What is Bitpay and how it works
In short, Bitpay is a payment gateway that allows merchants for an easier way to accept Bitcoin. BitPay means good news for the Bitcoin Community’s growth. It allows merchants to accept Bitcoin and in exchange it offers daily direct deposits of the fiat currency. For merchants that already have a shopping cart, BitPay’s Hosted Checkout can allow shoppers to pay for their order using bitcoins. For merchants that only have a catalog of items, BitPay can provide buttons and widgets for merchants to place by their items, which will add them to a shopping cart at BitPay.
How transactions are handled
When an invoice is presented to the customer when paying, the receiving Bitcoin address is shown. A QR Code of that address is also shown allowing for easy payments from a mobile device. The invoice also includes a button for using the URI payment method which will allow supports for URI links from a Bitcoin client.
The message “This invoice is valid for 15:00 minutes ONLY” is displayed and a timer counts down the clock. The reason this timer exists is to protect BitPay from exchange rate moves — the price quoted is only valid for fifteen minutes because of Bitcoin’s volatility. If payment arrives after the timer has expired, an additional payment amount may be required to cover the difference in the exchange rate from the original quote.
The automated solution and shopping cart is available for all merchants for a fee of 0.99% of the value of the sale. If the merchant wants to receive a currency other than bitcoins, (e.g. US Dollars) BitPay can trade the coins for dollars, and send a direct deposit to the merchant’s bank account. As a result the Merchants never risk loosing money because of Bitcoin’s volatile price.
Bitpay was founded on May 2011 by Anthony Gallippi and Stephen Pair in Atlanta, Georgia. Bitpay received it’s first round of real funding in January 2013 when the company announced $510,000 USD in angel investments, which was it’s first external capital after being internally organized. Following that initial investment BitPay received an additional $2,000,000 USD in venture capital investment which was led by the Founders Fund. In December of 2013,Hong Kong business magnate Li Ka-shing invested through his Horizons Ventures firm about $2.7 million into BitPay. In May of 2014, BitPay received $30 million in funding from investors including Index Ventures, Virgin Group’s Richard Branson and Yahoo founder Jerry Yang. This totals to roughly $35,000,000 USD in investments.
On September of 2013, 2 years after BitPay’s formation it was able to reach 10,000 merchants to accept Bitcoin. On September of 2012 it accepted it’s 1,000th merchant, so in other words BitPay was able to grow 10 times in the years of 2012-2013. This was all done with the initial 2.5 Million raised from the Fouders Fund and the $500,000 in angel investmnets.
Back in 2013, Commenting on BitPay’s 10,000 merchant milestone, investor Shakil Khan told TechCrunch: “BitPay is doing a great job at educating merchants to the benefits of accepting Bitcoin, 10,000 merchants on board is excellent news for such a young company in a very new industry, and YES, as an investor I am very happy with the progress being made by Tony and his team.”
Where is Bitpay today
Now fast forward another year and As of May 2014, BitPay provides payment processing services for more than 30,000 businesses, including the gaming giant Zynga, popular blogging platform WordPress, and the NBA‘s Sacramento Kings. Fifty percent of the company’s merchants are located in the United States, while only 30% are based out of the European Union, and the remaining are sprinkled elsewhere on the globe.
Today BitPay has processed over $100 Million in total and is currently processing $1 million in transactions a day.
What does that mean for Bitcoin
The word for Bitcoin in 2014 is Merchant Adoption, that is the name of the game. Right now Bitcoin’s biggest goal is to attract a bigger audience which begins with Merchan Adoption. Companies like BitPay not only are successful in themselves but also support Bitcoin because it is a tool which promotes Merchant Adoption. The fact that BitPay was able to acquire over 30,000 merchants is astonishing.
On the other hand, BitPay can acquire another 30,000 merchants and not make much of a difference if those merchants are small-time home businesses. We need to focus on the big corporates that have massive amounts of orders and volume going through them. BitPay should focus on processing more volume of transactions per day vs. acquiring more merchants. However as we see the fact that BitPay is currently processing over $1 Million in Bitcoin a day is already promising.
However, is $1 Million a day of transaction volume really that impressive?
Maybe for Bitcoin is its but at its peak in 2008 E-gold was processing more than USD 2 billion worth of precious metals transactions per year, which when calculated comes out to about $5.5 million per day. BitPay still has a long way to go but they sure are on the right track!