PayPal Announces Bitcoin Support
by Jarred Walton on September 23, 2014 8:03 PM EST
It's been a long time in coming, but PayPal announced in a blog post today that they have partnered with BitPay, Coinbase, and GoCoin to allow merchants to accept Bitcoin. This comes just a few weeks after the announcement that businesses working with Braintree would be able to accept Bitcoin, and this is a more direct use of Bitcoin. The support will come via integration in the PayPal Payments Hub, and there is one significant catch: for now this is only supported for merchants in North America. Still, it's at least one small step towards further acceptance of virtual currencies. There are other qualifications to using Bitcoin with PayPal as well.
The blog notes, "To be clear, today’s news does not mean that PayPal has added Bitcoin as a currency in our digital wallet or that Bitcoin payments will be processed on our secure payments platform. PayPal has always embraced innovation, but always in ways that make payments safer and more reliable for our customers. Our approach to Bitcoin is no different. That’s why we’re proceeding gradually, supporting Bitcoin in some ways today and holding off on other ways until we see how things develop."
Interestingly, this comes at a time when the mining phase of Bitcoins and other virtual currencies has largely moved beyond GPUs and onto dedicated SHA256 and Scrypt ASICs. That's good news for gamers and graphics gurus like our own Ryan Smith, as it means we hopefully won't see quite as many GPUs that should be playing games sacrificed in pursuit of cryptocurrency mining. (And yes, I know there are many alt-coins that use other Proof of Work algorithms that haven't been ported to ASICs, but few if any are actually profitable to mine with GPUs at this point.) Scott Ellison of PayPal also notes that PayPal has worked with many merchants selling cryptocurrency mining hardware, but they do not work with pre-orders/pre-sales (i.e. early funding of hardware that has not yet shipped).
Today's announcement and the earlier Braintree announcement mark a clear change in tone from PayPal regarding Bitcoin, as the history of PayPal and Bitcoin has been a bit rocky up until now. Going back a few years, in the early days of Bitcoin PayPal actively took steps to prevent people from using their service to purchase Bitcoins. Others have reported bans from PayPal and closed accounts for dealing in Bitcoins. Obviously the inability to roll back purchases made via Bitcoin is a risk, and companies like Coinbase and BitPay now have services in place to mitigate some of the risks. Regardless, with sites like Newegg.com, TigerDirect.com, Overstock.com, and others all beginning to accept Bitcoin as a viable method of payment, it looks like PayPal has decided to join the club.
While there are still plenty of naysayers when it comes to Bitcoins and cryptocurrencies in general, this is great news for Bitcoin proponents as integration with PayPal opens the doors for thousands of small shops to begin working with Bitcoin.
Source: PayPal
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bsim500 - Friday, September 26, 2014 - link
Jarred, Bitcoin is as intrinsically worthless as the US Dollar. There's nothing "backing" it other than faith that others will continue using it as "money" (the "hashes" that are calculated merely guarantee that a Bitcoin unit is "legally" valid they don't actually give it any "value" - it's like "backing" the US Dollar with anti-counterfeiting US banknote verification machines which exist solely because the US Dollar exists - circular logic).It also has zero intrinsic usage (eg, unlike Gold or Silver's industrial or jewellery uses), and if things turned really bad and the Internet went down (quite easily done by forcibly shutting down ISP's, DNS root servers, physically severing international undersea Internet cables with submarines or even continued national electricity outages) it's value & tradability in a state of dire emergency is instantly zero. The fact you can only create 21m units (preventing inflation) doesn't make it "valuable" in and of itself any more than creating a currency out of 21m pretty seashells or 21m bags of salt.
Bitcoin also suffers from the exact opposite "overswing" vs paper currencies - if you can only create 21m units and they get exponentially harder to "mine", then early units will be more valuable than later units, which can cause runaway DEflation or currency shortages. 21m units divided by 7bn people = a global average of 0.003 units per person ($1.5 per person @ $500 per Bitcoin). There's actually too few units to function as a global currency beyond just a few geeks using it as a novelty item.
At worst, it can actually start to mimic the dynamics of a "pump and dump" pyramid scheme where all you end up with is people trying to "cash in" on "mining" the "easy" units, then when they get harder to "mine", simply dump them onto other buyers on the back of over-hype, then create another "...coin" variant to "mine" the easy money early then then dump that onto other suckers a year later, and keep repeating. That's why there are now so many variants.
The real absurdity of Bitcoin can be summed up this way : There are 13.3m Bitcoins in circulation (up from 11.5m 1 year ago) and they have a value of $412 per coin. That = $5.5bn of total wealth, and 1.6m new Bitcoins created per year (worth $660m). However, Bitcoin costs almost $3bn in electricity alone for mining $800m of new "coins" per year (and the gap widens as Bitcoin's take longer to mine). The Federal Reserve's money creation system may be seriously skewed but it's not half as silly as collectively paying $30 in electricity bills to "mine" $10 value of new "Bitcoins" each year...
If you disagree with that, then I have a $20 note for sale. Just send me €15 Euro's for the note + €30 for the postage to acquire the note - and that's Bitcoin in a nutshell. ;-)
Bit coins' are for those who have a "thing" about the Federal Reserve's inflationary USD, but don't really understand why a heavily deflationary cryto-currency (verging on pyramid scheme dynamics) is just as bad, if not worse, and people are amusingly clinging to it simply because it's the first thing that's come along that's been seen to challenge "the man"...
