What does exactly BitPay do?
BitPay is a service to make it easy for business to accept bitcoin as a form of payment.
How did you decide to start this business?
We thought bitcoin had a lot of potential for payments on the Internet: you can receive a payment from any country on earth, instantly, because the Internet has no boundaries and with no risk of fraud. But for many business to start using bitcoins was not every easy, a website would have to go through a lot of different softwares and spend a lot of time to make bitcoin a payment option.
According to data you recently released, BitPay processed over $5.2 million in bitcoin transactions for its merchants during the month of March, with over 5,100 completed invoices. What kind of clients do you target?
Right now most of our clients, I’d say 90 percent of them, are e-commerce businesses because bitcoin is really good for making Internet payments. There is a lot of risk taking credit cards for payment: credit cards were never designed for the Internet. So we have people who are selling gold, electronics, televisions, iPads, jewelry, software, music… anything you can buy in the Internet.
This Tuesday bitcoin was trading around $135. At its peak a few weeks ago, it reached $266. In January, it was trading at $15. What would you say to those who claim it is a Ponzi scheme, with no intrinsic value?
We use commodities like gold and silver and copper as a value, as money, and paper money eventually had a value because it was more convenient than money to carry around. Now we have digital money. If you have a gold coin in your hand, that’s great, but if you want to pay in Germany that gold coin is not useful. The real value of bitcoin is its utility, what you can do with it. You can send it instantly to anywhere in the world 24 hours a day, on a Sunday afternoon when all banks are closed. The intrinsic value of bitcoin is the network itself, the massive distributive computing project, it is an asset that you can use for property rights for example.
Let’s say I buy a high-end TV using bitcoins, but since there is so much volatility in the currency, there’s a big chance I’d want to return the item and buy the same one the next day if its price drops by a significant percentage. For companies that sell physical goods doesn’t that mean a headache?
Not really. If you go to any store and you pay in cash and you want to return an item you are going to contact the merchant and they will give you the cash back, and that’s pretty much how bitcoin works. Where the volatility comes in to play is with the currency exchange and that’s one of the services where BitPay makes it easy. You set the price of your items in dollars, euros or whatever currency you have. So you can set all your payments in dollars but if somebody wants to pay in bitcoins the company would order that to BitPay, we determine the rate, let’s say for 100 dollars, and put a timer on it. Right now the time is 15 minutes. And for that time we guarantee the rate. Now if the customer wants a refund he would get refunded those 100 dollars worth in bitcoins. That can be more or less bitcoins but in any case it’s 100 dollars value. So bitcoin is more a transaction mechanism than a source of value.
In a nutshell: tell me the biggest advantage and disadvantage you see in bitcoins
Its biggest advantage is that it makes digital commerce very easy, much easier than to use a credit card or PayPal, especially if you are trying to do your business international. Its biggest disadvantage is that it’s still too difficult for the average person to use. But I think those problems will get solved. In the beginning, the Internet was really hard to use.
Creators and users of bitcoin are anonymous. Bitcoin has been subject to increasing security issues and transactions also have a tendency to take a long time to confirm. How do you convince me to trust it?
First of all, bitcoin is voluntary. You don’t have to pay in bitcoins. Why would somebody want to pay this way instead of with a credit card? Number one, there is no risk of identity fraud. With PayPal the risk is even higher because if somebody has your password they can have every credit card and every debit card that you have linked to your account. Bitcoin makes it a lot easier. When you are buying something from a merchant you are never giving them access to all the money in your account, to your 20,000 dollars of line of credit. You are paying 25 dollars and you push them exactly 25 dollars, but they never get access to your account information.
What if it turns out bitcoins are used mostly for illegal stuff, like gambling, could the government shut the currency down?
I don’t think so. Criminals use emails and cell phones and you can’t ban those technologies. Just because people can use bitcoins for illegal stuff you can’t ban it for that. There are way too many positive uses for the technology: charities can also take donations from many countries, for example.
Bitcoin has already its competitors, like OpenCoin. Will you consider the possibility of enabling transactions with other digital currencies?
May be. We could easily do that, but right now bitcoin is the most secure digital currency by far. It’s used by 97 percent of the all virtual currency markets users. We could do it in the future but those technologies would have to demonstrate that they have the security and reliability.