Bitcoin and Crypto

The Status Quo of Payments with Bitcoin and Cryptocurrencies

Crypto currencies and in particular Bitcoin are continuing to advance. But for BTC to become a part of everyday life, it needs ways and solutions to use the digital currency as a means of payment. An update on the status quo concerning payments with Bitcoin and Co.
 

September 03, 2020

Blockchain applications like cryptocurrency have really changed the financial playing field. Cryptocurrency adoption is at an all-time high worldwide with Statista reporting that more than 50 million blockchain wallet users were active by the end of this year’s Q2. More and more individuals and merchants are transacting with cryptocurrencies like Bitcoin due to it being versatile, easy-to-use, having a lower overall cost, the ability to secure sensitive data, and giving users better control over their funds.

However, we have yet to see a mainstream and mass adoption of this financial tech both across the globe and in Germany, despite German banks now able to manage cryptocurrencies for clients. In this post, we’ll take a deep dive at the current state of crypto and Bitcoin as a payment currency and modern uses of this blockchain application.
 

Regulating Cryptocurrency

At the height of crypto-mania, one of the main reasons why people were interested in cryptocurrency was its decentralised nature. The blockchain is spread across different networks of computers, and allows every single user to become one of the network’s countless payment processors. This means that cryptocurrencies are free from institutional interference and government manipulation.

But while decentralisation opens up a lot of possibilities for cryptocurrency, the legality of crypto largely depends on who you are, where your location is, and how you plan on using the technology. Many businesses want to use crypto for different reasons ⁠— and of course, various countries also see cryptocurrencies differently. In fact, Bitcoin, the world’s most prominent cryptocurrency, is outright banned in some countries — despite the potential it and other cryptocurrencies have for finance. 
 

Bitcoin - legal status in Germany, US and Co.

FXCM states that Bitcoin enjoys legal status in major economies like the US, China, Japan, Germany, and India. However, regulations can differ widely. For example, Bitcoin is not considered as legal tender in the US and instead is treated as property that can be traded, while in Japan, Bitcoin is officially considered as a legal payment method. 

Here in Germany the first Bitcoin account was recognised in 2013, although any commercial use of it wasn’t able to receive tax exemptions. Today, crypto exchanges and custodians doing business in Germany had to have applied for a license from the German regulator the Federal Financial Supervisory Authority (BaFin) before 2020 began in order to do business this year. Accepting Bitcoin as a means of payment, for example for retail merchants, is not affected by these regulations and is therefore possible without any problems. 


Crypto Companies Are Leading the Revolution

Despite banks and other financial institutions expressing apprehension with adopting cryptocurrency, crypto companies are going ahead and spearheading crypto as payment revolution through their own innovations. Most cryptocurrency transactions are being done online as e-wallets, mobile banking, and e-commerce continues to rise. In fact, London-based crypto firm Wirex has rolled out their own line of crypto debit cards. Through this, users can top up their debit cards through their bank account and load it as Bitcoin. Users can then use this to pay merchants that accept Bitcoin or convert it into another crypto or fiat currency.

Aside from the technology used by consumers, some crypto companies are also helping merchants adopt the technology. The key to widespread adoption is having a seamless merchant payment ecosystem. However, the problem of block times (the time required to create a new block in a Bitcoin chain) must first be solved, which BitBucks CEO Frank Meier believes is an inherent disadvantage for Bitcoin transactions at the POS. Fortunately, the crypto companies and wallet services contribute to the introduction of the technology and solve this problem in a unique way.
 

BitBucks and other Bitcoin Wallets for payments

Thankfully, crypto firms are doing their part to usher in the technology. For instance our own BitBucks Bitcoin Wallet. With the app for iOS and Android, customers can easily pay in retail for goods and services simply by scanning a store's QR code belonging to the merchants BitBucks-account within the app. The transaction will then be processed in Bitcoin, however to achieve a more user-friendly experience, all amounts are displayed in the respective fiat currency.

There are also other Crypto infrastructure platforms, such as Paytomat which enables merchants to access a crypto-to-fiat payment processing system or Cyclebit, that offers merchants to accept digital assets like cryptocurrencies wherever they are in the world. 

As Bitcoin and cryptocurrency continues to be adopted by more and more individuals, we will certainly see the technology to take over our current payment systems. Laws and regulations will have to adapt to this financial technology and soon, even huge financial institutions won’t have a choice but to also accept and mass adopt crypto as payment.
 

Written by

Jo Burke

Crypto-enthusiastic author. Passionate about the future of Bitcoin and Co.

FAQ - Bitcoin Wallet for Payments

Can I mis-type with my transaction?

