PayPal Announces Bitcoin Support

by Jarred Walton on 9/23/2014 8:03 PM EST
Comments Locked

35 Comments

Back to Article

  • The Von Matrices - Tuesday, September 23, 2014 - link

    This announcement of Paypal is not as significant as you make it out to be.

    All PayPal did is implement Coinbase/BitPay's API into their system. Any other business could have already done this directly without getting PayPal involved (Newegg is a good example of a customer already using BitPay's services directly). When PayPal is actually serious about Bitcoin, they'll process the payments themselves. That will be the groundbreaking announcement. For now, this is just a bunch of hype.
  • JarredWalton - Tuesday, September 23, 2014 - link

    While it's true others could have used Coinbase or BitPay directly, this is actually quite a big deal in that PayPal used to ban anyone found to be buying/selling/giving away Bitcoins as part of a PayPal purchase. Also, there are tons of places that already work with PayPal that can now say, "Oh -- all I have to do is set things up to allow people to pay via Bitcoin? Gee, that's easy!" If you're looking to see Bitcoin gain acceptance, I'd say this is a major move in the right direction by PayPal.
  • The Von Matrices - Wednesday, September 24, 2014 - link

    The ability for sellers to quickly modify their stores to accept Bitcoin is surely a plus, but this announcement changes nothing in that PayPal still has no business model if Bitcoin adoption continues to increase. The company can't survive acting as a second middle man between the buyer and seller. PayPal needs to provides the Bitcoin exchange services directly (whether by buying one of the Bitcoin exchanges or by building their own exchange) to remain viable.
  • mkozakewich - Wednesday, September 24, 2014 - link

    There were a tremendous number of scams from people buying cryptocurrency with PayPal money and then reversing the transaction. There was just no way to deal with it easily.

    Some of the banning would have been about protectionism, but even today I'll bet accounts will be disabled for the sale of cryptocurrency. It's in their terms of agreement, I'm sure.
  • The Von Matrices - Sunday, September 28, 2014 - link

    Also, PayPal does not allow any currency exchanges of any currency and never has. Bitcoin never has been treated specially in this regard; people just ignored the rules that existed before Bitcoin then cried hypocrisy when their accounts were suspended. The only ban regarded the selling of mining equipment, which was likely due to uncertainly about the legal issues, but since the laws have been clarified this ban has been repealed.
  • ABR - Wednesday, September 24, 2014 - link

    I'm not sure I'd characterize this as "great news for bitcoin proponents". Wasn't the original intention to create an _alternative_ to the existing ecosystem in which financial institutions occupy a privileged and parasitic (in the eyes of some) place? This is on the path to bitcoin just becoming a normal currency taxed, tracked, and regulated just like the other flavors of virtual numbers we move around electronically day by day. The only difference ultimately being the lack of a country name on it (who cares) and the inability too have physical pieces of paper and metal to use (though I'm sure this will come to if the demand does). Bitcoin is dead. Long live bitcoin!
  • The Von Matrices - Wednesday, September 24, 2014 - link

    I don't think this announcement is indicative of the future of Bitcoin by any means. PayPal choosing to accept Bitcoin is in a way fostering PayPal's own demise. The primary reason for PayPal introducing this service is because the number of sellers that know anything about Bitcoin let alone actually want to hold Bitcoin itself is minimal. Right now PayPal has a business model in that the company can tell sellers that they will get more buyers by accepting Bitcoin, and sellers are willing to pay PayPal to dissociate themselves from a payment method that they do not know much about.

    However, the side effect of PayPal introducing this service is that it increases awareness of Bitcoin and cause people to become familiar with the currency. Once sellers are comfortable with dealing in Bitcoin, they will realize that instead of paying 2.9% + $0.30 on every PayPal transaction they can accept Bitcoin directly, avoid chargebacks, and make the buyers pay the transaction fee (which is cheap anyway). This means that those sellers could either charge less for purchases in Bitcoin or pocket the money, but in either scenario there isn't an incentive for the sellers to promote PayPal's services. At this point PayPal has an uphill battle to convince buyers and sellers that their services are still worth the fees they add on top of the transaction, which I think will be a difficult case to justify and may ultimately result in the demise of PayPal.
  • ABR - Wednesday, September 24, 2014 - link

