Is accepting Bitcoin better than accepting credit cards or direct account payments? Who is Bitcoin really for? This article is about the process of accepting Bitcoin and should help you decide, whether it is worth the trouble, considering accounting and technical issues.
What exactly is the Bitcoin?
Bitcoin is a name for a digital currency, BTC is a short name for Bitcoin used by financial markets. In reality, a Bitcoin itself is a piece of data stored in a digital wallet.
Digital wallet contains a secret private key; this key is used to sign a transaction, providing a cryptographical proof that the transaction was signed by the real owner of the wallet. The important thing about the wallet is that you need to know how to keep it safe and protected, otherwise you will lose all your Bitcoins or they may be stolen from you. Example of how your wallet address may look like: 1ExPriKlaD0FaBiTco1NADr3sSV5tsGaMF6hd, make it public and you can get paid.
A transaction is a piece of data stored in the so-called blockchain. The blockchain is a shared public ledger containing all the transactions ever made by Bitcoin. This is also a soft spot of Bitcoin, not only are your transactions public once somebody (your competition, police, IRS, Revenue, …) knows your wallet number, it is also large and bloated in hundreds of gigabytes. Because of its size, the public process of payment verification is painfully slow these days.
Is Bitcoin anonymous?
Yes and no, it depends if you share your wallet number with the public and how you share it. It is important to note, that if you acquired your Bitcoin publicly and used your credit card or bank account, every transaction you make can be traced back to you. You need to share it at least with someone to get paid and if you are an online store, it will be public in your invoices. If you use a third party payment gateway, you will have to register with your name, proof of ID. This is because, in the US and Europe, there are strict AML ( Anti Money Laundering ) rules and regulations that do not allow to process transactions for unknown clients. A commonly exercised rule is known as a KYC ( Know Your Customer ) rule. Besides the standard regulations, many governments are getting ready for cryptocurrency in their own ways and you need to examine the law that applies in your country.
If you ever get an offer to use an anonymous payment gateway, where KYC and AML do not apply, there is a good chance you will never see your Bitcoin ever again.
If you choose to use Bitcoin, we strongly advise to separate business and private wallets, same as with standard bank account, private transactions should not be mixed with business, it is bad for accounting. Transactions are also public to your clients, competition, and everybody on the internet.
Do you have to pay taxes?
Yes. Unless you live in a tax haven, Bitcoin income is considered as a standard income. If you register with a payment gateway that uses standard currency payout, you will get your USD, EUR, or whatever currency you have chosen anyway.
How much does it cost to send and accept Bitcoin?
This is where the issues start to pile up. It is quite expensive to send Bitcoin and confirmations take so long, that most businesses stopped using Bitcoin. Transaction fees have risen, in January 2018 skyrocketed to 55 USD with the bubble, that was a breaking point when bitcoin became less useful for standard payments for goods and services and become a speculative currency. Would you buy a sandwich for 55 USD + the sandwich price? After January transaction fees went slowly down under 1 dollar, but still there is a confirmation time problem.
You can check the current average transaction fee here.
Confirmation time and how it affects your business
Confirmation time is a time that it takes to confirm the transaction and enter it to the blockchain with a new mined block. Confirmation time depends on Bitcoin network activity and sometimes services you use require 6 confirmations, so they minimize the chance transaction gets reverted, so if standard confirmation time is 15 minutes, it will get confirmed in 15 x 6 = 90 minutes. Now if you want to sell someone an e-book, customer’s credit card will be confirmed in few seconds, for Bitcoin you will wait for an hour, this is bad for business and that is why you need to assess your own situation and decide whether Bitcoin is good for your business or not.
Long transaction confirmation times led to other problems, after the confirmation with high Bitcoin price fluctuation, the Bitcoin was not worth the same it was 90 minutes ago, say bye bye to your money. Stripe allowed accepting Bitcoin, it was so easy with them, they have WooCommerce plugin with Bitcoin payments integrated, so you did not have to do anything, just click Enable Bitcoin Payments checkbox. Stripe discontinued the service for reasons mentioned above.
You can check the current average confirmation time with history here
Who is bitcoin for?
In these days, Bitcoin is mostly a speculative risky investment currency for the brave. If you know how to use Bitcoin and are aware of its downside, you would not be reading this article. If you are still unsure, use the links provided above, take out a calculator and make sure that your price + transaction fee confirmed in the average confirmation time is what you expect from the online transaction.
Bitcoin may be good for you, if you accept larger amounts of money or offer services that will be attractive for people that already invested in the Bitcoin and now are looking for ways to get rid of it.
Bitcoin liquidity and manipulation schemes
Assuming you already have collected Bitcoin from your customers, you have several choices on how to make use of your digital currency assets. One way of using collected Bitcoin is to spend it on your business expenses, but your buying power is limited to businesses that accept Bitcoin, your negotiating advantages get limited. Another common practice is to exchange Bitcoin to your default currency. You can not just walk into the bank and exchange Bitcoin. Business owners have fewer choices; use digital currency broker or digital currency exchange platform.
As Bitcoin is more speculative currency, it’s value is extremely volatile. You can not rely on Bitcoin’s current value to be stable. If you collected $50.000 worth of Bitcoin this month and you are planning to liquidate it and use the money to pay out your employees, next week the same amount of Bitcoin may be worth $40.000.
A recent study called The economics of cryptocurrency pump and dump schemes reveals manipulation schemes coordinated using communication channels like Telegram and Discord, where participants successfully organized rapid currency price increase and sudden drop. While these speculations make some organized individuals a lot of money, unsuspecting first-time buyers or investors and especially businessmen lose money and Bitcoin remains a speculative digital currency.
How to accept Bitcoin in WordPress
Accepting Bitcoin (BTC) on your website is very easy if you use WordPress, there are plugins, even services that will convert Bitcoin to your currency and send you an amount equivalent to current exchange rate minus the processing fee.
You can get paid by sharing your wallet number in your invoice, this is equivalent of bank transfer, but you will receive Bitcoin, not your currency. There are many Bitcoin plugins for WordPress to checkout, remember that you will need to know what you are doing there regarding securing your data.
If you wish to accept Bitcoin and receive your money in your own currency directly to your bank account, we recommend using a payment gateway. One example of such a gateway is BitPay. They are here long enough, offer payouts in 38 currencies and take 1% of your transaction, BitPay has also it’s own WordPress plugin for WooComblog/accepting-bitcoin-on-your-website-is-it-worth-itmerce, but just over 1000 active installation just tells you how (un)popular Bitcoin is amongst online store owners.
If you wish to accept Bitcoin on your website or online store, we can help, but generally, we do not encourage our customers to do so, unless they were familiar with Bitcoin before or already use Bitcoin and know how to protect their digital wallets and can prevent from being digitally robbed. You decide if Bitcoin is worth it! Share your thoughts in comments.