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Monthly Archives: January 2014

Acquiring Your First Bitcoins

There are various methods to acquiring bitcoins. Among the most popular are 1) selling merchandise for Bitcoins, 2) Buying bitcoins from a brokerage, and 3) Trading other currencies for bitcoins on a currency exchange.

Selling Merchandise

Anyone can sell merchandise for bitcoins. For many, this can be an easy and low cost method for acquiring bitcoins, although it requires quite a bit of care determining how Bitcoin transaction processing can safely and securely fit into the billing structure. Contact CoinNEO for help with these determinations.

Brokerage vs Exchange

Brokerages, such as Coinbase, are a fast and convenient way to buy and sell bitcoins. Brokerages act as a middleman, buying bitcoins in bulk and selling them to customers. Brokerages charge fees for this service, just as any currency broker would.

Exchanges, such as CampBX, MtGox, and BTC-E, offer direct buying and selling between currencies. Once an account is funded, Exchanges allow for quick buying and selling of currencies within the platform, without the need to first withdraw to cash in order to realize gains and losses in local currency. Trading fees are lower than brokerage fees, but funding and withdrawing from an exchange to local currencies may take considerably more time and may be far more expensive.

Funding A Brokerage

Brokerages offer the smallest barrier to entry into the Bitcoin marketplace. Coinbase, a leading US brokerage, accepts these forms of funding methods:

1. Automated Clearing House (ACH): This is the most common funding system for brokerages. This links a US checking account and routing number, allowing users to buy BTC with their USD.

– Transactions typically take 2-5 business days to complete.

– A small ACH fee may be included with each transaction.

2. Credit Card: Credit cards can be used as an additional verification method, allowing for same day bitcoin purchases while using ACH.

Withdrawing From A Brokerage

To transfer BTC back to USD, the BTC is sold at current market value in USD, and deposited as USD into a US checking account via ACH.

– ACH withdrawal process may take 2-5 business days.

– A small ACH fee may be included with each transaction. Coinbase charges a 1% brokerage fee on the total amount, plus $0.15 fixed fee for the ACH deposit.

Depositing to An Exchange

Exchanges are far more expensive to deposit and withdraw money from, but offer lower trading fees than a brokerage. Exchanges would be more useful for those looking to conduct a large volume of trades (day trading, for instance), and to trade bitcoins between other physical and digital currencies. CampBX, a leading US Exchange, offers the following funding methods for US users:

1. Money Orders: Money orders can be mailed to Exchanges in order to fund an account.

2. Personal Checks: Personal checks can be mailed to Exchanges in order to fund an account.

Withdrawing From An Exchange

Withdrawing from Exchanges are considerably more time consuming and expensive than using a brokerage. CampBX offers the following withdraw methods:

– ACH: While not available for deposits, CampBX make ACH available for withdrawal for a $2 fee.

– Domestic and International Wire Transfer: Wire transfer may be initiated for a fee of $20 domestic, and $35 international.

– USPS Money Order: Money orders may be issued for a $20 fee for up to $1,000 withdrawal.



CoinNEO recommends Coinbase for buying and selling bitcoins for regular, every day use. They allow for a minimum purchase of $0.10 worth of bitcoins (remember, bitcoins can be purchased in fractions). Coinbase is very easy to sign up for and use, and even offer $100 in instant currency for new users. Once verified with a bank account and credit card, Coinbase offers immediate buys, and users can have access to and use their bitcoins right away. The fees are reasonable, and their tools are becoming more and more sophisticated as time goes on.

For selling merchandise, Contact CoinNEO to discuss your organization in greater detail.

Bitpay Application Process

(Originally posted 12/10/2013)

I decided to submit a Bitpay application for CoinNEO. I wanted to see how the application process worked, and get my hands on the merchant software tools so I can better educate myself about the features and functionality of Bitpay.

I assumed this would be a pretty fast process. Indeed, the application submission is quite easy and only takes a few minutes. I completed the application on November 18th. However, I have been waiting for several weeks for approval. I emailed Bitpay about this delay and they responded on December 3rd, stating they are simply overwhelmed with applications. I am not sure how long I will have to wait for approval.

