This week in bitcoin: Free payment processing finally takes true advantage of bitcoin tech

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This week’s bitcoin review takes a look at why both BitPay and Coinbase dropping (some of) their transaction fees.

The new bitcoin business model? Freemium

Until this week, the notion of bitcoin as a technology and bitcoin as a business hasn’t entirely matched up. The beauty of bitcoin’s technology is its ability to send payments to any address free of charge. This is what’s made it attractive to everyone from the remittance industry to drug dealers to hackers to the average Joe, and what made it so forward-thinking. However, many of the business models have matched a more traditional business model that takes a share of the profits.

That changed when BitPay moved from a one percent transaction fee on its starter plan to making it free. It essentially moved from a controller — pay me my one percent toll to use this technology — to a gateway, helping any business get on board with bitcoin.

Coinbase then followed suit and also announced that it is waving the transaction fees for any registered nonprofit, like its newest partner Wikimedia (parent to Wikipedia).

Of course, the company still has to make money. When I spoke with Tony Gallippi, BitPay’s executive chairman, about the company’s plans, he emphasized that the company was moving toward a freemium model that’s not normally associated with payments, but is quite common with software. The plans BitPay offers add perks like Quickbooks Integration (likely to be essential for any business doing a large number of bitcoin orders) and 24-hour support.

Bitcoin as a technology has always been free, so it’s a smart move for BitPay to start embracing that and making its business off the premium services the company offers, like support or extra features, rather than acting as a tollbooth for the blockchain.

In the words of Startup L Jackson….

The market this week

The market dipped below $600 last Friday and stayed there. Despite a flurry of good news, like the zero transaction fees, the price didn’t budge and continued to dip over the week before rebounding Thursday to close at $581. The price has since rallied to about $598 as of 11a.m. PST, so we may see it jump back over the $600 mark once more. How long it will stay there though will be anyone’s guess.

Bitcoin price through July 31
For background on why we’re using Coindesk’s Bitcoin Price Index, see the note at the bottom of the post. 

In other news we covered this week:

Here are some of the best reads from around the web this week:

  • Ars Technica and Le Monde published court papers today showing that Mark Karpeles should have never been CEO of the now-failed MtGox exchange. Instead, he should have been in jail in France for fraud.
  • Jed McCaleb, the founder of MtGox and Ripple, has kept people in the dark about his secret bitcoin project for months. Thursday he revealed to the Wall Street Journal that it’s actually not about Bitcoin at all. His new creation, Stellar, is more like a nonprofit Ripple 2.0 that’s backed by Stripe.
  • Likewise, Overstock.com wants to embrace bitcoin-as-a-protocol and reinvent the stock market, according to Wired. Plus, it will pay some its employees bonuses in bitcoin this year.
  • Bitcoin isn’t a currency, according to its advocates — or at least not when it comes to the law.

Bitcoin in 2014


The history of bitcoin’s price

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A note on our data: We use CoinDesk’s Bitcoin Price Index to obtain both a historical and current reflection of the Bitcoin market. The BPI is an average of the four Bitcoin exchanges which meet their criteria: Bitstamp, BTC-e, LakeBTC and Bitfinex. To see the criteria for inclusion or for price updates by the minute, visit CoinDesk. Since the market never closes, the “closing price” as noted in the graphics is based on end of day Greenwich Mean Time (GMT) or British Summer Time (BST). 

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