    Besides performing the transactions, Paypal provides record keeping, mechanisms to mitigate the risk between unknown buyers and sellers, and convenience. None of these are either free or solved by bitcoin in itself. If Bitcoin becomes popular, Paypal might be able to adjust its business model and retain its dominant position, or perhaps competitors will step in. Maybe the removal of credit card companies as middlemen will incrementally reduce the fees, maybe 1% instead of 3, but there will still be profit-making around the exchange of funds. Bitcoin is just a first experiment though, and lessons learned may bring future versions that make the dream of middleman-free payments a reality.
  • whyso - Wednesday, September 24, 2014 - link

    Bitcoin is one of the worst ideas ever from a resource and environmental point of view. It may have good intentions but its mindlessly burning electricity. Government's need to step in and kill it with environmental taxes before it takes off. I'm not against the idea but the work done has to have some useful purpose.
  • Homeles - Wednesday, September 24, 2014 - link

    Thankfully, things like Curecoin aim to do something useful with all that number crunching. It's definitely wasteful in the meantime, though.
  • JarredWalton - Wednesday, September 24, 2014 - link

    Securing the coins and preventing people from stealing others' coins is certainly a "useful purpose" if you happen to use Bitcoins. How much energy does the backing of the Bitcoin network use in a day? Let's call it roughly 6000 MWh (though it might be up to twice that I suppose). According to this page (http://www.eia.gov/electricity/), the US uses about sixty thousand times that much power in a day! And the world as a whole uses about 250,000 times that much power in a day.

    How much of that power is going to the millions of desktops sitting idle at corporations during the night? How much of that goes to powering servers used for financial institutions? What about all the air conditioning, radio, lights, etc. that we don't really need?

    There are so many things that use power, and how "useful" they are is a highly subjective question. The reason things use power is that someone, somewhere has the money pay for the power and they feel it's in their best interest to do so. If we were to shut down the entire Bitcoin network the total power use of the world would drop by 0.0004%.

    Put another way, the "average" American home uses about 30 kWh per day of electricity, or roughly 1250 W power draw 24/7. To achieve the same 0.0004% savings a home would need to cut their power use by 0.005W. So yeah, let's tax the hell out of it so that we can save almost no power in the grand scheme of things.
  • JarredWalton - Wednesday, September 24, 2014 - link

    FYI: math error. I think I'm off by a factor of 30 on the US power comparison. Even then, we're still looking at a relatively small percentage of total power use.
  • garadante - Wednesday, September 24, 2014 - link

    You have to remember that even making it look small by throwing around seemingly large numbers, that's still an exorbitant amount of energy wasted, for what? Bitcoin does what tangible good? It's effectively a hype machine that's currently a scam to get people to buy into it so original miners can profit. Whether there's any long term future for it is completely in the air and until there -is- any certainty, resources invested into it are wasted. Think of how many petaflops in supercomputing that energy could have otherwise been put to use for? What sort of scientific advances could have been made that -will- have tangible benefits? Simulations for ongoing research into TWRs that could give us cheap, plentiful, clean, safe energy for centuries to come, for instance. And that's one example of infinite examples. If environmental arguments sway you, think of how many gallons of fuel/tons of coal/trees that much energy could've preserved? Again, for what? An intangible bubble driven purely by hype and empty promises.
  • garadante - Wednesday, September 24, 2014 - link

    Example: According to Wikipedia, the Titan supercomputer uses 8.2 MW for 17.8 petaFLOPS in LINPACK. That means it uses about 200 MWh a day. Your estimate of 6000 MWh would run 30 Titan supercomputers. That is an astounding number. I just found a year old article for Forbes saying combined computing power for Bitcoin has surpassed 256 times that of the top 500 supercomputers -combined-... Even if those numbers have shifted in the last 10 months, which no doubt they have, we're still talking likely 2 orders of magnitude more computing power for Bitcoin than all supercomputers combined. Can you imagine how ecstatic the scientific community would be to have access to 2 orders of magnitude more computational power for their research? Can you imagine the field advancing breakthroughs that would come from that? But nope. Instead, we have Bitcoin! Woo!
  • garadante - Wednesday, September 24, 2014 - link

