1. If Bitpay was making a lot of money on payment processing, would they have gone to free forever? No!
- The reason is payment processing does not generate much cash! Certainly nothing that can support a 60 person team that bitpay has.
- There is very little bitcoin payment volume and not expected to be much in the near future. Honestly, despite how much press coverage it gets whenever a merchant accepts bitcoin. No one is doing big volume through bitcoin.
Certainly not at a volume that is meaningful to a processor.
- Bitpay says they processed 100m in transaction last year. That is false. Bitcoin price was around $100 most of the year. And in December it went to $1000/btc. And so they took $1000 and applied that to all the sales throughout the entire year
- They recently have a massive change in strategy when Tony Gallipi stepped down as the CEO and Stephen Pair became the CEO (original CTO). This is important, because since then the strategy became open source focused (very much like Redhat for bitcoin)
2. Bitcoin payment processing has incredibly low barrier to entry.
- Unlike visa and mastercard which has massive barrier to entry. Vanilla Bitcoin payment processing really just involves less than 100 lines of code. Like
Step 1: Use BIP32 to safely and securely accept payments (Keep the private key offline and derive addresses using the master public key on the server).
Step 2: Write a little script to run locally to hook up to a API to sell the bitcoin. Voila, you have basically got bitpay.
Like many other internet based service, the fees eventually trends towards 0. Unfortunately, monetization of bitcoin payments is going to look very different than the traditional visa/mastercard/paypal model and it cannot come from vanilla fees alone.
Because what used to be proprietary network/technologies has been mostly replaced by the bitcoin protocol itself. And so value has to come from somewhere else.
Your post is full of conjectures, outlandish claims, and of course no data to back any of them... "not expected to be much volume" - seriously? BitPay is seeing an insane growth: https://news.ycombinator.com/item?id=7974197 - And on CNBC Stephen Pair recently said BitPay gains 500-1000 merchants every week: http://www.youtube.com/watch?v=f8YSivdLKf0 Claiming they lied about doing $100 million in 2013 (this rumor is apparently being spread by a few anti-Bitcoin reddit posters...) is equally ridiculous. BitPay is currently processing $1 million/day in sales: http://finance.yahoo.com/news/bitcoin-payments-pioneer-bitpa...
BitPay has 30,000 merchants, and sells 2 plans on top of their free service: business and enterprise. Assuming 1%-5% of their merchants are subscribed to their business plan ($300/mo), and assuming the enterprise plan price is sold for 5x this value (negotiable, on average) but attracts only 1/5th the number of business plan customers (so 0.2%-1% of merchants paying $1500/mo), then it would give BitPay between $2.2 million and $10.8 million of revenue per year. $2.2M would not make BitPay cash-flow positive, but $10.8 would certainly do it. In that case it is a no-brainer that they would make their basic service free: they would entice merchants to give BitPay a shot, and BitPay would profit from the small percentage who later decide to upgrade to a business or enterprise plan.
Yeah because their service can be reduced to 100 lines of code. Infrastructure, support, all the services they provide anyone could mimic with 100 lines of code, right? That's nonsense. All credit to bitpay for pushing the envelope towards mainstream adoption of Bitcoin.
No. I mean, good on them for making it free. It is great.
And no, of course you can't replace everything they do with 100 lines of code. But you can get a fairly long way. If you don't need all these pretty consoles, things like quickbook integration.
However, the point remains: if you are a developer and you want to accept bitcoins. There are more and more third party APIs (blockchain APIs), reporting tooling (watch only bitcoin consoles). If you know a bit of bitcoin. It really is pretty easy.
Oh and I get it, what about scale? what about customer service?
My point is this: this is a vastly different industry then for example, visa or even stripe. Bitcoin Payment processing will trend towards extremely low fees. While visa provides something that no startup can do in house, what bitpay provides can be done securely in house over a few weekends.
And bitpay gets that. My speculation is that this is part of a greater strategy to abandon paymenet processing as the core and go towards redhat for bitcoin
>Bitpay says they processed 100m in transaction last year. That is false. Bitcoin price was around $100 most of the year. And in December it went to $1000/btc. And so they took $1000 and applied that to all the sales throughout the entire year
It is pretty much open secret amongst the bitcoin crowd. They didn't announce it of course. But next time you meet someone from bitpay, explicitly ask them how that $100m is calculated.
It's a statement in a press release with no details by a company widely believed to have fudged reported numbers in the past to look a lot more impressive.
I personally don't put much weight on it. I could see them saying the same thing if they had 1 >$1m day which we already know they had back in October 2013.
1. If Bitpay was making a lot of money on payment processing, would they have gone to free forever? No!
- The reason is payment processing does not generate much cash! Certainly nothing that can support a 60 person team that bitpay has.
- There is very little bitcoin payment volume and not expected to be much in the near future. Honestly, despite how much press coverage it gets whenever a merchant accepts bitcoin. No one is doing big volume through bitcoin. Certainly not at a volume that is meaningful to a processor.
- Bitpay says they processed 100m in transaction last year. That is false. Bitcoin price was around $100 most of the year. And in December it went to $1000/btc. And so they took $1000 and applied that to all the sales throughout the entire year
- They recently have a massive change in strategy when Tony Gallipi stepped down as the CEO and Stephen Pair became the CEO (original CTO). This is important, because since then the strategy became open source focused (very much like Redhat for bitcoin)
2. Bitcoin payment processing has incredibly low barrier to entry.
- Unlike visa and mastercard which has massive barrier to entry. Vanilla Bitcoin payment processing really just involves less than 100 lines of code. Like
Step 1: Use BIP32 to safely and securely accept payments (Keep the private key offline and derive addresses using the master public key on the server).
Step 2: Write a little script to run locally to hook up to a API to sell the bitcoin. Voila, you have basically got bitpay.
Like many other internet based service, the fees eventually trends towards 0. Unfortunately, monetization of bitcoin payments is going to look very different than the traditional visa/mastercard/paypal model and it cannot come from vanilla fees alone.
Because what used to be proprietary network/technologies has been mostly replaced by the bitcoin protocol itself. And so value has to come from somewhere else.