From 2003 t0 2012, I built up and ran a technology blog called ReadWriteWeb (RWW). At its peak, it had over 20 people working for it, nearly all of them in the US.
The fact I could manage this business virtually, from New Zealand, showed the power of the Internet tools the blog evangelized. The RWW team communicated via Skype. We published on Movable Type. We managed projects on Basecamp. We scheduled meetings with GoToMeeting. We kept track of the editorial calendar using Google Calendar.
There was, however, one crucial component missing in our virtual office: a decent tool for online payments. And we had to do a lot of online payment processing; paying staff and accepting payments from our sponsors being the two most important. The closest we got to a viable tool was PayPal, but we quickly learned to avoid it.
PayPalâs fees for international payments were (and still are) exorbitant. What we ended up using was the international banking system, SWIFT. It was full of red tape, the bankâs online software was buggy, and often we found that one or more intermediary banks had taken a chunk of money during the process.
In short, the banking system was opaque and frustrating⦠but even then it was better than PayPal.
My overly long point is this: Online payments arenât yet solved. Bitcoin may be the solution.
Bitcoin is a decentralized digital currency.
As I type this, its value is $372.57. It fluctuates a lot, which is part of the reason itâs not quite ready to be a PayPal killer. But the underlying system is solid.
I wonât go into the technical definition of bitcoin, but simply put, there are two main uses for bitcoin currently:
What makes bitcoin more appealing than PayPal or credit cards?
For a start, the fees are much less extravagant. You may not even need to pay any transaction fee, although bitcoinâs website suggests that paying a small fee could speed up the transaction.
Bitcoin is also appealing because it is essentially a universal currency. So, there arenât onerous currency conversion procedures to go through â which are always a âgotchaâ with international bank transfers, PayPal transactions and credit card payments.
A number of mainstream goods and services websites have begun to accept bitcoin as paymentâââincluding WordPress, OKCupid, Expedia and Microsoft.
Perhaps the biggest retailer so far is Overstock, which began accepting bitcoin in January 2014.
The founder of Overstock, Patrick Byrne, tweeted that month:
#Bitcoinâs first full day on @overstock.com was a huge success: 840 orders, $130,000 in sales. Almost all new customers. #stunned
â Patrick Byrne (@OverstockCEO) January 10, 2014
Byrne is a big advocate of bitcoin, although it should be noted that Overstock itself does not accept bitcoin. Instead it partnered with a third-party company, Coinbase, to accept bitcoin on its behalf. Coinbase then pays Overstock in US dollars, though it does keep some bitcoin reserves.
This way Overstock avoids the risks of holding bitcoin â especially the volatility of bitcoinâs value.
So if youâre a retail company or startup, or offering services online, should you accept bitcoin? It canât hurt to add it as an option, although Overstockâs experience suggests that itâs not straightforward to set up.
What about from the other side of the coin (so to speak). Should you use bitcoin as a consumer? Itâs a viable option if you live in a country that makes it easy for you to purchase bitcoin.
Unfortunately, my own country is not one of those. Foiled again! But those of you in the US and much of Europe are well served with bitcoin vendors.
Coinbase is one of the most established bitcoin ventures. Backed by VC luminaries like Fred Wilson and Chris Dixon, Coinbase offers a bitcoin buy and sell exchange as well as a âwalletâ to hold your bitcoins (similar to a bank account).
But even if you have access to a slick service like Coinbase, there are risks in using bitcoin to purchase goods and services. Apart from the volatility of the price, there is a lack of consumer protection.
As the US Federal Trade Commission warned in June 2015:
ââ¦payments made with virtual currencies arenât reversible and donât have the same legal protections as some traditional payment methods. Once you hit send, you canât get your money back unless the seller agrees.â
Itâs clear that bitcoin isnât ideal for online payments at this time.
As a retailer, compared to existing currencies itâs not straight forward to receive payment in bitcoin. And as a consumer, it isnât universally available and (where it is available) it carries risks.
But thatâs one reason why startups exist: to overcome obstacles to adoption of a new technology. There are opportunities for startups to make it easier for retailers and consumers, and to widen access to the exchange of bitcoin.
One particular use case Iâm excited about with bitcoin is its potential to enable the long sought after business model of micropayments. This is the practice of paying a tiny amount for a good or service.
For example, paying $0.10 cents to read an article on a news website. Because of ad blockers and the rapid decline of online advertising revenue, publishers are currently struggling.
Micropayments perhaps offers an alternative revenue source. At the very least, itâs worth experimenting with and I applaud startups that are putting forward potential solutions.
One such startup is called SatoshiPay. Itâs named after bitcoinâs mythical creator, Satoshi Nakamoto. Also, âsatoshiâ is the accepted term for the smallest fraction of a bitcoin: currently set at 0.00000001 BTC.
SatoshiPay bills itself as an enabler of âbitcoin nanopaymentsâ and asks us to âimagine a web where you can purchase an article, image or video for 1 cent.â Itâs early days for the companyâ â it only just announced its seed funding â but SatoshiPay is a good example of how bitcoin could drive innovation in online payments.
In conclusion, bitcoin isnât yet ready to dethrone PayPal as king of online payments.
Indeed PayPal itself may yet evolve into a key bitcoin payments processing company â although CoinBase has gotten the first mover advantage on that front. But once bitcoinâs volatility settles down (which may be a while, on the evidence of a recent schism in its developer ranks), bitcoin has clear technical advantages over PayPal, banks and credit cards for online payments.
One thing is for certain: bitcoin is in the process of disrupting Paypal. And for that we should be thankful.
This post originally appeared on Medium and has been republished here with the authorâs permission. For more of Richardâs insights, subscribe to his newsletter, Augment Intelligence, here.
Image credit: Neirfy / Shutterstock.com