    Just checked the bitcoinwatch website and I see the global petaflop rate for Bitcoins has increased 5 fold since that Forbes article. Which means It's more like 3 orders of magnitude more computing power for Bitcoins than the world's supercomputers combined. I just have such an immense disgust for society right now. A market cap of only $5.6 billion in Bitcoin value -or- over 1000 times more computational power for science. That's a no brainer if there ever was one.
  • yefi - Wednesday, September 24, 2014 - link

    Hashrate is 250,000,000 GH/s. An ASIC miner takes about 1-2W per GH/s, so that would be 6000-12000 MWh / day.

    "Can you imagine the field advancing breakthroughs that would come from that?"

    Not much unless it involves inverting a hash. All of this computational power is built on ASICS which can only perform one specific task. Comparing them to supercomputers, they're not really equivalent. It's like comparing the flops of a GPU to a CPU and surmising that your something-GTX is 1000x faster than your i-something. They do different things.

    Incidentally, proof-of-stake involves a less resource-intensive way for processing transactions, though I guess as you see cryptocurrency as nothing more than a scam, an intangible bubble and a source of disgust, any form of power consumption above 0 watts would be unjustified. :)
  • garadante - Thursday, September 25, 2014 - link

    Still, 6000-12000 MWh is 300-600 Titan supercomputers which is a good chunk of the world's sueprcomputing power. Titan is 17.8 petaFLOPS, according to Forbes the combined petaFLOPS for the TOP 500 supercomputers was 0.250 exaFLOPS in late November 2013 (which I believe would be the TOP 500 list Titan was on) then Titan is effectively at most 7% of the world's supercomputing power, at least probably somewhere close to that. Even a highly conservative estimate of 3% (likely higher as most of that 0.250 exaFLOPS comes from the top ranking supercomputers which means anything outside of the TOP 500 contributes negligibly) means 300 addition Titans would be a 9 fold increase in the world's available supercomputing. Using 600 additional Titans as well as 7% would be 42 fold supercomputing power.

    While your argument regarding ASICs is completely true I'd considered that and I wonder if there aren't common calculations run by supercomputers that could be offloaded onto ASICs. Certain types of calculations common in certain fields or perhaps many fields. Bitcoins having a market cap of $5.6 billion means companies developing ASICs for Bitcoin mining likely have a relatively low realistic revenue selling their ASICs in the millions of dollars range. Whether that's 10s or 100s I'd have no idea, this is all guessing on my part. But they decided that was profitable enough to spend the time developing ASICs for Bitcoin mining. If you could put a monetary value on the technological advancements coming from supercomputer results, considering how field changing and life changing they can realistically be (considering they're answering questions for developing cleaner energy, understanding of the very nature of our universe, weather modeling, more efficient cars/planes/etc, pursuing cures for diseases, etc, etc, etc so many times) in the long run it'd be worth a whole lot more than that $5.6 billion. But that's the whole point about this. Long run. Bitcoin was huge because it was seen as a way to make a quick buck, back when mining was easier. Mining got harder, ASICs companies thought they could profit off the swift transition to ASICs. Key point being swift. No waiting for cures for cancer to pan out, even if the tangible benefits are infinitely more useful.

    So at the end of the day all I see is a huge amount of waste electricity, computing power, and ASIC developing potential gone to waste to pursue what? A virtual currency independent of any government? A noble cause, if naive in many ways, and almost impossible to execute in the real world. Bitcoin is worthless without having the exchanges for most people. The only reason it became so popular is because of the exchange rate into real, physically ownable currency and how that exchange rate ballooned as more and more people saw the surge in exchange rates. Bitcoin derives its value from standard, government backed currencies. I suppose you could argue that some people would still value it without that exchange rate but that's the whole point. That group would be a very, very small subset of the whole population giving Bitcoin no real ability to succeed long term. But discussing the real and imagined benefits and problems with Bitcoins is an entirely separate discussion. My disgust for the wasted power still stands. Any virtual currency that promotes such a blatant waste of precious resources sits ill with me. Jarred mentioned something like Curecoin. That sounds as if its coin mining + some sort of folding and that sounds interesting. People getting paid for all those folding points! That seems far more interesting than Bitcoin with its otherwise completely worthless hashing computations.
  • JarredWalton - Thursday, September 25, 2014 - link

    The issue with the work that Bitcoin -- or any other cryptocurrency -- uses is that you need something fundamentally secure if you're going to use it as a means of preventing duplicate transfers, among other things. Basically, the solution to every single block needs to be effectively random, and that's definitely not the case with most scientific calculations.

