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Taking Volatility Out of Bitcoin For Web Hosts

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A major question facing web hosts is whether or not to accept cryptocurrency Bitcoin.  At first what seemed like a novelty now has the potential to become money of the Internet. The peer-to-peer decentralized digital currency is being embraced by many major merchants like WordPress, Reddit, Namecheap, and Overstock.

Web hosts have slowly begun allowing Bitcoin as a pricing option. Check out over 50 hosting options at the Bitcoin Wiki page.

There are numerous reasons why web hosts would be interested in Bitcoin. For one, it opens up a whole new group of customers that credit card companies and Paypal have shunned. Paypal only accepts 25 currencies (not BTC yet), while there’s over 180 world currencies.

Also, most bitcoin transactions carry zero processing fee, compared with the 3.5 percent that credit cards change. Naturally this leads to higher profit margins and more competitive pricing.

Conversely, the cons for accepting Bitcoin are plenty. Bitcoin has been viewed by some as the digital drug currency, thanks to its anonymity. This can attract nefarious clientele who may disappear easier, or spammers hosting illegal content.

Dennis Henry, HostDime’s Vice President of Operations, may have a solution to this problem.

HostDime is very excited about the promise BTC and other cryptocurrencies offer, but we are also worried about potential risks. We are working to offer Bitcoin payment via one of our larger international branches in the next six months as a sort of ‘beta’ for our acceptance of the currency. We are putting limits in place such as requiring clients to establish a billing history using conventional currencies in order to lessen our threat exposure. We hope to see great results from this beta in order to expand BTC acceptance among our international branches, and possibly our US operations.”

The most frightening aspect for merchants is the volatility of Bitcoin and the fluctuating price. The currency has recently experienced a roller coaster ride of worth, starting around $13 in January 2013, and then climbing above $1000 10 months later. It soon dropped to around $800 where it continues to hover today after a few months of stability.

If a company priced their products in Bitcoin, they would have to change their prices daily. This is a common Bitcoin myth; businesses don’t price their products in this way.

From a merchant’s point of view, the price of Bitcoin doesn’t matter. Luckily there are services like Bitpay that immediately convert Bitcoin into the currency of your choice. The merchant never actually holds Bitcoin, so the Bitcoin price at purchase makes no difference. You don’t even need a Bitcoin wallet.

BitPay is an electronic payment processing company that enables businesses to accept cash and allows shoppers to make purchases using Bitcoin. BitPay offers WHMCS integration for processing Bitcoin payments, and guarantees the exchange rate at the time of purchase.

When asked how Bitpay handles price volatility on their end, here is their response: “When the invoice is created, the rate is locked in for 15 minutes. So buyers and merchants do not assume any volatility as long as the transaction can be paid within the time window.  This allows commerce to take place in a volatile market, with no risk to the merchant of the volatility. BitPay assumes the risk for up to 15 minutes. Although most people pay within the first 1-2 minutes, so the risk window is shorter.”

Other Bitcoin merchants need multiple block confirmations, which can take an hour or longer. Bitcoin has seen a price decrease of 20 percent within just an hour, so an instant guaranteed price of purchase gives businesses the confidence they need.

As a web host pondering BitCoin acceptance, ask yourself if the benefits outweigh the hazards.

If you accept Bitcoin directly and don’t plan to convert it, you take on added risk due to price volatility. You will see high gains if the Bitcoin value continues to move upward, or you could see that money disappear if the Bitcoin bubble breaks.

Bitcoin is a young currency that is still unpredictable and controversial, but thanks to services like Bitpay, it has gotten less risky for business owners.

jaredsmithAbout the Author: Jared Smith is a guest blogger for the WHIR. You can read more of his technology articles at HostDime.com/Blog. He’s also the creator of music publication TooGoodForRadio.com, which offers over 100 free songs every month. He loves new technology, good music, bad movies, basketball, and inspired writing.

 

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