Most of these companies sign up to accept Bitcoin through large Bitcoin payment processors such as Coinbase or BitPay. Large retailers that have started accepting Bitcoin in the last year include Dell, DISH, TigerDirect, Newegg, and more. However, none of these merchants hold the Bitcoin that they accept.
One notable exception to this trend is Overstock.com, whose CEO Patrick Byrne has been a vocal digital currency advocate. He has hired Counterparty developers to work on a decentralized/distributed alternative to Wall St called Medici.
CoinDirect founder Jon Fry sat down with CCN for an interview to go over CoinDirect’s unique offering to Bitcoin supporters.
How does CoinDirect.io work?
CoinDirect leverages a merchant’s master public key of Electrum to generate a unique bitcoin address (belonging to the merchant) for each customer, matches that customer information to the bitcoin address, and then notifies the merchant when the customers payment to that address has been seen and confirmed.
A user inputs their master public key from the Electrum wallet. Next they create a new product, link it to a master public key, and input all the product information, such as description and price. The app then creates a link for that product that the merchants deliver to their customer (for example, in the form of a “buy with bitcoin” button).
Each time a customer clicks the link and inputs their information, a new unique bitcoin address is generated and assigned to them using the master public key. The price in bitcoin is calculated using Open Exchange rates, and all the relevant information is given to the customer on the payment page for them to fulfill the order.
The app checks the blockchain for the transaction and updates automatically on the payment page to notify the customer their payment has been seen and confirmed. It also notifies the merchant, through a callback URL or in the orders tab in the app, when the transaction has been found in the blockchain and then again when it has received 6 confirmations.
What kind of users has CoinDirect attracted thus far?
Primarily the interest is coming from those who are interested in actually receiving bitcoin rather than instantly converting it to cash. If you’re not going to convert the bitcoin to fiat, then there’s not as much incentive to have another company accept your payments for you.
So a lot of the first users who are more interested in staying true to the roots of why bitcoin was created, to create a direct relationship for online payments between them and their customers.
A lot of the users previously just handed out a single bitcoin address to all of their customers when accepting payments, but this requires a lot of manual work, isn’t ideal for privacy reasons, and is really difficult to automate and scale.
What type of businesses are you hoping will choose to use CoinDirect.io?
We’re looking to focus on where we can provide the most value for our merchants. So we’re just taking in as much feedback as we can to see where we should focus our energies.
We’d love to service businesses who are interested in accepting bitcoin to help run their businesses more efficiently. So those who accept bitcoin from their customers and then use it to pay their operating expenses.
I think there is a great opportunity to help merchants in countries that do not have access to merchant accounts and other online payment service providers. Also, in countries where the local currency are highly inflationary, we’d like to service businesses to help them accept bitcoin instead.
Other ideal businesses uses are to help businesses sell internationally at lower cost. So small businesses that have found their products or services are popular in a foreign market can leverage CoinDirect to export on their own without the same costs as other payment service providers.
Why doesn’t CoinDirect want to handle user’s private keys or fiat currency?
We never hold users private keys because we don’t want to have to be in a position where we are forced to be a trusted third party. We don’t want to create a central location for private keys, and we don’t want to be a quasi-bank or exchange. The reason bitcoin was created was to be able to circumvent financial institutions, so we aren’t trying to create a new kind and become one.
Also, if we are in possession of a merchant’s private keys, then we would actually just be accepting the payments on their behalf. This would require that we register as a third party settlement organization (TPSO) and that are costs and filing requirements associated with this in many jurisdictions.
We don’t exchange for currency because this requires that we register as a money exchanger, and there are licenses that must be obtained in each jurisduction where you operate, in addition to the the banking relationships you must establish in each country in order for you to provide this service.
We’d like to be able to remain as flexible and lean as possible so we can focus our energies on providing value for our customers.
What do you think about CoinDirect’s mission? Comment below!
Images from Shutterstock.
Last modified (UTC): November 19, 2014 11:41