The Evolution of Cryptocurrency Payments
On January 12, 2009, the first ever
Bitcoin transaction between the still-elusive Satoshi
Nakamoto and the late cryptocurrency pioneer Hal Finney was
made. As Finney himself described in a forum post he made on March 2014,
Nakamoto had sent him 10 Bitcoins to test out what was then a
newly launched system. More than a decade later, the methods of
transacting Bitcoin and other cryptocurrencies have evolved
alongside the currencies themselves, adapting with newer technologies and market
demands. Here, we take a look at how cryptocurrency payments have
changed over time: First recorded product purchase with Bitcoin:
pizzas When Nakamoto sent those 10 Bitcoins to Finney, the two
completed the transaction through a PC-based program specifically made to
handle Bitcoin transactions. In a sense, those 10 Bitcoins were
sent to Finney similar to how one would send files over an email, although using
a more secure underlying network. And while Bitcoin was moving between
the digital “wallets” of its early adopters, it wasn’t until over a year
after the inaugural transaction between Nakamoto and Finney when the
first Bitcoin purchase was made. On May 22, 2010, a programmer and
early Bitcoin adopter named Laszlo Hanyecz sent 10,000 BTC to
another user on BitcoinTalk, a Bitcoin-focused online forum, which
was used as payment for two large Papa John’s pizzas delivered to
Hanyecz’s house. While today that would mean purchasing two large pizzas for
over $58 million, the transaction at that time valued those 10,000 BTC at around
$40. While it wasn’t a Bitcoin purchase in every sense of the word—the
recipient of the 10,000 BTC had to pay for the two pizzas with his own fiat
money—the event is widely considered as the first ever recorded product purchase
using Bitcoin, one that’s celebrated every year as Bitcoin Pizza
Day. Bringing it to online shops It would take several months
before cryptocurrency payments can be made without needing to
shell out fiat currency in the process, and one innovation that brought them a
step forward was the formation of dedicated cryptocurrency payment
processors. Similar to PayPal, these digital applications allowed
e-commerce platforms and other online retailers to accept
Bitcoin, and subsequently other cryptocurrencies, as a
payment option. One of the earliest payment processors that
remain active today is BitPay, an American company founded in
2011. Online shops that signed up with BitPay were able to add
Bitcoin to the list of possible payment methods for
their customers. A year after it launched, the company was able to
partner with over 1,000 online merchants. Since then, several other
cryptocurrency-focused payment processors have popped up, and they
all espouse the various benefits of cryptocurrency payments over
other traditional methods. These include cryptocurrency’s unparalleled
security that makes it much safer against fraud than other digital
payment methods; its much cheaper transaction fees due to the use of
blockchain technology; and its almost borderless capabilities allowing merchants
to accept payments from all over the world. Catching the big fish
While cryptocurrency was slowly but steadily becoming a legitimate
payment method in the digital space, many were still
wary—or downright skeptical—of its security and risk. While that wariness and
skepticism is still present in several spaces today, a number of notable names
have turned those perceptions around by adopting Bitcoin and other
virtual currencies into their payment networks. One of
cryptocurrency payments’ first notable wins was WordPress, which
began accepting Bitcoin payments for its premium features
by the end of 2012, being enabled by BitPay. Two years later, tech giant
Microsoft becomes the first company of its caliber to enable
cryptocurrency payments within its ecosystem, accepting Bitcoin
for digital purchases of Windows apps and Xbox games. But perhaps one of
the biggest wins for the cryptocurrency industry in those years was
PayPal’s adoption of cryptocurrencies into its platform, albeit in only
certain types of transactions back in 2014. It partnered with three
payment processors—BitPay, Coinbase, and GoCoin—to enable Bitcoin as a
payment method for transactions involving digital commodities such
as video games and music. Today, it’s not uncommon to see online stores, as well
as large companies with an online presence, to accept
cryptocurrency as a method of payment. Some have even moved beyond
Bitcoin and begun to accept other major cryptocurrencies such as Ethereum and
Litecoin. Bringing it offline While the number of digital companies
accepting cryptocurrency as a mode of payment continues to grow by the
day, it remains a challenge to bring primarily physical and brick-and-mortar
companies into the cryptocurrency ecosystem in an efficient way.
Fortunately, some companies have taken up that challenge, churning out various
innovations that make it possible to bring cryptocurrency payments offline.
About the author Pundi X is a company which uses its own XPOS system, a
blockchain-based point-of-sale system that enables brick-and-mortar stores to
accept cryptocurrencies as a payment method via instant transactions. Systems
like this are making it possible for people like Hanyecz to truly pay for their
pizza orders, and many other products and services using cryptocurrency.
