How to pay with cryptocurrency

A quick guide to processing payments

Introduction

Cryptocurrency payments are becoming increasingly popular. For a long time cryptocurrencies have been used mainly for investment purposes, but now we can observe that some countries are introducing crypto assets as a legal tender. Sellers are allowed to accept payment in a specific cryptocurrency if customers want to pay for a product or the service in this way. The first country that introduced Bitcoin as a legal tender was Salvador, and the main argument for that was to reduce the cost of inter-country transactions.

The first Bitcoin transaction took place on May 22, 2010. That was when Laszlo Hanyecza bought two pizzas from Papa John’s and he paid as much as 10,000 Bitcoin for them. More and more companies are introducing the ability to pay with Bitcoin. If Bitcoin is not an official means of payment in your country, you can check which establishments allow such payments here: https://coinmap.org/.

What benefits do cryptocurrencies provide us?

• Security

Bitcoin is a network that has not yet been hacked. All transactions are visible on a blockchain, so we know precisely when and where the funds were sent. Transactions cannot be reversed, so more caution is required when giving addresses and amounts. There is no distinction for international transfers, so you do not pay additional fees. There is no intermediary, so there is no possibility that someone like a bank will forbid you to withdraw your funds. Accepting cryptocurrencies as a payment method can be beneficial for the merchants. It has several advantages over traditional forms of payment.

• Lower transaction fees

In general, cryptocurrency transfers require smaller fees than debit or credit card payments. Most bitcoin transactions cost between 0 and 1 percent, whereas the average credit card transaction fee is between 1.5 and 3.5 percent.

• Faster transfers and funds availability

Cryptocurrency transfer times are measured in seconds or minutes and transferred funds are immediately available on the merchant wallet.

• Global

Cryptocurrency is global and cross-bordered and no currency conversion process takes place.

Cryptocurrency payments from the customer’s perspective

An example of Bitcoin shopping may look as follows. You walk up to the checkout and want to pay for the chocolate. To do that, you need to have a cryptocurrency wallet installed on your smartphone with the access to funds. The seller also has a wallet on his device, where he enters the amount and generates a QR code containing information about the address of the seller and the amount to be sent. Then, using your wallet, you scan the QR code with your smartphone and make the transaction. The merchant sees on his screen that the transaction was successful, and that’s it. Modern blockchains like Solana, Tendermint-based Blockchains, Ethereum 2.0, or the Lightning Network (a payment protocol layer built on Bitcoin) are designed to enable fast transactions between network participants and solve blockchain scalability problems.

Apart from using a crypto wallet, there are other ways to use cryptocurrencies as a means of payment. The most versatile of these is to use a special card. For example, using a Binance Visa Card, you can pay with your cryptocurrencies anywhere Visa is supported. During the payment, cryptocurrency is exchanged for fiat currency, so the seller doesn’t even know that you paid for his product with cryptocurrencies. He will receive the fiat currency on his account. Then, the funds travel within the same exchange, often without changing their location in the network, while reducing transaction costs. The advantage of this solution is also a large selection of cryptocurrencies, which we can pay with. The provider, however, charges us a commission.

Additionally, in most countries, after cryptocurrency exchange for the fiat currency, we have to pay taxes as if we got rid of securities. Such cards often offer cash back for the purchases. In addition, we do not need to have such a card physically, and we can use a smartphone for payment. Moreover, we can also use such a card to withdraw funds from ATMs.

Accepting payments in cryptocurrencies

In the transaction described earlier, the vendor accepted payment using a wallet. It may work well for a one-person company, but it has a few disadvantages when try to adapt it to the larger business. The very first problem is that sometimes it’s required to do the refund to the customer and someone can do this with the access to our wallet, which is problematic considering many employees. In addition, transactions on the blockchain are transparent. For example, someone from a competitor can track our turnover knowing the address of our wallet. The matter becomes even more complicated if a company has many points of sale or conducts sales on the Internet. New problems arise, such as tracking transactions and linking orders to payments. Using cryptocurrency wallets requires some familiarity with the world of cryptocurrencies and adds to our concerns if we want to convert cryptocurrencies into fiat currencies. All these problems can be solved by introducing some automation. We can create the right software for this or use ready-made solutions. Payment gateways come to our aid.

