The Complete Guide to Accepting Bitcoin (BTC) as a Merchant
The crypto crowd probably has more than its share of entrepreneurs, so for those of you of that mindset, we present a complete guide on how merchants can begin accepting Bitcoin (BTC) if they aren’t already. That includes how to choose the right wallet, how to accept Bitcoin (BTC) payments in a physical store and online, technology that can be used to streamline point of sale interactions, the services which can be used to convert Bitcoin (BTC) into fiat instantly to prevent losses from market volatility, and how to keep Bitcoin (BTC) secure if a merchant chooses to HODL.
Why A Business Should Facilitate Bitcoin (BTC) Payments
Before going into the specifics of setting up Bitcoin (BTC) payments, it is important to explain the benefits of Bitcoin (BTC). Perhaps the most important benefit is that Bitcoin (BTC) transactions are completely irreversible. Practically all fiat payments rely on banks and credit card processors, opening up merchants to the stress and loss associated with chargeback fraud. Customers can claim that their identity was stolen, the product was defective, or that the product never showed up and get their money back. Merchants can sometimes fight chargebacks, but even if the merchant is successful, it is a stress-inducing process and wastes time.
With Bitcoin (BTC), there is zero chance of a chargeback since it is a decentralized network, and there is no way for customers to take their funds back. This allows merchants to have peace of mind when accepting payments and gives them total control on which customers get refunds.
Additionally, due to decentralization, a Bitcoin (BTC) account can never be frozen for any reason. This makes businesses more efficient and stable, versus fiat accounts like banks and PayPal which can be frozen or banned without any explanation.
Also, Bitcoin (BTC) has fees per transaction that are usually around $1, no matter the size of the payment. This can be far cheaper than the fees that credit card processors charge merchants, typically around 3%.
Finally, there is a growing group of people who are cryptocurrency oriented, and accepting Bitcoin (BTC) will likely attract people from the crypto space into a merchant’s store.
Choosing The Right Bitcoin (BTC) Wallet For Accepting Payments
Accepting Bitcoin (BTC) payments requires a merchant to start a Bitcoin (BTC) wallet. Technically, the safest wallet is Bitcoin Core since it is completely self-sufficient and does not depend on any third party servers to function, but it can take weeks or months to become operational since it requires downloading the entire blockchain history.
A much quicker option is a lite-wallet like the Blockchain Wallet, which can be opened up and ready for business in less than a minute. The Blockchain Wallet depends on a third party server, and is perhaps not as safe as Bitcoin Core. However, Blockchain has a solid reputation and is probably the safest lite-wallet.
A key benefit of the Blockchain Wallet is that as soon as a Bitcoin (BTC) transaction is received it becomes spendable, at least most of the time. This is unlike Bitcoin Core and wallets on cryptocurrency exchanges that require confirmations.
For example, Bitcoin Core requires one confirmation, which takes on average 10 minutes but can really take hours or even an entire day during times of network congestion. If a merchant is accepting Bitcoin (BTC) payments via Bitcoin Core or, even worse, an exchange wallet like Coinbase that requires three confirmations, the customer could end up waiting all day just for their payment to be confirmed by the merchant.
Obviously, this would be a bad experience for online customers, and an intractable experience for retail customers. In-fact, the wait for a transaction to be confirmed would make Bitcoin (BTC) impractical to use as a payment method in physical stores.
Therefore, merchants should use the Blockchain Wallet to receive funds instantly even without a confirmation, creating a smooth checkout experience with no delays for the customer.
However, a merchant should be careful to analyze a Bitcoin (BTC) payment from a customer before handing over the purchased goods to ensure that the customer sets a proper transaction fee. If a proper transaction fee is not used, it can take days for a Bitcoin (BTC) payment to come through. If the fee is zero, there is even a chance a payment will disappear before confirming. Thus, merchants need to make sure that the transaction fee set by a customer is at least above zero, otherwise that customer may be trying to pull a scam.