    There may be ways to somehow get that sort of distribution of "solutions" with real-world problems, but take protein folding as an example: the computations are far more general in nature than SHA256 hashing, which means making ASICs is more difficult, which means everything moves back to CPUs and GPUs, which means we're effectively back to where we started with Folding@Home.

    Yes, Bitcoin "wastes" energy that could potentially be used for noble and good causes. But even if Bitcoin stopped wasting energy (i.e. disappeared), the energy saved doesn't inherently get put into doing something useful. I suspect if we look at the world as a whole, you could argue that upwards of half of the energy we as humans consume is "wasted" -- lights and electronics left on when no one is around using them, inefficient power conversions, etc.
  • whyso - Thursday, September 25, 2014 - link

    Thats no reason to create new ways to waste power. The world needs to work on ways to reduce its use of resources. I'm not a left wing environmentalist but conservation will be key moving into a future where the entire world (not just the small proportion of 1st world countries) can live a comfortable life.
  • The Von Matrices - Friday, September 26, 2014 - link

    As much as I like Bitcoin, it brings to the forefront about a sad truth about the world. The only reason that such computational power and the resulting waste of energy is needed is because humans are inherently untrustworthy. The large computational power is only there to present a barrier to anyone wanting to falsify transactions. There would be no need for a proof of work system or the wasted computational power (and energy) if we all were able to trust each other to not falsify records.
  • bsim500 - Friday, September 26, 2014 - link

    Jarred, Bitcoin is as intrinsically worthless as the US Dollar. There's nothing "backing" it other than faith that others will continue using it as "money" (the "hashes" that are calculated merely guarantee that a Bitcoin unit is "legally" valid they don't actually give it any "value" - it's like "backing" the US Dollar with anti-counterfeiting US banknote verification machines which exist solely because the US Dollar exists - circular logic).

    It also has zero intrinsic usage (eg, unlike Gold or Silver's industrial or jewellery uses), and if things turned really bad and the Internet went down (quite easily done by forcibly shutting down ISP's, DNS root servers, physically severing international undersea Internet cables with submarines or even continued national electricity outages) it's value & tradability in a state of dire emergency is instantly zero. The fact you can only create 21m units (preventing inflation) doesn't make it "valuable" in and of itself any more than creating a currency out of 21m pretty seashells or 21m bags of salt.

    Bitcoin also suffers from the exact opposite "overswing" vs paper currencies - if you can only create 21m units and they get exponentially harder to "mine", then early units will be more valuable than later units, which can cause runaway DEflation or currency shortages. 21m units divided by 7bn people = a global average of 0.003 units per person ($1.5 per person @ $500 per Bitcoin). There's actually too few units to function as a global currency beyond just a few geeks using it as a novelty item.

    At worst, it can actually start to mimic the dynamics of a "pump and dump" pyramid scheme where all you end up with is people trying to "cash in" on "mining" the "easy" units, then when they get harder to "mine", simply dump them onto other buyers on the back of over-hype, then create another "...coin" variant to "mine" the easy money early then then dump that onto other suckers a year later, and keep repeating. That's why there are now so many variants.

    The real absurdity of Bitcoin can be summed up this way : There are 13.3m Bitcoins in circulation (up from 11.5m 1 year ago) and they have a value of $412 per coin. That = $5.5bn of total wealth, and 1.6m new Bitcoins created per year (worth $660m). However, Bitcoin costs almost $3bn in electricity alone for mining $800m of new "coins" per year (and the gap widens as Bitcoin's take longer to mine). The Federal Reserve's money creation system may be seriously skewed but it's not half as silly as collectively paying $30 in electricity bills to "mine" $10 value of new "Bitcoins" each year...

