The Ins and Outs of Bitcoin for Merchants
Last updated on 2018-07-23
About the Book
There’s a lot of material out there about Bitcoin, but not very much of it deals with the practical realities of using it as money. Most publications emphasize what Bitcoin is currently trading at, and how cryptocurrencies may evolve even further as an asset class in the future. This e-book depicts little-known facts about accepting cryptocurrency for business including the practical implications associated to the Bitcoin blockchain and its digital ecosystem, it will arm you with basic information, so you can put virtual realities into a real-world context.
Chapter by chapter, the content offers deep insights into businesslike scenarios leaving readers with a decision grid that assists with guidance for IT engineers and project managers of technology companies who have an interest in integrating this epoch-making innovation into their applications.
The ultimate goal of this guide is to demystify digital currency and to clear up the misconceptions associated with it. If you’re considering adopting Bitcoin for e-commerce, this short, no-nonsense guide will help you understand the ins and outs of payment processing, the regulatory environment and security issues surrounding Bitcoin, and a wealth of information that’s not available in a single, comprehensive source elsewhere. You’ll find a complete rundown of issues you’ll want to consider before launching into Bitcoin payments for the first time. The content bridges the knowledge gap between payments traditionally handled in legal tender and payments made in digital currency.
Table of Contents
The Ins and Outs of Bitcoin for Merchants 1
Bitcoin Bunny 3
Prologue 4
Dedication 5
Copyright 6
Table of Contents 7
Disclaimer 11
Introduction – Who should read this? 12
1. A Brief Introduction to Bitcoin 14
So What the Heck is Bitcoin Really About? 14
How Did Digital Trust Come About? 15
Yeah, But is it Safe? 16
Bitcoin in Action – A Sample Transaction 17
What’s Happening Under the Hood: Blockchain Transaction Propagation 17
Work in Progress 21
2. Mastering Bitcoin for Merchants 22
Why Use Bitcoin? 22
The Advantages of Bitcoin 22
Customer Privacy and Doing Business Remotely 23
Inbound Payments - Who Really Uses Bitcoin? 24
E-Commerce Verticals benefiting from Bitcoin 25
Invoicing of Multinationals in Emerging Markets 25
Outbound Payments - Disbursements versus Settlements 26
Payouts 27
Drawbacks of Bitcoin 27
Work in Progress 29
3. Setting Up and Using Bitcoin as a Merchant 30
How to Set Up Bitcoin for Business 30
Get Your Wallet 31
Bitcoin Testnet 31
Ways to Accept Bitcoin 32
Direct Integrations for Merchants — DIY Processing In a Nutshell 34
Using Third-Party Payment Processors 35
Work in Progress 37
4. Making a Choice between P2P or Payment Processors 38
Determining your Mode 38
Decision Grid 38
Facts in Support of Third-Party Payment Processors 38
Legal Prerequisites Affect Market Verticals and Industry-Specific Choices 40
Types of Payment Processors 40
Which Third-Party Processor to Go With 41
How Does Bitcoin Work for Merchants? 43
Exchange Rates for the Merchant 43
Third-Party Processors and Price Feeds 43
Security and Your Bitcoin 44
5. Payment Processing 45
Making Payments with Bitcoin 45
Transaction Fees 46
The Great Paradigm Shift — Clearing and Settlement 46
Cash Flow Effects 47
Automating Payment Protocols 48
Recurring Billing in Bitcoin 49
Comparing Bitcoin to Cards 49
Work in Progress 50
6. Processing Times and Payment Tracking 51
Bitcoin Payment Processing Time 51
Blockchain Explorers 52
Payment Status with P2P Transactions 52
Payment Status through Third Parties 52
Where have all the Instant Payments gone? 53
Digital Cash Management 54
Dispatch Time 54
Implementing the Real-Time Payment Experience 55
What Miners Do During Confirmation Time 55
Bitcoin Microtransactions 56
7. Consumer Protection 57
Bitcoin and Consumer Law 57
Refunding in Bitcoin 57
Refunds: Crypto or Fiat? 58
8. Exchange Rates and Other Considerations 59
How to Avoid Bitcoin Volatility 59
What is an Exchange in the Bitcoin Ecosystem? 59
Other Cryptocurrency for E-commerce 60
Should I Convert to Legal Tender? 61
9. Transaction Issues and Operational Security 62
Bitcoin Recap 62
Troubleshooting and Technical Issues 63
Fraud Prevention Services 64
Data Protection 65
10. How Blockchains Get Attacked and How Bitcoin Got Hacked 66
Potential Security Vulnerabilities 66
Launching a 51% Attack 66
Who has the power to launch an attack? 67
DDoSing the Blockchain 68
Transaction Malleability Attacks 69
Malware and why it’s Good to Keep Your Machine Tidy 70
Hacking Smart Contracts 70
Hacking the Servers of Bitcoin Services 71
Phishing Data from Wallets 72
Which Blockchain Is the Most Secure? 73
Set of Instruments: Hardfork or Softfork? 74
Security Outlook 74
11. Bitcoin’s Place in the Regulated World 76
AML/KYC Compliance 76
Legal Issues for Users in Some Countries 78
The US Regulation Dance 78
Reasons for Bitcoin Hostility 78
Risky Business? 79
12. Payments for Initial Coin Offerings, ICOs 81
Work in Progress 82
13. How and How Not to Talk to People about Bitcoin 83
Choose Your Words Carefully 83
How NOT to Explain Bitcoin to Your Stakeholders 83
On Explaining Bitcoin: the Simple Way to Get Away from the Myths 84
Bitcoin Bunny on Cloud Nine 85
The Final Word 87
Summary 88
About the Illustrator 89
About the Author 90
Back Page 91
About the Author
Bernhard Kaufmann is the R&D Compliance Officer at Moving Media GmbH, the Swiss-based financial intermediary that operates Payment21.com, a gateway that specializes in processing AML-compliant digital cash transactions for regulated industries.
Donations for community affairs can be sent to the following Bitcoin address:
1CHx6ZyW5MZ6oRTfRKHPNY6JY1UvoZWZ8T
About the Contributors
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