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
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.
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.
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.
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