Should you accept bitcoin payments? How do you do it? Wait what is bitcoin anyway?
The mysterious currency made up by someone whose identity is unknown jumped from around $572 USD in August 2016 to $4,765 USD one year later. One bitcoin wallet (BitPay) has grown in sales volume by 328% in a year and reached one billion in sales.
For those who haven’t been paying attention, the world of bitcoin is moving fast. If you’re an e-commerce merchant, should you be doing anything about it?
Ok, let’s be real: what is bitcoin?
To be fair, I’ll preface this by saying I run in specific circles by nature of living in San Francisco. But over the last few months, it’s hard not to come across at least three conversations a week that mention bitcoins or The Blockchain or cryptocurrencies. There’s a very long answer to the question “but is it even a real thing?” Here’s a short one.
Cryptocurrencies, including bitcoin and a few others are a type of currency that is entirely digital. No paper money or coins. And instead of being tied to a state or collection of states (like the Australian dollar or the Euro), it’s...just not.
Currencies have two main functions: first their transactional value. You want an item, so you pay the amount of currency it’s worth that day. It’s also worth equity or holding value which is when holding onto a currency gains value by shifting exchange rates - it’s the idea that the currency of an economy that’s going to grow is worth more tomorrow than it is today, so if you hold on to the currency you’re earning money.
Bitcoin is currently growing rapidly in its holding value as it becomes more mainstream. Think of it as a new country’s currency in a rapidly-industrialising economy, except that instead of a country it’s entirely decentralised and not tied to any existing state or financial institution. Because no one entity can suddenly “print” more money, there isn’t a risk of hyperinflation.
Ok, still with me?
So why is bitcoin taking off so quickly?
It’s likely because the creation of bitcoin comes with a new type of technology to hold it - the blockchain. Let’s start with what currently happens in a transaction. Information transfers from one entity to another, and we keep that information safe from hackers by doing everything we can to cover it up -- that’s what encryption and PCI-compliance is for. The thought is that the harder it is for anyone to see that information, the safer it is from being changed or stolen by a Bad Guy.
The Blockchain does something entirely different. It says, “instead of one guy holding the keys in a secret pocket and having the pressure of hiding it there really well in a world of pickpockets, what if lots and lots of people had a tiny piece of a key and in order to make any changes every single one had to line up at the exact same time?”. Tens of thousands of servers each hold teeny tiny pieces of the same information and therefore the chances of any one Bad Guy getting enough information to do anything useful is significantly lower.
Bitcoin and now dozens of other similar digital currencies use this kind of technology, which started off pretty fringe and without the need for much identity verification because it did not come through any existing state or financial institutions - making it an early favourite for anyone who isn’t keen to share their identity or nature of their transactions.
Over the past couple of years though, and certainly projected into the future, large institutions who want to use blockchain technology to protect their data have become very interested in currencies that use it. Banks and other big players are looking to invest in blockchain technology, and as they do, the currencies using blockchain become more and more valuable.
Using bitcoin as a Shopify merchant
When you do, you’re given a bitcoin wallet that you can accept bitcoin to, store it if you want, pay others who accept bitcoin or immediately convert it into your home currency and transfer it into your bank account right away. It does pretty much the same thing as accepting any other foreign currency.
Thousands of Shopify merchants are already accepting bitcoin, so should you?
It’s cheaper than credit cards
While credit card fees can cost around 2.5%-3% per transaction, accepting bitcoin with BitPay is a flat 1%. You can figure out what to do with your extra change.
It’s shiny and new
Bitcoin payments are what is considered an “emerging market”. It’s new. It’s happening. It’s a symbol of keeping with the times if nothing else.
It’s pretty easy to go global with bitcoin
Bitcoin is often used to make international transfers in a fraction of the time it takes to go through a bank. We’re talking ten minutes. Nothing else does that.
It’s secure and fraud-free
I know, I know...isn’t bitcoin a “cryptocurrency”? As in, a name that makes it sound shady right off the bat. But bitcoin and other cryptocurrencies aren’t just for the black market. They use a system called the “blockchain” which is actually far more transparent and far less susceptible to hacking or than normal transactions through a bank. That means a significantly reduced risk of fraud-related chargebacks.
Tell me the cons
There are of course some risks you should be aware of.
Bitcoin is volatile
It’s been on a general upward, but with some huge swinging back and forth. So if you choose not to convert it right away and hold onto bitcoin, you could risk losing money if it goes down (note that this can happen with any currency).
It’s not the only cryptocurrency out there
There are now thousands of new cryptocurrencies that may be competing with bitcoin and we have no idea what the future is really going to hold for the OG of cryptos.
What do you even do about taxes?
Most countries haven’t quite figured out how to tax bitcoin as an asset the way most currencies are. So if you’re holding onto bitcoin, your accounting could get more confusing.
The nuts and bolts: using BitPay to accept bitcoin payments
If you’re interested in jumping on the bitcoin train, good news! It’s pretty easy to accept for Shopify merchants.
1. Sign up for a BitPay account
2. Create a new API key on BitPay
This basically means getting a special line of code that serves as a key to open up BitPay’s information to you. It’s a string of 42 characters that you’ll copy and paste in the next step.
Payment Tools > Legacy API Keys
If there isn’t an API already there, add a new one.
3. Add the BitPay payment method to your Shopify Account
Log in to your Shopify admin account and select "Settings" > "Payments" > "Alternative Payments" > "Select an Additional Payment Method" > "BitPay.". Then, stick in the API key from Step 2.
And done! Shoppers will have the option to pay in bitcoin, and you access that currency through your BitPay account. You should link your BitPay account to your normal merchant bank account to convert and transfer money you can use elsewhere.
Elkfox is here to help
Whether you want to accept Bitcoin or figure out what else is next for your business, we’ve got your back on all things e-commerce and Shopify. Talk to us.