The Ins and Outs of Bitcoin for Merchants
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The Ins and Outs of Bitcoin for Merchants

Little-known Facts about Accepting Cryptocurrency For Business

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. 

About the Author

Bernhard Kaufmann
Bernhard Kaufmann

Bernhard Kaufmann is a blockchain technology expert specializing on peer-to-peer payments for digital goods and services. His extensive experience with the Bitcoin ecosystem, as well as his involvement as an AML-compliance officer, have convinced him that decentralized and non-custodial applications require less administrative effort, have lower transaction costs, and are ultimately more secure than centralized systems. His company was the first crypto firm in Switzerland to get direct approval from the Swiss Financial Market Supervisory Authority as a regulated financial intermediary. Today, the author focuses on novel use cases involving Ethereum smart contracts.

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

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