BitPay Won’t Use Bitcoin Alternatives For Payment Systems Despite Scaling Issues

While many expected bitcoin to replace the use of credit cards and replace the banking system in 2013, the cryptocurrency has faced challenges as a payment system since it has not been able to safely accommodate its growth, according to Nasdaq.

Bitcoin is currently dealing with some issues as a payments platform, mainly because the system is experiencing growth at a rate faster than it can safely scale.

Stephen Pair, a co-founder of BitPay, said customer service inquiries have increased due to transaction confirmation delays. BitPay has also witnessed higher transaction fees for its own transactions, causing the company to stop covering bitcoin network fees on invoice payments.

BitPay Responds To Payment Delays

BitPay has become more creative in designing user experience for delayed payments. Delays are often an opportunity to explain the way the bitcoin network works and direct people to wallets with dynamic transaction fees.

Copay and BitPay wallet users have largely escaped transaction delays since their wallets dynamically calculate transaction fees.

One method for addressing transaction delays and increased transaction fees is the Lightning Network. Its caching layer would allow for improved versions of features such as immediate transactions at no cost that people have associated with bitcoin.

Pair said BitPay is exploring all possible scalability solutions. He is not surprised bitcoin has to scale. He is surprised that while short-term throughput bumps were expected, changes for on-chain throughput were expected a few years ago.

The slow pace of increased throughput was not foreseen, he said. A scalability limit will be reached at some point that will be addressed by solutions like Lightning Network.

BitPay Will Stick With Bitcoin

BitPay has studied alternatives to the bitcoin blockchain and concluded none are compelling, Pair said.

Some observers suspected BitPay and similar companies might switch from bitcoin to altcoins or permissioned blockchains on account of the high U.S.-dollar-denominated fees and network congestion.

While Pair acknowledged there are scaling issues, the company continues to witness more consumers using the existing technology.

He said bitcoin is the most cost effective, secure and fast means of value transfer on the Internet.

BitPay sees itself as a payment innovator. Consumer and business-to-business payments are no different on BitPay’s platform and the bitcoin network.

Tony Gallippi, BitPay co-founder, noted at the recent Distributed: Markets fireside chat that the company’s transaction count more than doubled in the last year. Much of the growth was in digital goods and video games.

Gallippi said the Steam digital distribution platform’s acceptance of bitcoin was a source of growth for BitPay, and that there is much overlap between the bitcoin and gamer communities.

Pair said BitPay is also witnessing growth in bitcoin’s use for B2B money transfers. He said bitcoin is a fantastic solution for such transfers, particularly for global payments where bank transfers are inefficient and slow.

Also read: BitPay CEO on safe bitcoin scaling: soft fork first, hard fork next

B2B Payments Embrace Bitcoin

B2B companies are using the BitPay platform for billing settling international payments with a lot of suppliers, Pair said during the fireside chat.

Gallippi noted there has been an increase in bitcoin’s use for payment disbursements.

He said it is not easy to pay people on a regular basis in the majority of countries. It is hard to pay people in places where a lot of apps are being developed, such as India, Africa, the Middle East and Eastern Europe.

For app stores or digital marketing companies, Gallippi said BitPay can receive one payment from the business and then disburse payments in bitcoin to all of the endpoints.

BitPay built the product for its need to pay its employees in bitcoin, Pair said. There are now a lot of Fortune 500 companies asking BitPay to solve similar payment issues.

Featured image from Shutterstock.

Bitpay CEO on Safe Bitcoin Scaling: Soft Fork First, Hard Fork Next

Over the past few months, Bitpay co-founder and CEO Stephen Pair has been advocating for a safe and non-contentious method to scale the Bitcoin network. In an informative blog post, Pair revealed his perception of a cautious approach to bitcoin scaling.

Basically, Pair believes that a soft fork-based scalability solution is the most beneficial for the network and community. It eliminates the possibility of a hard fork, which will inevitably lead to a chain split at this phase of bitcoin development. While some hard forks such as the Ethereum forks executed in late 2016 allowed the network to facilitate changes in a safe manner, with the current tension between Segregated Witness (Segwit) and Bitcoin Unlimited communities, a split chain is inevitable if a hard fork breaks out.

He wrote:

“One very important challenge we must resolve is how to successfully upgrade Bitcoin in a safe, deliberate and non-contentious manner. And we must be able to upgrade Bitcoin because no organism can live in its own waste products.”`

For Pair, the optimal scaling method is to start with the activation of a soft fork to enforce new rules into the network. Then, the developers can initiate another soft fork to deprecate the use of the old block and lastly, execute a non-contentious hard fork to drop the old block and adopt the secondary block as the primary block structure.

The standard threshold for a soft fork implementation is a 95% acceptance from node operators and from the network. For Segwit to pass the network adoption phase of activation, 95% of the network apart from the miners must upgrade their nodes to support Segwit.

Although Pair didn’t specify which scaling solution he is in favor of–Copay, bitcoin wallet platform of Bitpay, does support Segwit–Pair clarified that the most secure and viable approach to scaling the bitcoin network is to adopt a soft fork first, i.e. Segwit, and move on from there.

