BitPay's New Plan
blog.bitpay.com
blog.bitpay.com
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.
Did they say this, or are you just conjecturing?
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.
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.
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
That's a very insightful comment. Given Jeff Garzik's work modularizing bitcoind and all of their open source work, I can totally see it happening.
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.
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I'm not buying into free + forever.
Companies can build successful businesses around not charging for the core service.
>Hey, everyone! This is BitPay. We know you have a lot of questions so we'll be doing an AMA at 12:00PM EST (today) on r/Bitcoin
[0] http://www.reddit.com/r/Bitcoin/comments/2c510m/bitpays_new_...
Did they check the exchange rate for buying on Coinbase or selling. Coinbase might be playing with the exchange rate too.
If they had any reasonable volume wouldn't it make more sense to stagger their selling? On a long enough timeline it'd probably even out, especially if they did something more clever than "sell X% every Y minutes"
Hell, I'd do it at $6k/month. At which point, they may actually make more that way.
How much money are they going to make from those plans? A grand here and there from the big clients and a hundred bucks from the small clients?
Their annual run rate is at least 6-7 million dollars a year if not more.
I think this is just part of a greater shift in strategy in focusing on becoming the redhat for bitcoin. And thus opening up all their payment processing tech for free.
Pure speculations, but I will not be surprised if they eventually open source their core payment processing as well.
There's really no reason for a merchant not to accept Bitcoin at this point.
I don't much understand why people worry about the "free forever" part, though. Surely, if they become too expensive, you can just switch?
I believe the word you're looking for is liquidity.