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Do businesses that accept bitoins for payments typically immediately cash it out on exchanges or do they actually carry the "FX" risk? edit: since MtGox only c

Do businesses that accept bitoins for payments typically immediately cash it out on exchanges or do they actually carry the "FX" risk? edit: since MtGox only charges a fixed %age fee for transactions, automating a conversion into USD wouldn't cost any more than doing periodic larger transactions (other than the development and maintenance cost of such a system

deleted 14y ago
[deleted]
barmstrong 14y ago
See "instant exchanges" https://coinbase.com/docs/merchant_tools/payouts https://coinbase.com/docs/merchant_tools/payouts
- hkmurakami 14y ago
  Thx for the info! It'll be interesting to see how the model and fees develop, as Btc exchanges move from the current x% model to the inevitable x% + $y, $y, or $y/share model.
- spoiledtechie 14y ago
  Did anyone else read the fees? 1% and 15cents? That's incredible.... Compared to the 2.9% and 30 cents most other payment processors charge. I will be migrating my start up soon!
  - hkmurakami 14y ago
    I think it's just a reflection of the underlying transaction facilitators (CC processors vs Bitcoin exchanges). The CC processors charge the % + fee, and the services that build on top of that tack on their cut. MtGox charges a % cut (I forget what it is, but it's below CC rates by a lot) and so you tack on your cut on top of it to end up with a lower cost than CC processors. I really do feel that MtGox will move to a higher fee schedule as Bitcoin volume increases, so it'll be interesting to see the convergence of Bitcoin fees vs CC/Stripe/Paypal fees and how processors reconcile the two and balance growth (driven by lower cost) vs immediate profits.
    - mahyarm 14y ago
      That might not happen, credit card fees are usually broken down as so: 1. Receiving Bank Fee 2. Sending Bank Fee (most of the charge) 3. Network fee (visa, mastercard, etc) And a good amount of fraud built into those fees. Fees often vary by fraud risk, with internet and telephone charging ~3% and supermarkets getting around %1 already. Debit cards can be flat fee also.
    - codeulike 14y ago
      I think it's just a reflection of the underlying transaction facilitators (CC processors vs Bitcoin exchanges). And thats one of the reasons Satoshi started Bitcoin to begin with - transactions within the traditional money network have become very complex and expensive. One of the aims of bitcoin is more economically efficient transactions: The cost of mediation increases transaction costs, limiting the minimum practical transaction size and cutting off the possibility for small casual transactions, and there is a broader cost in the loss of ability to make non-reversible payments for non- reversible services. With the possibility of reversal, the need for trust spreads. Merchants must be wary of their customers, hassling them for more information than they would otherwise need. A certain percentage of fraud is accepted as unavoidable. These costs and payment uncertainties can be avoided in person by using physical currency, but no mechanism exists to make payments over a communications channel without a trusted party
    - rmc 14y ago
      As bitcoin volume increase, miners will probably start charging transaction fees themselves. So that'll increase.
      - slapresta 14y ago
        That's not how Bitcoin works. Miners can't charge me anything. They can choose to not process my transaction if it doesn't have enough fees for them.
        rmc 14y ago
        Sure, it's all optional. But if all the miners are charging a small amount, and you face a choice between "wait a week for the transaction to complete" or "pay 1%", then BitCoin essentially has fees.
  - vidarh 14y ago
    You just wait until they have to take dispute resolution and fraud seriously or face losing business - the fees will increase.
  - makomk 14y ago
    Bear in mind that there are also going to be fees paid by the customer in order to get Bitcoins, unless they're one of the tiny number of people who mine Bitcoins profitably. Those fees are probably going to be enough to bring the total cost close to that of a normal payment processor even with the cheapest options. Also, right now the value of their bitcoins will probably drop by more than 2.9% in the time between them buying the coins and being able to send them.
mseebach 14y ago
Generally (I can't speak for the concrete case), when a business accepts payment in different currencies, it's because they intend to hold that currency, typically because they can settle liabilities in that currency. Pure speculation, but this could simply be a case of OKCupid wanting to support the Bitcoin ecosystem by providing a service that can be paid for directly in Bitcoin, thus raising the attractiveness of accepting Bitcoin as payment, further strengthening the system. To do this, they'll probably have to put the long-term net value of their Bitcoin holdings as zero, but they can probably afford that.
- Evbn 14y ago
  It is far far more likely that they are doing this as a PR/marketing effort: they can get exposure, and new customers who want to spend BTC on something. Not because OKC/Match wante to invest in the BTC system.
goodside 14y ago
Right now, we (OkCupid) don't hold assets in BTC. It's converted immediately to USD, in which we denominate the original prices. The BTC price fluctuates with the exchange rate.
patio11 14y ago
Do businesses that accept bitoins for payments typically immediately cash it out on exchanges or do they actually carry the "FX" risk? People in the Bitcoin community believe that these options are mutually exclusive, but they're not. If you're doing a dual currency transaction in a period of high volatility, somebody is paying for that exchange risk. It's either the customer, the payment processor, or the merchant, or possibly two of them, but it certainly isn't no-one. There were multiple periods today in which Bitcoin fell more than 10% in 15 minutes. If I were insane enough to sell Bingo Card Creator for Bitcoin, and then gave an elementary schoolteacher a quote for 0.42785714285714285714285714285714 BTC ($29.95 at 70 to the dollar), it's entirely possible that in the five minutes of thinking it took to process everything on the screen, the 0.42785714285714285714285714285714 BTC that I received would be worth only $27.81 at market prices. Hmm, that's funny, I just paid 7.1% in transaction fees before paying the transaction fees. (We're obviously operating in a perverse hypothetical world where elementary schoolteachers would both understand that option, have BTC available to spend, and be happy spending them, and where I would consider actually implementing this.) It's possible that the payment processor I was working with would absorb this risk for me, because they hope to keep my business. That would be an extraordinary dangerous decision for them, because they're now running their merchant payments operation as a sideline to currency speculation. (Which I suppose makes them a perfect fit for the Bitcoin community.)
- minimax 14y ago
  To play the devil's advocate, I'll point out that anyone selling in multiple currencies has to deal with hedging fx risk. For example, USDJPY has been pretty nuts thus far in April (not BTC nuts, but intraday swings of 1-2%). If you were 1) very determined to sell in BTC and 2) could buy USDBTC options you could probably sell in BTC and limit your exposure to the fx risk.
  - patio11 14y ago
    I'll point out that anyone selling in multiple currencies has to deal with hedging fx risk Yes, and anyone whose business involves juggling chainsaws has to pay an awful lot for workplace insurance, but Bingo Card Creator doesn't involve chainsaws. Bitcoin proponents love to say "No transaction fees! Can your credit card processor do that?" while perhaps forgetting to mention that the actual mechanism for achieving this involves you juggling chainsaws.