On January 12, 2009, the first ever
Bitcoin transaction between the still-elusive Satoshi
Nakamoto and the late cryptocurrency pioneer Hal Finney was
made. As Finney himself described in a forum post he made on March 2014,
Nakamoto had sent him 10 Bitcoins to test out what was then a
newly launched system. More than a decade later, the methods of
transacting Bitcoin and other cryptocurrencies have evolved
alongside the currencies themselves, adapting with newer technologies and market
demands. Here, we take a look at how cryptocurrency payments have
changed over time: First recorded product purchase with Bitcoin:
pizzas When Nakamoto sent those 10 Bitcoins to Finney, the two
completed the transaction through a PC-based program specifically made to
handle Bitcoin transactions. In a sense, those 10 Bitcoins were
sent to Finney similar to how one would send files over an email, although using
a more secure underlying network. And while Bitcoin was moving between
the digital “wallets” of its early adopters, it wasn’t until over a year
after the inaugural transaction between Nakamoto and Finney when the
first Bitcoin purchase was made. On May 22, 2010, a programmer and
early Bitcoin adopter named Laszlo Hanyecz sent 10,000 BTC to
another user on BitcoinTalk, a Bitcoin-focused online forum, which
was used as payment for two large Papa John’s pizzas delivered to
Hanyecz’s house. While today that would mean purchasing two large pizzas for
over $58 million, the transaction at that time valued those 10,000 BTC at around
$40. While it wasn’t a Bitcoin purchase in every sense of the word—the
recipient of the 10,000 BTC had to pay for the two pizzas with his own fiat
money—the event is widely considered as the first ever recorded product purchase
using Bitcoin, one that’s celebrated every year as Bitcoin Pizza
Day. Bringing it to online shops It would take several months
before cryptocurrency payments can be made without needing to
shell out fiat currency in the process, and one innovation that brought them a
step forward was the formation of dedicated cryptocurrency payment
processors. Similar to PayPal, these digital applications allowed
e-commerce platforms and other online retailers to accept
Bitcoin, and subsequently other cryptocurrencies, as a
payment option. One of the earliest payment processors that
remain active today is BitPay, an American company founded in
2011. Online shops that signed up with BitPay were able to add
Bitcoin to the list of possible payment methods for
their customers. A year after it launched, the company was able to
partner with over 1,000 online merchants. Since then, several other
cryptocurrency-focused payment processors have popped up, and they
all espouse the various benefits of cryptocurrency payments over
other traditional methods. These include cryptocurrency’s unparalleled
security that makes it much safer against fraud than other digital
payment methods; its much cheaper transaction fees due to the use of
blockchain technology; and its almost borderless capabilities allowing merchants
to accept payments from all over the world. Catching the big fish
While cryptocurrency was slowly but steadily becoming a legitimate
payment method in the digital space, many were still
wary—or downright skeptical—of its security and risk. While that wariness and
skepticism is still present in several spaces today, a number of notable names
have turned those perceptions around by adopting Bitcoin and other
virtual currencies into their payment networks. One of
cryptocurrency payments’ first notable wins was WordPress, which
began accepting Bitcoin payments for its premium features
by the end of 2012, being enabled by BitPay. Two years later, tech giant
Microsoft becomes the first company of its caliber to enable
cryptocurrency payments within its ecosystem, accepting Bitcoin
for digital purchases of Windows apps and Xbox games. But perhaps one of
the biggest wins for the cryptocurrency industry in those years was
PayPal’s adoption of cryptocurrencies into its platform, albeit in only
certain types of transactions back in 2014. It partnered with three
payment processors—BitPay, Coinbase, and GoCoin—to enable Bitcoin as a
payment method for transactions involving digital commodities such
as video games and music. Today, it’s not uncommon to see online stores, as well
as large companies with an online presence, to accept
cryptocurrency as a method of payment. Some have even moved beyond
Bitcoin and begun to accept other major cryptocurrencies such as Ethereum and
Litecoin. Bringing it offline While the number of digital companies
accepting cryptocurrency as a mode of payment continues to grow by the
day, it remains a challenge to bring primarily physical and brick-and-mortar
companies into the cryptocurrency ecosystem in an efficient way.
Fortunately, some companies have taken up that challenge, churning out various
innovations that make it possible to bring cryptocurrency payments offline.
About the author Pundi X is a company which uses its own XPOS system, a
blockchain-based point-of-sale system that enables brick-and-mortar stores to
accept cryptocurrencies as a payment method via instant transactions. Systems
like this are making it possible for people like Hanyecz to truly pay for their
pizza orders, and many other products and services using cryptocurrency.