Overview of payment gateway providers

A payment gateway is the software that facilitates the acceptance of payments in crypto assets. These are often ready-made plug-ins and libraries we can use on our website. For example, we can place a ready-made button on the page, which enables payments with cryptocurrencies. It is also possible to automatically send invoices to the client’s email. There are also applications for phones which turn them into terminals. Using such a service relieves us of the entire setup of the infrastructure needed to accept multiple assets and automatically convert them into fiat currencies. We also don’t have to worry about security.

The offers differ by the supported cryptocurrencies, countries and fiat currencies into which our crypto assets can be automatically exchanged. Below you can read a short overview of the providers’ offerings.

CoinGate

CoinGate offers more than 70 cryptocurrencies and serves companies from over 70 countries. When you choose CoinGate, you will receive multiple withdrawal options. It is possible to withdraw the crypto assets you receive. For example, if you receive Ripple (XRP), you can request a withdrawal to a provided third-party wallet. Coingate allows you to convert the cryptocurrency you receive into the fiat currency of your choice without any hassle. You can settle one cryptocurrency for another — Received Bitcoin (BTC)? Convert it into Ethereum (ETH) or into any other cryptocurrency you like.

Once you’ve registered with CoinGate, you can start sending cryptocurrency bills immediately without spending any extra time on setup or coding. To do so, all you need to manage is add the payer’s email address and set the amount and currency you want to receive.

CoinGate’s merchant integration tools allow you to implement cryptocurrency payments into virtually any online business. A simple and functional dashboard will enable you to track your orders, adjust invoices, withdraw funds and even trade the cryptocurrencies you earn.

CoinGate charges a 1% fee on all transactions.

Coinbase Commerce

Coinbase Commerce is a tool created by Coinbase — one of the largest cryptocurrency exchanges in the world. It can be used as a payment gateway, as well as a regular exchange. It works globally and allows you to accept payments from customers worldwide. It supports the ten most popular cryptocurrencies BTC, ETH, USDC, USDT, APE, BCH, DAI, DOGE, LTC and SHIB. It allows you to manage your private keys independently and fully control your funds. Thanks to Coinbase, you can easily bill and invoice your clients.

Fees are 1% of each transaction and it is possible to convert received cryptocurrencies to cash or USD Coin. It facilitates instant currency conversion from Bitcoin into fiat currency without the merchant having to request a withdrawal.

You can integrate your site directly with powerful e-commerce platforms such as Shopify or WooComerce.

Bitpay

BitPay converts cryptocurrencies to your preferred currency and adds the total payment amount to your next BitPay account settlement. The funds are then deposited into your bank account or cryptocurrency wallet. Bitcoin, Bitcoin Cash, Dogecoin, Ether, Litecoin, Gemini US Dollar, Circle USD Coin, Paxos Standard USD, Binance USD, Dai, Wrapped Bitcoin, Shiba Inu and Ripple settlements are supported in 240 countries. You can choose to take any percentage of your payment in one of these currencies.

There is a possibility to accept blockchain payments in several ways. One is online payments, which are simple and convenient for customers on any device. Merchants can use BitPay’s retail payment tools alongside traditional point-of-sale systems to create a faster, seamless checkout experience for customers and staff.

Transaction fees start at 1% and are based on the risk of the business in question.

Non-profit organizations can solicit donations via donation buttons and hosted donation pages.

NowPayments

The service offers 70+ cryptocurrencies and fiat conversion. In addition to the top cryptocurrencies, NowPayments currently accepts more than 50 cryptocurrencies. NowPayment has the smallest transaction fees on the market, starting at 0.4%, which depends on the value of the assets flowing through your business. It also offers a non-custodial solution. It means that they do not hold your funds at any time, and they go from your client directly to you. You can receive payments in cryptocurrencies and withdraw fiat and also vice versa.

Automatic coin conversion is also on offer. Customers can pay in any currency, and you will always receive the one you set.

In addition to the support team, you can use a dedicated account manager. Thanks to this you can solve any problems or questions with one person.

For payment integration, they offer tools such as invoices, API, plug-ins and custom solutions tailored to your specific needs.

Summary

As you can see, payments using crypto assets have many advantages. New solutions are being developed in response to existing problems such as high transaction costs and difficulty of use. The adoption of cryptocurrencies is very high and payments using them may be expected in the future, as they solve many of the problems of the current monetary system. Their regulation will show whether people want to use them for everyday payments and the market will verify.

Words by Oskar Więckowicz, Blockchain Engineer at Altimetrik Poland

Copywriting by Kinga Kuśnierz, Content Writer at Altimetrik Poland