Bitcoin, a heavily underground peer-to-peer payment solution, is starting to peek its head above ground. Effective, January 10, 2013, a payment solutions company called BitPay has announced $510K in investment, led by Shakil Khan, Barry Silbert, Jimmy Furland and Roger Ver. Put simply, BitPay feels like it is positioned to become the equivalent to PayPal as the BitCoin payment processor.
What makes BitCoin so interesting is that it flies in the face of payment models that we’re used to today; it’s a push model rather than a pull one. When you give a website your credit card and billing information to buy something, the company is pulling money out of your account. Giving up that personal information isn’t the safest thing, and Bitcoin allows you to “push” the money to a company to buy something. This means that no personally identifiable information goes with it, making eventual identity theft and fraud nearly impossible during the transaction.
BitPay, has successfully processed more than 10,000 bitcoin payments for their merchants. In their first 10,000 transactions, BitPay has experienced exactly zero cases of payment fraud. Not a single payment received has failed to confirm over the bitcoin peer-to-peer network, and reversals are not possible with bitcoin payments. Companies can now ship their merchandise with confidence to any country on Earth. This is a welcome relief for internet merchants who are battling payment fraud every day.
The key benefit that companies are starting to realize with bitcoin is the fraud mitigation. With credit cards, one out of every 167 transactions turns out to be fraudulent for domestic orders, and for international orders the rate is one out of every 50 transactions (source: Cybersource 2012 Online Fraud Report).
Every day, more companies are starting to see the value that bitcoin can bring to their business, whether it’s reducing risk, expanding international sales, or improving efficiency. However, integrating bitcoin has some unique challenges that other payment types do not have, and companies will quickly run into these challenges.
“We have a good grasp of all the edge conditions and scaleability issues that a typical company would face integrating bitcoin payments, since we’ve done this over 10,000 times,” says Anthony Gallippi, co-founder and CEO of BitPay. “We have some tremendous expertise in this area. This expertise puts our business solutions well ahead of all others in the marketplace.”
BitPay has the most expansive line of BitCoin payment tools available, including the leading Payment Gateway API for BitCoin, and plugins for popular eCommerce platforms such as Magento, WordPress, and Virtuemart. After closing their seed round of funding for $510,000 from a small group of angel investorsm, BitPay already has over 2,400 merchants using its platform to accept BitCoin payments, and recently disclosed that in 2012 they processed over $3 million in bitcoin payments for its merchants.
BitCoin’s big advantage is that it is essentially the cold, hard cash of the Internet. Instead of bills, BitCoin’s software keeps a public ledger of every transaction among users. If a buyer and seller are running the software on their computers, they can directly exchange Bitcoins, anonymously and with no taxes or bank fees. Others can pay a company to process the payment. BitCoin accounts are listed simply as a string of letters and numbers with no names attached, giving a level of anonymity impossible with debit and credit cards or even PayPal accounts.