If you are thinking of using Bitpay for your business, you may want to at least begin the application process early. It is not a 5 minute process like many believe it is. For me, it has been about 3 weeks and counting.

Update 12/15/2013:

Bitpay application process complete! I received my account info and it conducted a test transaction within minutes. This has a great feature I see already:

I can set up a payment page for my business. I enter the dollar amount and order number, and it then generates a QR code for the customer. Once the customer sends the payment, the page callback tells us that the payment has been received. This is a feature that is not built in to Coinbase’s merchant payment page. With Coinbase, the order confirmation is sent through email, or can be see in the merchant’s Coinbase account, but not right on the payment page upon completion.

Update 1/15/2014:

One day! A CoinNEO client filed a Bitpay application and it was approved in one day. Fantastic news, I think my personal experience may have been an anomaly.

Do I Refund in BTC or USD?

Posted January 9, 2014

(Originally posted 12/8/2013)

The question about how to handle Bitcoin refunds is up for debate. Bitcoin volatility will no doubt increase the chances of the following issue becoming a problem for merchants who decide to accept Bitcoin. Here is a scenario I worry about:

Scenario: I am a merchant, and I sell a $5 item (.007 BTC current market rate). The customer comes back in 2 weeks and wants to return the item, and return it for .007 BTC. However, BTC has increased 50% over the past 2 weeks. So now, .007 BTC is worth $7.50.

What are the customer’s rights, and what are my merchant rights concerning this refund? Can I refund the customer $5 at the current BTC rate, or do I have to refund .007 BTC?

If this needed to be mitigated in court, what are the arguments for both parties? This tactic could be used to swindle both customers and merchants.

For now, in America at least, it seem the consensus is that merchants should include in their TOS that all sales and refunds are in USD. While you can advertise that you accept Bitcoin as a payment option, all items should be advertised for sale in USD only. If a customer buys an item for $5, then the refund will be for $5, regardless of what the current Bitcoin exchange rate is. However, if you advertise items for sale in BTC rather than USD, you will most likely be hard pressed to refund the item in BTC as well. If BTC does indeed continue to skyrocket, this could pose a major problem to retailers. It would be advisable to discuss this with your personal legal and accounting council in greater detail.

UPDATE 12/8/2013:  I have realized now that it is almost impossible to perform a 1 for 1 refund if you are trying to issue a BTC refund, but at the current USD rate. For instance, I recently sent $1 to myself between 2 of my Bitcoin wallets. When the transaction was complete, the actual USD amount was $1.13. This was probably due to a 13 cent volatility between the time I entered $1 and the time I hit Send. If I want to return the $5 to a customer and have the Bitcoin network do the calculation, one of us is going to get the short end of the stick – every little penny adds up.

I still am not sure what the legal, or even ethical commentary should be on this matter. For now, I have posed this question to Bitcoin and Legal communities and will update as I receive feedback.

UPDATE 12/12/2013: After speaking with many people about this, from merchants, to individuals, legal professionals, and accountants, it seems the best way for a small business to handle this is to issue USD refunds at the current BTC rate. As one person explained, regarding the volatility of the bitcoin markets, it is no different than selling someone a piece of art. If I sell someone a piece of art for $100, and the artist’s work skyrockets in value 2 weeks later, that does not give the customer a right to return the art at the higher value. The transaction is understood to be in USD at the time of transaction, not matter what other processes are involved. Yes, it would be advisable to make this clear in your TOS, or even during the sale of the items, but this is the solution which would mitigate the most amount of risk for both the merchant (if BTC rises in value) and the customer (if BTC falls in value).

UPDATE 1/9/2014: Overstock.com began accepting Bitcoin today. Their return policy, while not stated on their website, is to issue store credit in USD for all Bitcoin purchases. This differs from their return policy, which offers full refunds in certain cases. Still, refunding in current USD equivalent seems to be the favored solution by the community.