue if you plan on withdrawing funds from your Bitcoin digital wallet soon after payments are made to you
- Theft: there have been some high profile cases of Bitcoin theft. Essentially, storing a copy of your digital wallet offline is a very sensible precaution to mitigate this issue
Bitcoin payment gateways
There are a number of payment providers who can help merchants start accepting Bitcoin payments, including BitPay, Coinbase and Stripe. All offer similarly low transaction rates (see this page for merchants on WeUseCoins.com).
Bitpay is currently the most popular Bitcoin payment gateway, with implementations for common ecommerce platforms such as WooCommerce and Magento already in existence.
CoinBase is also popular, and has integrations with ecommerce platforms including Magento (1.x and 2.x) and more.
What to ask your payment provider about Bitcoin
We found this merchant checklist from WeUseCoins.com when asking for payment gateways particularly useful:
- Can I get a unique Bitcoin address for each transaction?
- How is the exchange rate calculated?
- How fast are payments approved?
- What is my exchange rate risk?
- How do I receive the funds?
- Are there any fees involved?
- How can I see a listing of my sales?
Bitcoin for ecommerce merchants
The benefits of Bitcoin are clear , though the disadvantages may be off-putting to most merchants. With lower transaction fees, you can increase profit margins or pass the savings on to consumers and gain an edge over your competitors, but the current decisions being made over the blockchain – at the very core of Bitcoin – likely mean more conservative merchants will want to be cautious in adopting it for now.