JarredWalton - Friday, September 26, 2014 - link
By my math you're off by a factor of 10 on the power cost for running the Bitcoin network. Let's call it 9000 MWh per day, or 9 million kWh per day. That's 3,285,000,000 kWh per year and at $0.10 per kWh it's $0.3285 billion per year.While you might make the argument that the rate of BTC generation will decrease, inherently the amount of power used to back Bitcoin will track with the price and rate of generation. If it costs you $10 to mine $5 worth of Bitcoin, you'll shut off your miner -- and in fact, I'd say you'd most likely shut it off when the power cost equals the value of the BTC generated, if not slightly earlier than that.
bsim500 - Friday, September 26, 2014 - link
"According to BlockChain’s Bitcoin Statistics, miners are currently using 98,000 MGW hours or $14 million dollars of electricity a day to mine bitcoins"http://marginalrevolution.com/marginalrevolution/2...
http://www.forbes.com/sites/timworstall/2013/12/03...
"If it costs you $10 to mine $5 worth of Bitcoin, you'll shut off your miner"
People aren't always rational. Hence tulip mania (and every other bubble since...) :-)
Even without that, in order to function as a serious currency you need 3 things : 1. Store of value, 2. Trading stability from day to day (neither inflationary nor deflationary), and 3. Liquidity (enough units that it's actually widely usable beyond a novelty currency without shortages or deflation kicking in). Bitcoin doesn't even meet criteria No. 1 and flat out fails No's 2 & 3. (And even then $1147 to $421 in a single year is a very poor "store of value" compared to virtually every other tangible commodity, the stock market or even other 1st world fiat currencies). That's an equivalent annual inflation rate of 63% in one year. Only basket case 3rd world countries (Iran, Iraq, Argentina, Venezuela, etc) have charts that look like 2013-2014 Bitcoin vs the USD.
If you want to hedge against an inflationary USD, back in reality, you buy precious metals, base metals, real estate, commodities, etc. Real tangible stuff that's "consumed" and not merely traded as a speculative bubble or non-tangible good. As an "emergency currency", you wouldn't buy anything you couldn't hold in your hand and use without electricity or the Internet. And as a "safe haven from the evil Fed" it's pretty comical. The key to seeing the problem is not "BC vs USD" - it's BC vs relatively static commodities, and the Bitcoin bubble is obvious when you Google "Silver vs Bitcoin chart" or even "price of wheat in Bitcoins" and you'll see exactly what the problem is. Imagine your local baker selling $1.50 bread in 2011 for $3,415 in 2013 then $1,440 in 2014, etc, and it's not difficult to figure out why most places (inc Paypal) who "accept Bitcoin" are still pricing everything in USD's and not actually pricing anything in Bitcoins (as you would a proper alternative currency - see Dollarization in 3rd world countries for many examples)). And that's why Bitcoin isn't a currency, it's merely an alternative method of digital payment for goods that are and will continue to be still denominated in USD's.
MrTeal - Friday, September 26, 2014 - link
Those numbers are wrong. The vast majority of the network is mining on equipment in the 1J/GH range. At the current network speed of 250PH/s, that's around 250MW, or $220M/yr @ $0.10/kWh.That's also not taking into account that most of the new massive mining farms are going into locations like Iceland, eastern Washington, etc where the cost of electricity is significantly less than $0.10/kWh.
Jaybus - Friday, October 3, 2014 - link
<quote>if you can only create 21m units and they get exponentially harder to "mine", then early units will be more valuable than later units, which can cause runaway DEflation or currency shortages.</quote>Exactly. BC is a pyramid scheme scam propagated by the math geeks who started it. Does anyone really believe that the governments of the World are going to hand over control of currency for any reason whatsoever?
Btw, the units don't matter. We can always use milibitcoins or microbitcoins as standard units.
I don't think anyone actually knows if there is a mathematical maximum number of BCs, just as nobody knows whether or not the number of prime numbers i finite. The estimates of BC count are based on computing power and the fact that mining gets exponentially harder and harder. So there are two possible scenarios. There indeed is a ceiling, or maximum theoretical number of bitcoins, in which case we will soon be dealing with a fixed number of bitcoins and so massive deflation. The other possibility is that there is no theoretical limit and a future quantum computer will create massive inflation.
Dumb idea for the World. Great idea for the early adopters who have gotten to fleece the wannabes. As I said, it is a clever pyramid scheme.
If nothing else, BC is doomed simply because there is no way governments will allow control of their currencies to be usurped.
Notmyusualid - Friday, September 26, 2014 - link
This is amazing news.Hopefully a EU rollout is not too far behind.
The ability to cut out the banksters profit when I make my *MANY* international transactions almost makes me weep with joy.
And don't forget the inability of corrupt governments to adjust the value of Bitcoin too.
What does worry me, is that people are able to make any money at all from mining - that money has to come from SOMEWHERE. But I'm lead (wrongly?) to believe that is is almost insignificant.
I once tried to buy a Halcro amplifier from the USA, sent near $10k via my bank, got ONE DIGIT wrong on the receivers address details, and despite having correct swift etc, correct bank addresses - my bank charged me to SEND it, took a spread on the exchange, the foreign bank refused it, took a spread on converting it back, and I was out HUNDREDS of pounds.
I was so angry with the banks, I cancelled my amplifier order (much to my pain now). They could have called me (I have a personal banker), but no, nothing.
Bring down the whole current econimic system I say, and no, I'm not anti-establishment, I just know enough to recognize that things are not working well as they are.
Bitcoin - I salute you.
vision33r - Friday, September 26, 2014 - link
This may allow scammers to sell something on ebay and transwer money into bitcoin and then run away.Notmyusualid - Friday, September 26, 2014 - link
Bitcoin transactions are not anonymous, though the FBI / insert other government agency here /etc would really like the general public to keep believing so...xaml - Friday, September 26, 2014 - link
The only justification to use such a questionable, shady and unnecessary additional payment form is a lack of responsibility. Therefore, say no to it!The Von Matrices - Sunday, September 28, 2014 - link
I agree, we should say to to PayPal.