deleted 14y ago

[deleted]

barmstrong 14y ago

See "instant exchanges" https://coinbase.com/docs/merchant_tools/payouts https://coinbase.com/docs/merchant_tools/payouts

hkmurakami 14y ago
Thx for the info! It'll be interesting to see how the model and fees develop, as Btc exchanges move from the current x% model to the inevitable x% + $y, $y, or $y/share model.
spoiledtechie 14y ago
Did anyone else read the fees? 1% and 15cents? That's incredible.... Compared to the 2.9% and 30 cents most other payment processors charge. I will be migrating my start up soon!
- hkmurakami 14y ago
  I think it's just a reflection of the underlying transaction facilitators (CC processors vs Bitcoin exchanges). The CC processors charge the % + fee, and the services that build on top of that tack on their cut. MtGox charges a % cut (I forget what it is, but it's below CC rates by a lot) and so you tack on your cut on top of it to end up with a lower cost than CC processors. I really do feel that MtGox will move to a higher fee schedule as Bitcoin volume increases, so it'll be interesting to see the convergence of Bitcoin fees vs CC/Stripe/Paypal fees and how processors reconcile the two and balance growth (driven by lower cost) vs immediate profits.
  - mahyarm 14y ago
    That might not happen, credit card fees are usually broken down as so: 1. Receiving Bank Fee 2. Sending Bank Fee (most of the charge) 3. Network fee (visa, mastercard, etc) And a good amount of fraud built into those fees. Fees often vary by fraud risk, with internet and telephone charging ~3% and supermarkets getting around %1 already. Debit cards can be flat fee also.
  - codeulike 14y ago
    I think it's just a reflection of the underlying transaction facilitators (CC processors vs Bitcoin exchanges). And thats one of the reasons Satoshi started Bitcoin to begin with - transactions within the traditional money network have become very complex and expensive. One of the aims of bitcoin is more economically efficient transactions: The cost of mediation increases transaction costs, limiting the minimum practical transaction size and cutting off the possibility for small casual transactions, and there is a broader cost in the loss of ability to make non-reversible payments for non- reversible services. With the possibility of reversal, the need for trust spreads. Merchants must be wary of their customers, hassling them for more information than they would otherwise need. A certain percentage of fraud is accepted as unavoidable. These costs and payment uncertainties can be avoided in person by using physical currency, but no mechanism exists to make payments over a communications channel without a trusted party
  - rmc 14y ago
    As bitcoin volume increase, miners will probably start charging transaction fees themselves. So that'll increase.
    - slapresta 14y ago
      That's not how Bitcoin works. Miners can't charge me anything. They can choose to not process my transaction if it doesn't have enough fees for them.
      - rmc 14y ago
        Sure, it's all optional. But if all the miners are charging a small amount, and you face a choice between "wait a week for the transaction to complete" or "pay 1%", then BitCoin essentially has fees.
- vidarh 14y ago
  You just wait until they have to take dispute resolution and fraud seriously or face losing business - the fees will increase.
- makomk 14y ago
  Bear in mind that there are also going to be fees paid by the customer in order to get Bitcoins, unless they're one of the tiny number of people who mine Bitcoins profitably. Those fees are probably going to be enough to bring the total cost close to that of a normal payment processor even with the cheapest options. Also, right now the value of their bitcoins will probably drop by more than 2.9% in the time between them buying the coins and being able to send them.