Receiving Bitcoin (BTC) Payments Online
Inside of a Bitcoin (BTC) wallet there is the option to send and receive. In order to accept payments, a merchant should go to the “receive” tab and copy their Bitcoin (BTC) address, which is a long string of letters and numbers that typically starts with the number one.
It is critical to simply use copy and paste when copying a Bitcoin (BTC) address since even if one letter or number is misspelled, the payment goes to a completely different wallet and is lost forever.
An online merchant can then manually send the Bitcoin (BTC) receiving address to a customer via e-mail, text message, or instant messenger. To be on the safe side, a merchant should draft up an official invoice with the Bitcoin (BTC) address on it, which can easily be done via numerous invoice creation apps. This will avoid issues like the customer claiming they sent Bitcoin (BTC) when they did not.
Aside from accepting Bitcoin (BTC) payments manually, Bitcoin (BTC) payments can be automated just like other digital payment methods. There are plug-ins which automate Bitcoin (BTC) payments for WordPress and OpenCart, among the most popular blog an e-commerce platforms respectively. For a business with lots of sales volume, automating Bitcoin (BTC) payments is essential.
Receiving Bitcoin (BTC) Payments In A Physical Store
In a retail store the process of copy and pasting a Bitcoin (BTC) address and sending it to a customer is inefficient. Bitcoin (BTC) can be sent between many popular wallets, including the Blockchain Wallet, via QR codes. A QR code is a square block that looks like a barcode, and it can be used by customers to easily send Bitcoin (BTC) while being assured that the receiving address is 100% accurate.
A store can physically display the QR code corresponding to their Bitcoin (BTC) receiving address right on the checkout counter. Customers simply login to their mobile Bitcoin (BTC) wallets, and they will see an option in the send tab to scan a QR code. The customer scans the QR code, types in the amount to send, confirms the transaction, and then the merchant instantly receives the funds.
Perhaps even better is to have a tablet computer on the checkout counter dedicated to Bitcoin (BTC) payments. This tablet could simply use the Blockchain Merchant app, which generates a custom QR code for the customer to scan. The customer will not have to do anything else besides scan and then hit send, since even the payment amount is included within the QR code.
One very clever trick, if a merchant wants to completely avoid any chances of theft, is to use a QR code for a Bitcoin (BTC) wallet that is not even at the store. Bitcoin (BTC) payments can be sent to offline wallets no matter how far away they are.
Using The Right Exchange Rate
A critically important factor when accepting Bitcoin (BTC) payments is to use the correct exchange rate. Bitcoin’s (BTC) price varies from exchange to exchange and country to country. To be consistent, a merchant should choose one major exchange and stick to it for determining the exchange rate.
It is best for a merchant to choose the biggest exchange for their country’s specific fiat, such as Bitfinex, Bitstamp, Coinbase, or Kraken for the USD. An easy site to use is Bitcoin Ticker, which gives up to the minute Bitcoin (BTC) prices for all of the major USD exchanges.
To determine a payment amount in terms of Bitcoin (BTC), the merchant should simply divide the product’s total cost by the Bitcoin (BTC) price. For example, a laptop which costs $499 would be approximately 0.072318 Bitcoins (BTC) at an exchange rate of $6,900 per Bitcoin (BTC).
A merchant could manually calculate how much Bitcoin (BTC) a customer could send for each specific order based on the exchange rate, or automate the process. Bitcoin (BTC) e-commerce plug-ins necessarily automate this process, since otherwise they would not be able to complete a checkout.
A merchant should always verify that a Bitcoin (BTC) payment plug-in is using the correct exchange rate, and functioning properly in general.
Services Which Convert Bitcoin (BTC) To Fiat To Avoid Market Volatility
One of the only problems when accepting Bitcoin (BTC) payments is the market can be quite volatile, meaning that the value of Bitcoin (BTC) can change quickly between the time it is received by a merchant and the time it is sold for fiat. There are services which completely protect merchants against market losses however via converting Bitcoin (BTC) instantly to fiat.