If Segwit is substituted into Pair’s safe and non-contentious upgrade progress, the roadmap for development will be as follows:

1. Segwit will be implemented and accepted by the network or node operators
2. Miners will adopt Segwit, rejecting blocks that aren’t valid or applicable to Segwit
3. Second soft fork is executed to deprecate use of the old block
4. A hard fork is executed to drop the old block

On March 19, major global bitcoin exchange Bitfinex announced the launch of prediction market for “chain split tokens,” enabling traders to place bets on the probability of the Bitcoin Unlimited hard fork from being executed. The announcement from Bitfinex signalled the likelihood of Bitcoin Unlimited on being forked.

Bitfinex stated:

“Today, Bitfinex proudly introduces trading on Chain Split Tokens (CST). The first such product of its kind, CSTs will allow Bitfinex customers to speculate on future fork events of the Bitcoin blockchain, specifically, the potential fork between Bitcoin Core and Bitcoin Unlimited. We are designating these CSTs as BCC (Bitcoin Core) and BCU (Bitcoin Unlimited).”

However, the vast majority of the industry’s leading exchanges including Bitstamp, Bitfinex and BTCC are planning to consider Bitcoin Unlimited as an alt-asset, not as bitcoin. Therefore, even in the event of a Bitcoin Unlimited hard fork, the Bitcoin Core development team as well as the community can still pursue the scalability roadmap presented by Pair.

Featured image from Shutterstock.

BitPay Will Add Miner Fees to Invoices Citing High Bitcoin Transaction Costs

BitPay, the global bitcoin payment service provider, has announced that it will adding a fee to each invoice, in light of high network transaction fees.

In a BitPay blog, the company announced that from March 23, a new fee will be added to each BitPay invoice to cover the increased transaction costs; however, the blog adds that merchants’ fees won’t be affected by this change.

For purchases paying a BitPay invoice, ‘the automatically calculated (based on current network fee estimates) network cost will be shown as a part of the total amount to be paid.’

However, if the network cost is higher than the purchaser is willing to pay, the payment provider states that the purchaser can ‘allow the invoice to expire without paying it.’ It is still free, though for payees to receive money through the invoice service.

BitPay said:

Until now BitPay has covered the network costs for combining and sweeping Unspent Transaction Output’s (UTXO) from BitPay invoice payments.

BitPay revealed that Bitcoin’s network mining fees crossed $50,000 in February, forcing the company to increase the minimum invoice amount from $0.04 to $1.

BitPay adds that this is unlikely to have a significant impact on most payments made through the service provider.

However, we realize that for many users, this network cost may make smaller payments uneconomical. The Bitcoin network’s growth and its growth constraints are forcing innovation around this problem, particularly here at BitPay.

Bitcoin’s Network Issues

The ongoing debate surrounding the blockchain’s transaction problems has increased of late.

Just last month it was reported that for the first time ever Bitcoin was running over capacity as transaction backlogs become a common problem. At one point, it was reported that around 900,000 Bitcoin transactions were waiting to clear as they remained stuck on the blockchain.

With potential solutions to Bitcoin’s network issues circulating, discussions about a possible Bitcoin split are looming. As a result, the price of Bitcoin dropped below $950 over the weekend before recovering to $1,043.

Much of the Bitcoin community is turning to Bitcoin Unlimited (BU) as a possible solution. At its highest, it reached 40 percent support; however, those in the SegWit camp are backing it believing it to hold the answer to the network problem.

How long it will take before a decision is reached remains to be seen, but if a hardfork does take place, it will effectively split the currency into two, and who knows how that will impact the currency’s price.

Featured image from Shutterstock.

Bitcoin Commerce Increases by 1,800% at BitPay

Bitcoin adoption continues to increase with Sonny Singh, Chief Commercial Officer at BitPay, revealing in a public statement that BitPay has experienced a 1,800% increase growth in volume.

Some of this growth is due to affiliate networks, like Amazon or Google AdWords, which have increasingly adopted bitcoin, according to Singh, for a variety of reasons. Primarily, the dispersed nature of affiliate network participants across the globe makes fiat transfers difficult, especially if credit cards are not available or fast bank transfers, such as SEPA, are not an option.

With bitcoin, a payment can be sent to someone in USA just as easily as to someone in Africa, with the receiver requiring no bank account. In most countries, receivers can then exchange them on a local bitcoin exchange or spend them directly with merchants that accept bitcoin. Moreover, according to Singh:

“Bitcoin is far less expensive than credit cards, with zero chargebacks and no chance of identity theft. Because of this, bitcoin processors like BitPay can offer merchants services fees of on average between 1% – 2%, while credit card transactions costs range from 2% – 6%. Since credit card fees don’t cover the merchant’s own cost for losses to chargebacks or payment fraud, credit cards stack up even more poorly when compared to bitcoin.”

An interesting example is Turkey which has recently blocked merchants from using PayPal. The result, “a dramatic increase in advertisers and affiliates paying and receiving bitcoin,” according to Singh, which cannot be directly censored. Increasing bitcoin’s popularity in Turkey for online payments and general commerce.

More widely, from Brazil to Argentina, India and China, bitcoin is finding wider adoption, especially when it concerns sending or receiving global payments, as these countries lack an efficient banking infrastructure. Bitcoin, replacing the need for a bank account, allows them to join the global economy in an efficient manner with transfers in mere minutes, providing developing countries with a way to leapfrog from an outdated banking system to a 21st century global payment network.

Images from Shutterstock and BitPay.