    If you disagree with that, then I have a $20 note for sale. Just send me €15 Euro's for the note + €30 for the postage to acquire the note - and that's Bitcoin in a nutshell. ;-)

    Bit coins' are for those who have a "thing" about the Federal Reserve's inflationary USD, but don't really understand why a heavily deflationary cryto-currency (verging on pyramid scheme dynamics) is just as bad, if not worse, and people are amusingly clinging to it simply because it's the first thing that's come along that's been seen to challenge "the man"...
  • JarredWalton - Friday, September 26, 2014 - link

    By my math you're off by a factor of 10 on the power cost for running the Bitcoin network. Let's call it 9000 MWh per day, or 9 million kWh per day. That's 3,285,000,000 kWh per year and at $0.10 per kWh it's $0.3285 billion per year.

    While you might make the argument that the rate of BTC generation will decrease, inherently the amount of power used to back Bitcoin will track with the price and rate of generation. If it costs you $10 to mine $5 worth of Bitcoin, you'll shut off your miner -- and in fact, I'd say you'd most likely shut it off when the power cost equals the value of the BTC generated, if not slightly earlier than that.
  • bsim500 - Friday, September 26, 2014 - link

    "According to BlockChain’s Bitcoin Statistics, miners are currently using 98,000 MGW hours or $14 million dollars of electricity a day to mine bitcoins"

    http://marginalrevolution.com/marginalrevolution/2...

    http://www.forbes.com/sites/timworstall/2013/12/03...

    "If it costs you $10 to mine $5 worth of Bitcoin, you'll shut off your miner"

    People aren't always rational. Hence tulip mania (and every other bubble since...) :-)

    Even without that, in order to function as a serious currency you need 3 things : 1. Store of value, 2. Trading stability from day to day (neither inflationary nor deflationary), and 3. Liquidity (enough units that it's actually widely usable beyond a novelty currency without shortages or deflation kicking in). Bitcoin doesn't even meet criteria No. 1 and flat out fails No's 2 & 3. (And even then $1147 to $421 in a single year is a very poor "store of value" compared to virtually every other tangible commodity, the stock market or even other 1st world fiat currencies). That's an equivalent annual inflation rate of 63% in one year. Only basket case 3rd world countries (Iran, Iraq, Argentina, Venezuela, etc) have charts that look like 2013-2014 Bitcoin vs the USD.

    If you want to hedge against an inflationary USD, back in reality, you buy precious metals, base metals, real estate, commodities, etc. Real tangible stuff that's "consumed" and not merely traded as a speculative bubble or non-tangible good. As an "emergency currency", you wouldn't buy anything you couldn't hold in your hand and use without electricity or the Internet. And as a "safe haven from the evil Fed" it's pretty comical. The key to seeing the problem is not "BC vs USD" - it's BC vs relatively static commodities, and the Bitcoin bubble is obvious when you Google "Silver vs Bitcoin chart" or even "price of wheat in Bitcoins" and you'll see exactly what the problem is. Imagine your local baker selling $1.50 bread in 2011 for $3,415 in 2013 then $1,440 in 2014, etc, and it's not difficult to figure out why most places (inc Paypal) who "accept Bitcoin" are still pricing everything in USD's and not actually pricing anything in Bitcoins (as you would a proper alternative currency - see Dollarization in 3rd world countries for many examples)). And that's why Bitcoin isn't a currency, it's merely an alternative method of digital payment for goods that are and will continue to be still denominated in USD's.
  • MrTeal - Friday, September 26, 2014 - link

    Those numbers are wrong. The vast majority of the network is mining on equipment in the 1J/GH range. At the current network speed of 250PH/s, that's around 250MW, or $220M/yr @ $0.10/kWh.
    That's also not taking into account that most of the new massive mining farms are going into locations like Iceland, eastern Washington, etc where the cost of electricity is significantly less than $0.10/kWh.
  • Jaybus - Friday, October 3, 2014 - link

    <quote>if you can only create 21m units and they get exponentially harder to "mine", then early units will be more valuable than later units, which can cause runaway DEflation or currency shortages.</quote>
    Exactly. BC is a pyramid scheme scam propagated by the math geeks who started it. Does anyone really believe that the governments of the World are going to hand over control of currency for any reason whatsoever?

