Could Paypal be accepting Bitcoin as a form of payment? Word on the street is that PayPal may be accepting the anonymous currency Bitcoin in the near future. As Yahoo News discovered, Paypal announced that it was naming Wences Casares, founder of Bitcoin wallet companies Lemon and Xapo, to the PayPal board of directors on Wednesday. This could be a sign that Paypal is headed in a Bitcoin-friendly direction, and that they may want someone with Bitcoin experience at the helm.
One of the big advantages to using Paypal is that consumers’ financial information is kept private when buying or selling goods. This PayPal privacy feature is also something offered by Bitcoin, which keeps the names of users safe by using a series of numbers called a Bitcoin address to mask the identity of buyer and seller alike. Though Bitcoin users cannot be identified by name, their purchases and transactions can be traced using the Bitcoin address.
Perhaps an added hint that Paypal may be moving towards accepting Bitcoin is Wence’s tweet earlier today. The newly-appointed Director tweeted that the Bitcoin experiment is “not over,” just a few days after former Bitcoin developer Mike Hearn left the project and declared Bitcoin “a failure.” It seems PayPal doesn’t think of Bitcoin in quite the same way as Hearn does.
At the moment, Paypal offers users a way to securely store their funds and allows for transfer to or from a linked bank account. In the future, could we see PayPal support for transfers to and from Bitcoin wallets? Many websites such as TOR (The Onion Router) that wish to protect users’ privacy are already accepting donations in the form of Bitcoin, and this could make it easier for Paypal to work with such organizations.
Paypal’s official Twitter account announced Paypal’s excitement for what is to come, though Paypal didn’t delve into specifics about what that is. Since both Paypal and Bitcoin use digital records and have no paper trail, it might make sense if Paypal were to move towards embracing Bitcoin. If PayPal is looking to Wence to pave the way for a Bitcoin shift, they certainly chose the right man for the job; TechCrunch.com noted that Wence’s Bitcoin company Xapo has raised $40 million to date, while his other Bitcoin venture Lemon sold for a stunning $42.6 million to security company LifeLock.
One major change Paypal will have to adapt to if it wants to work well with Bitcoin is that only a limited number of Bitcoins can be generated each year by design, thus controlling the available supply. Bitcoin’s value is also very volatile and can be subject to drastic changes in a short period of time, so this will make it difficult for PayPal to ensure correct payment for goods and services initially.
Unlike the paper currency currently used by PayPal, Bitcoin cannot be obtained through normal means such as employment. Bitcoin has to be either “mined” using an extensive computing process, or obtained from sites that offer “Cryptocurrency” as a reward for completing tasks. Additionally, Bitcoin is sometimes used to purchase illegal services or products since the user is only identified by number, not name. All of these factors could make it difficult for Paypal to dabble in Bitcoin, even with an experienced Bitcoin entrepreneur at the helm of PayPal. However, if Bitcoin addresses were stolen from PayPal, they could be easier to trace seeing as each purchase made would be linked to the stolen address.
Let us know what you think of Paypal’s new direction. Will the move help ensure users’ privacy, or could it turn into a nightmare for all involved? Will your trust in Paypal be affected at all by the decision to embrace the experimental Bitcoin as a legitimate currency?
[Image Via Antana/Flickr/CC-BY-SA 2.0]