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Tuesday, January 4, 2011

Bitcoin transition

Although not many changes are visible on the YouTipIt site, we’ve been working away madly in the last weeks. Especially the last month has been very exciting for us, since we decided to move YouTipIt to using Bitcoins as the tipping currency.

Our biggest issue has been getting things sorted out with our payment service providers (PSP) and banks. Setting YouTipIt up to conform both with PSPs policies, current financial laws, and not opening all sorts of possibilities for payment fraudsters at the same time, has proven to be a bit of nightmare. PSPs have been hesitant to work with us because they view us as pseudo bank, implying that we need to have some expensive financial or banking license. Banks won’t touch us because we’re too small and seemingly irrelevant to them. Or banks will charge such high transaction fees, that we won’t touch them. Then there are financial laws which force us to add a significant overhead of administrative and regulative work... And on, and on and on. In the last weeks we often felt like the man in the photo below.

(With kind permission from Graham from walksydneystreets.net: Check out their site for a lot more of the above)

We believe Bitcoin offers a radical new approach on implementing an online currency. Bitcoin describes itself as a peer to peer cryptographic currency. For those wanting the detailed juicy bits, we’ll refer you to their website: http://www.bitcoin.org.

Essentially what it sums up to though, is that a Bitcoin is an encrypted data package which can be stored on computers and transferred to other computers using a peer to peer network. Bitcoins are started to be accepted as a payment method on all kinds of payments sites. To be fair though, sites accepting Bitcoins are usually more for the technically inclined. But exactly this is where YouTipIt will hopefully be adding some simplicity: We see ourselves providing our members an online Bitcoin wallet. YouTipIt members don’t need to install the Bitcoin client. They don’t really need to understand the technicalities surrounding Bitcoins. They just need to embrace Bitcoin as an online currency, (which is always the challenge when introducing a new currency).

Another great thing about Bitcoin for us and in the end for the users, is that it does not are no financial regulators or other monstrosities involved. The value (i.e. exchange rate) of a Bitcoin is purely determined by the market and the trust people put into it.

In the coming release we will be implementing the following changes:
  • Instead of letting you deposit money in a real world currency, we will be selling Bitcoins. (Initially at a rate of approx 0.3 USD per Bitcoin.)
  • Tipping will be done in Bitcoin.
  • To keep the financial and regulative ogres at bay we will initially not be buying Bitcoins back from you, but will instead send off to one the other (growing amount of) sites which either trade Bitcoins for real currency or sell services or goods for Bitcoins.
  • Once we feel we are in good control of Bitcoin we will then offer to buy back Bitcoins from you.

We have implemented all those changes already and are currently in the process of testing them. We should be releasing this version by mid January.

FOR EVER!

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