One of the most reputable examples of such a service is BitPay, which instantly converts Bitcoin (BTC) to fiat and sends a deposit to the merchant’s bank. There is a guarantee that the merchant will receive what they charged the customer minus a 1% fee.
This fee may be worth it for those who do not want to deal with the stress of the rapidly fluctuating Bitcoin (BTC) market. Also, the 1% fee is a much lower rate than most exchanges or Bitcoin (BTC) ATMs charge to convert Bitcoin (BTC) into fiat.
Further, BitPay has a completely integrated Bitcoin (BTC) payment system, meaning merchants just have to download the BitPay app onto a point of sale tablet, and it takes care of creating a wallet, the exchange rate, and the QR code. Basically BitPay is a one stop shop to begin accepting Bitcoin (BTC), with little to no experience or hassle required.
The only downside is that BitPay is a centralized way of receiving Bitcoin (BTC), especially since it is so intimately tied to the banks. This could cause merchants to have their payments frozen by the bank, or their bank account banned.
The most surefire option of accepting Bitcoin (BTC) payments without any problems is to use the Blockchain Wallet, since no identification information is required and it is decentralized. However, then a merchant would need to convert Bitcoin (BTC) to fiat themselves.
A unique idea is for a merchant to have a Bitcoin (BTC) ATM directly in their store, which attracts business and revenues all by itself, and a merchant can immediately convert their Bitcoin (BTC) into physical cash with the ATM. Bitcoin (BTC) ATM companies are rapidly proliferating, and it is likely that any merchant with a physical store who wants an ATM will receive one. Also, a merchant could probably make a deal with the ATM company where they do not have to pay conversion fees when cashing out Bitcoin (BTC).
A merchant could also send their Bitcoin (BTC) to an exchange like Coinbase and then sell it for fiat, although this is basically the same as BitPay except more arduous and costly due to higher fees.
With both Bitcoin (BTC) ATMs and cryptocurrency exchanges there is a delay between depositing Bitcoin (BTC) and being able to sell for fiat, due to exchanges and ATMs requiring confirmations, so it is possible that the price of Bitcoin (BTC) could drop during that time, although it could go either way.
HODLING Bitcoin (BTC) And Keeping It Safe
A merchant may choose to forego converting the Bitcoin (BTC) to fiat, and instead simply hold (aka HODL) Bitcoin (BTC). A merchant may do this because they expect the price of Bitcoin (BTC) to go up in the future, or the merchants want to use Bitcoin (BTC) as a decentralized way of storing money long term. Also, a merchant may want to have some Bitcoin (BTC) on hand so that they can spend it for business purposes.
If a merchant is holding Bitcoin (BTC) long term they must keep their coins safe. The easiest way to store money long term is via a hardware wallet, which can be kept offline. Bitcoin Core can also be used.
Regardless, a merchant should make sure that they have a copy of the private keys or the seed for their Bitcoin (BTC) wallet, and to store this copy in a safe place. A copy of a private key or seed can be done by hand, but must be done with great care since messing up 1 letter or number will make the Bitcoins (BTC) irretrievable.
A unique idea is to use a non-digital polaroid camera to take a picture of the private key or seed. Absolutely do not use digital cameras, and do not store private keys or seeds on a computer or any other device connected to the internet.
Final Thoughts For New Merchants Accepting Bitcoin (BTC)
Perhaps the most decentralized way accepting Bitcoin (BTC) payments, and the technique that has the least risk if done properly, is for a merchant to create a Blockchain Wallet, accept payments with no confirmations to save time but make sure there is a proper transaction fee, set up the payment system in their store or online themselves, and then manually convert the Bitcoin (BTC) to fiat at an ATM or properly store it long term.
However, other merchants may choose to use a completely streamlined and integrated Bitcoin (BTC) payment service like BitPay. The downside is these sorts of services are centralized and closely connected to the bank system, and therefore have similar problems to banks. However, for bigger companies, a service like BitPay would make the most sense.
Regardless, this guide presents a variety of techniques and options for accepting Bitcoin (BTC) payments, whether online or in a physical store, and merchants can mix and match these options to their liking.