    Btw, the units don't matter. We can always use milibitcoins or microbitcoins as standard units.

    I don't think anyone actually knows if there is a mathematical maximum number of BCs, just as nobody knows whether or not the number of prime numbers i finite. The estimates of BC count are based on computing power and the fact that mining gets exponentially harder and harder. So there are two possible scenarios. There indeed is a ceiling, or maximum theoretical number of bitcoins, in which case we will soon be dealing with a fixed number of bitcoins and so massive deflation. The other possibility is that there is no theoretical limit and a future quantum computer will create massive inflation.

    Dumb idea for the World. Great idea for the early adopters who have gotten to fleece the wannabes. As I said, it is a clever pyramid scheme.

    If nothing else, BC is doomed simply because there is no way governments will allow control of their currencies to be usurped.
  • Notmyusualid - Friday, September 26, 2014 - link

    This is amazing news.

    Hopefully a EU rollout is not too far behind.

    The ability to cut out the banksters profit when I make my *MANY* international transactions almost makes me weep with joy.

    And don't forget the inability of corrupt governments to adjust the value of Bitcoin too.

    What does worry me, is that people are able to make any money at all from mining - that money has to come from SOMEWHERE. But I'm lead (wrongly?) to believe that is is almost insignificant.

    I once tried to buy a Halcro amplifier from the USA, sent near $10k via my bank, got ONE DIGIT wrong on the receivers address details, and despite having correct swift etc, correct bank addresses - my bank charged me to SEND it, took a spread on the exchange, the foreign bank refused it, took a spread on converting it back, and I was out HUNDREDS of pounds.

    I was so angry with the banks, I cancelled my amplifier order (much to my pain now). They could have called me (I have a personal banker), but no, nothing.

    Bring down the whole current econimic system I say, and no, I'm not anti-establishment, I just know enough to recognize that things are not working well as they are.

    Bitcoin - I salute you.
  • vision33r - Friday, September 26, 2014 - link

    This may allow scammers to sell something on ebay and transwer money into bitcoin and then run away.
  • Notmyusualid - Friday, September 26, 2014 - link

    Bitcoin transactions are not anonymous, though the FBI / insert other government agency here /etc would really like the general public to keep believing so...
  • xaml - Friday, September 26, 2014 - link

    The only justification to use such a questionable, shady and unnecessary additional payment form is a lack of responsibility. Therefore, say no to it!
  • The Von Matrices - Sunday, September 28, 2014 - link

    I agree, we should say to to PayPal.
  • Notmyusualid - Friday, October 3, 2014 - link

    See my comment above.
  • ben.avellone - Sunday, September 28, 2014 - link

    Bitcoin isn't perfect. However, I welcome any disruption to the currently established financial sector and all of their entrenched ideals, fees, corruption and corruption. I see Bitcoin as the spearhead of a movement.

    It doesn't matter if Bitcoin ends up failing at this point. The exposure that crypto-currencies have received since the inception of Bitcoin and the mindshare they currently possess will only serve to spawn more creative ideas and better alternatives to the current implementations which are in place. It's just a matter of time.
  • Notmyusualid - Friday, October 3, 2014 - link

    + 19834827349284632
  • alicenathanCA@gmail.com - Saturday, April 21, 2018 - link

    The underpinning structure of Blockchain and the many features being built will change how we transact for ever. Cryptocurrencies are in their infancy. We are still at the technical stage where to get involved you need some technical knowledge. And what about token? I know a good directory sellandbuycoins. I hope you come in handy.
  • Joe.theplumber - Monday, September 3, 2018 - link

    To sell bitcoins for paypal visit the bitify marketplace, Search from multiple vendors, they sell PayPal for 110%, example $100 in Bitcoin will give you $110 in PayPal. Easy as pie.

    https://bitify.com/?referral=5adb67906caaf

Log in

Don't have an account? Sign up now