mseebach 14y ago

Generally (I can't speak for the concrete case), when a business accepts payment in different currencies, it's because they intend to hold that currency, typically because they can settle liabilities in that currency. Pure speculation, but this could simply be a case of OKCupid wanting to support the Bitcoin ecosystem by providing a service that can be paid for directly in Bitcoin, thus raising the attractiveness of accepting Bitcoin as payment, further strengthening the system. To do this, they'll probably have to put the long-term net value of their Bitcoin holdings as zero, but they can probably afford that.

Evbn 14y ago
It is far far more likely that they are doing this as a PR/marketing effort: they can get exposure, and new customers who want to spend BTC on something. Not because OKC/Match wante to invest in the BTC system.

goodside 14y ago

Right now, we (OkCupid) don't hold assets in BTC. It's converted immediately to USD, in which we denominate the original prices. The BTC price fluctuates with the exchange rate.

patio11 14y ago

Do businesses that accept bitoins for payments typically immediately cash it out on exchanges or do they actually carry the "FX" risk? People in the Bitcoin community believe that these options are mutually exclusive, but they're not. If you're doing a dual currency transaction in a period of high volatility, somebody is paying for that exchange risk. It's either the customer, the payment processor, or the merchant, or possibly two of them, but it certainly isn't no-one. There were multiple periods today in which Bitcoin fell more than 10% in 15 minutes. If I were insane enough to sell Bingo Card Creator for Bitcoin, and then gave an elementary schoolteacher a quote for 0.42785714285714285714285714285714 BTC ($29.95 at 70 to the dollar), it's entirely possible that in the five minutes of thinking it took to process everything on the screen, the 0.42785714285714285714285714285714 BTC that I received would be worth only $27.81 at market prices. Hmm, that's funny, I just paid 7.1% in transaction fees before paying the transaction fees. (We're obviously operating in a perverse hypothetical world where elementary schoolteachers would both understand that option, have BTC available to spend, and be happy spending them, and where I would consider actually implementing this.) It's possible that the payment processor I was working with would absorb this risk for me, because they hope to keep my business. That would be an extraordinary dangerous decision for them, because they're now running their merchant payments operation as a sideline to currency speculation. (Which I suppose makes them a perfect fit for the Bitcoin community.)

minimax 14y ago
To play the devil's advocate, I'll point out that anyone selling in multiple currencies has to deal with hedging fx risk. For example, USDJPY has been pretty nuts thus far in April (not BTC nuts, but intraday swings of 1-2%). If you were 1) very determined to sell in BTC and 2) could buy USDBTC options you could probably sell in BTC and limit your exposure to the fx risk.
- patio11 14y ago
  I'll point out that anyone selling in multiple currencies has to deal with hedging fx risk Yes, and anyone whose business involves juggling chainsaws has to pay an awful lot for workplace insurance, but Bingo Card Creator doesn't involve chainsaws. Bitcoin proponents love to say "No transaction fees! Can your credit card processor do that?" while perhaps forgetting to mention that the actual mechanism for achieving this involves you juggling chainsaws.