BitPay, Foodler, Paymium execs talk bitcoin challenges #Bitcoin2013

How have early-adopting bitcoin merchants overcome stumbling blocks in doing business with a digital currency? A panel of entrepreneurs shared their experiences during a discussion today at Bitcoin 2013.

A panel of both Bitcoin business operators and other merchants convened at Bitcoin 2013 to discuss how to get over the stumbling blocks in the road of becoming early adopters of the digital currency.

Moderated by Mark Edge, a host with the libertarian call-in radio show "Free Talk Live," the panel included Pierre Noizat, co-founder and chief operations officer of Paymium; David Johnston, CEO of Engine Inc.; Stephen Pair, co-founder and CTO of BitPay; and Christian Dumontet, co-founder and CEO of online food ordering service Foodler.

Following are some of the questions and answers from the panel:

Q. Edge: How do you bring together merchants, who tend to be conservative, and early-adopter bitcoin users?

A. Pair (BitPay): If a merchant wants to be totally isolated from bitcoin, they can be. They can set their prices in dollars and get paid in dollars. BitPay becomes just the payment network, and of course it's a great payment network (because of the lack of chargebacks).

Q. Edge: Do you hope that people pay with bitcoins?

A. Dumontet (Foodler): "Yes, the fees are lower, you don't have the chargeback issue.

Q. Edge: Pierre, how are you targeting larger businesses?

A. Noizat (Paymium): The first challenge we have today is to have a working marketplace in Europe, to isolate the merchants from the volatility risk. They need to (be able to) cash out in euros instantly if they want to. That takes a mechanism that to my mind doesn't exist yet. (Note: Noizat's company had a partnership with a financial institution, but it ended in part because the institution was scared by bitcoin's volatility, according to Noizat. The company is now looking for a new banking partner.)

Q. Edge: David, do you find your customers are (reluctant) to try paying in bitcoin?

A. Johnston (Engine Inc.): Most of the people paying us in bitcoin are already in the bitcoin community ... Merchants, I advise that if you are interested in accepting bitcoin, go tap into the bitcoin community (on reddit or bitcoin forums). People in the bitcoin community want the value of their bitcoins to increase. I would recommend that you get involved in the online communities, make announcements there that you now accept it.

Q. Edge: Stephen, since BitPay sees the purchases that go through, so can you tell us which businesses are doing the most transactions with it, and why?

A. Pair (BitPay): We don't necessarily know who the buyer is. A merchant can set up the account with us so BitPay does not see any buyer information. A lot of merchants do share some buyer information with us because we can help them process refunds, etc. There are merchants that process 50, 100 transactions a day, and others that do one.

There's a lot of marketing value to announcing that you're accepting bitcoin, a lot of them do it for that purpose. Many of them do it because they are supportive of bitcoin and this is a good way for them to accumulate bitcoins. For some of them, bitcoins represent a tiny percentage of their overall sales, so they'll take the whole purchase in bitcoins (instead of converting it to dollars).

Dumontet (Foodler): The largest group of bitcoin customers is here in SF.

Q. Audience member: How can I get vendors in China to accept bitcoins? When I discuss it with them, it sounds like a scam to them.

A. Pair (BitPay): We implemented a billing feature so that merchants can keep a lot of their receivables in bitcoins.

Johnston (Engine Inc.): I thought it was really interesting just a few weeks ago that CCTV (China Central Television) aired that 30-minute documentary on bitcoins ... It's sort of an implied, "This is OK." That may be a great educational tool ... They can take the currency risk out if they want (by instantly converting to their local currency).

Edge (moderator): I think it just comes down to options and variables and growth.

Q. Audience member: I'm looking to build a company (in the US) that's 100-percent bitcoin.

A. Edge (moderator): You're going to have some challenges paying workers in bitcoins.

(Johnston of Engine Inc. says he thinks it would be possible to overcome the challenges. He suggests the questioner hire a consulting firm that will help him with compliance.)

Q. Audience member: It takes time for the bitcoin network to reconcile every transaction. So if you want to accept bitcoins, how long should you wait before and handing over the goods?

A. Pair (BitPay): If it's a bar of gold, wait for six confirmations.

Johnston (Engine Inc.): It's typically an hour to get a full confirmation, but I'm interested in the services popping up that say we can make this instant (using trusted merchants).

Dumontet (Foodler): The amount of computational power needed to falsify a three-confirmation transaction would make it very difficult.

Q. Edge: Do any of you have a recorded case of someone running a fraudulent transaction with BitPay?

A. Pair (BitPay): We had one transaction that didn't confirm, but it was an accident. It's not impossible ... it's been done before. People have (gamed) SatoshiDice (through double-spend fraud).

There's a very good paper that Meni Rosenfeld wrote that analyzes the risk ... It's a risk assessment... depending on the nature of the transaction, how long should you wait to be comfortable. Going out six confirmations is pretty iron-clad. After one transaction, you're pretty safe. If you're shipping something, the six confirmations aren't a concern because you might not ship it in an hour. (With digital goods that cost you little to nothing to (send), it's not really a concern.)

Edge (moderator): The risk of a chargeback through PayPal is comparatively high.

Pair (BitPay): Bitcoin is the most counterfeit-proof form of payment that's ever been created.

Q. Audience member: Are you considering offering discounts to those who pay with bitcoins?

A. Dumontet (Foodler): Yes, absolutely. First off, we don't charge any fees beyond the exchange rate at the time that the order is received, and we would absolutely like to offer a discount (or reward points).

Johnston (Engine Inc.): We currently do offer a discount (of 10-20 percent). We're into the bitcoin community ... we want to drive the adoption. A bitcoin early-adopter is likely to tell other people about products they're using. I'm willing to pay that discount for bitcoin people and I would offer that as a great strategy in general for merchants ... There is a savings -- either split that or give it all back to the consumer.

Q. Audience member: What do you do with the bitcoins after you accept them -- keep them or convert to U.S. dollars?

A. Dumontet (Foodler): In order to pay (our restaurants) we must convert. (Note: none of Foodler's restaurant partners accept bitcoins directly as payment.)

Q. Edge (moderator): What about small-time merchants with only a few transactions a month?

A. Pair (BitPay): Somebody just accepting one payment a month might just want to put their bitcoin address out there ... (BitPay has to help merchants a lot with processing and customer service, Pair says.) Mt. Gox has a bug where it's very easy to send a bitcoin payment three or four times. (Then BitPay has to run the refunds for their customers, Pair notes.)

Q. Audience member: What new tools do you as merchants and vendors want to see?

A. Johnston (Engine Inc.): I have a lot of interest in colored coins (bitcoins given special properties to distinguish them from "regular" bitcoins). There is a real opportunity to use the existing blockchain for more than transactions ... I'm interested in pushing forward the implementation of colored coins. I can take a bitcoin, split it into a thousand fractions, add a little metadata and say this is one share in Company X. Then I can send you a share of Company X from my wallet to your wallet ... The first company that really cracks that for stocks and bonds will be really disruptive.

Dumontet (Foodler): I'd like to see reputation (data) built in to the system.

Pair (BitPay): Deterministic fees, so when you pay from your wallet, your wallet could tell you how big the fee should be to have statistical likelihood of getting into a block within a certain timeframe.