No. Bitcoin addresses have a checksum of their own symbols. The chance of accidentally entering a false address with the correct checksum is virtually zero. It is much lower than, for example, with IBAN numbers.

Can bitcoin transactions be censored?

If you make the transaction yourself - no. Transactions are pseudonymised and processed by a network without distinction. As Bitcoin is a decentralised network, there is no central location with the power to prevent other nodes from carrying out and verifying transactions - as long as these are covered and valid according to the rules of the network. 

Doesn't Bitcoins' price rises also mean higher tax expenses for me?

Not at all! If you would like to exchange Bitcoin for i.e. Euro, you only pay taxes on the profit achieved by the price increase. And to be honest, paying taxes on profits doesn't sound that bad, does it?

How can I convert my earned Bitcoins to another currency?

Herefore the credit from the BitBucks app has to be transferred to another Bitcoin Wallet, with which the bitcoin amount can be converted into your desired currency at a so-called exchange market.

How can I store my private key?

Usually the Bitcoin wallet keeps your private keys private by storing them in an encrypted file. You can also print the private keys as "Cold Wallet" and separate them from the Internet. You should be aware that you are solely responsible for the security of the keys. If you lose them, you lose your bitcoins. Wallets such as BitBucks, which store keys for their customers, can offer inexperienced users additional protection against key loss.

How can I trace a transaction?

Bitcoin transactions are part of the blockchain and are therefore stored in every node of the network. “Blockexplorer” allows transactions to be traced using the BTC address or transaction ID. This is helpful in ascertaining that a transaction has actually occurred.

How do I pay with Bitcoin?

It's simple: copy the recipient's address into a field within your Bitcoin Wallet, enter the amount, and click "Send". In most BTC wallets, you can specify the amount in your local currency, so no conversion is required. Payment requests or the payment protocol are often used. They already include the amount and can either be activated by clicking or by copying them into the send field. Mobile wallets are able to scan transaction requests, so you only have to confirm the transaction. Bitcoin Wallets such as BitBucks even allow you pay with BTC by scanning the recipients QR-Code.

What are payment URIs and the payment protocol?

A payment URI is a request for payment that many wallets can generate. URIs define a target address, an amount and may include a notification for the sender such as the order number. These can be scanned like a QR code or copied into the send field of a wallet. One click on the payment URI opens the wallet with the pre-formulated transaction.
The payment service provider BitPay uses the payment protocol. This enables BitPay to set fees for a transaction and transfer this amount to the miner itself. In this way, BitPay can increase the success rate of its payments. This payment method is used in the same way as the URI: you can scan it in, click the link or copy it into a wallet. In any case, not all wallets support the payment protocol.

What are transaction fees?

A Bitcoin transaction attracts a fee which is paid to the miner. Under normal circumstances fees amount between one and five cents. However during peak times these may increase noticeably to values of 50 cents or even one euro. If you pay too little in fees, you will have to wait longer for confirmation of your transaction. Most wallets select the appropriate fees. Wallets like BitBucks, in which transactions can also be internally calculated, can save you fees and accelerate confirmation of your transactions.

What do I need to accept BitBucks in my store?

All you need is the BitBucks app on your smartphone and a QR code attached to it next to the cashier. During the payment process the customer scans this QR code with his Bitcoin wallet, enters the required amount and within a second the payment is received on your mobile phone.

What is a Bitcoin wallet?

A Bitcoin wallet is software you can use to administer your bitcoins. There are many wallets for all common computer systems. You can choose between local and online wallets. A local wallet gives greater independence and privacy, while an online wallet can offer more convenience. 

What is a Blockchain transaction?

With a transaction, you transfer Bitcoin from your Bitcoin wallet to another party. This transaction or payment will be signed off with your private key and forwarded to the node in the Bitcoin network. This is propagated across the whole network until it reaches a miner, which can confirm the transaction. 

What is a confirmation?

As soon as the miner puts your transaction into a block and then attaches it to the blockchain, the transaction is “confirmed”. This means that it is an official part of the blockchain and can no longer be countermanded. “Confirmation” corresponds to the two-week buyer protection period with PayPal or the settlement period with credit cards, which can take months. With Bitcoin, the confirmation period usually lasts 5-10 minutes. 

Where can I make payments with Bitcoin?

In theory, everywhere there is Internet. All you need is a Bitcoin Wallet such as BitBucks. Unlike national currencies, however, there is no obligation to accept Bitcoin as legal tender and so individual merchants may choose to accept it or not. At any rate, there are shops and stores in almost every country in the world that accept payments in Bitcoin, as well as numerous international online providers. Many merchants are also willing to accept BTC on request.

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