BTCPay Server vs. Payment Provider
What does BTCPay Server offer?
BTCPay Server is a solution to accept Bitcoin payments in your own store. But how does BTCPay Server differ from other solutions? To understand this better, you have to get into the confusion of terms like payment gateway, payment provider, payment server or payment provider.
What is the difference between the services of a BTCPay Server and why do you need a Bitcoin Payment Gateway, a Bitcoin Payment Server or the services of a Bitcoin Payment Provider?
Every one of us has paid on the Internet or in a store using PayPal, credit card or online bank transfer. But what actually happens, how does it work and who is involved?
To describe this, the analogy from the real world helps.
If you want to pay as a shopper at the supermarket chain, then you get a box pushed down by the cashier. You insert your card into this box, perhaps enter a PIN, and after a few seconds you are handed your purchases.
What does a Bitcoin payment provider do?
The activities carried out in the background of the above box, is the activity of a Bitcoin Payment Provider.
The Bitcoin payment provider acts as a middleman and ensures that the money gets from the buyer to the seller.
A Bitcoin payment provider handles the technical payment processing and disbursement of funds.
A Bitcoin payment provider uses a Bitcoin payment gateway for technical payment processing.
In addition to the technical payment processing, the Bitcoin payment provider receives payments from the end customers (payers) and forwards the funds to the merchants (payees).
Here, the Bitcoin payment provider acts as an intermediary between the end customer and the merchant.
The Bitcoin payment provider holds the funds from the payment for a certain period of time, posing a potential risk of default for the merchant.
Since the funds, or the Bitcoin, are held in custody for the merchant by the Bitcoin payment provider, this represents a form of crypto custody. Crypto custody business is a licensable activity since January 2020, which requires a special license.
The requirements from the license obligate the Bitcoin payment provider to subject merchants to what is known as a Know Your Customer (KYC) audit.
This requires a business model review and identity verification with a merchant.
This administrative burden in the run-up to payment processing makes it difficult to spontaneously try out and experiment with Bitcoin and Lightning as a payment method.
Additionally, Bitcoin payment providers charge a payment processing fee to the merchant. This fee ranges from 0.5% to 1% of the transacted revenue, depending on the provider and the revenue.
The German translation for Bitcoin Payment Provider is Bitcoin Zahlungsanbieter. payment-button For more information on what a Bitcoin payment processor does, see the post “What does a Bitcoin payment processor do?“
What does a BTCPay server do?
As briefly written above, a Bitcoin payment provider operates a Bitcoin payment gateway to handle the technical payment processing between the end customer and the merchant.
But can’t you also operate your own Bitcoin payment gateway and thus do without the services of a Bitcoin payment provider?
Dieser Ansatz steckt hinter BTCPay Server. A BTCPay server is an open source payment gateway for Bitcoin and Lightning. This Bitcoin payment gateway runs on a server, which is then called a Bitcoin Payment Server (BPS). We use the term Bitcoin Payment Server and BTCPay Server analogously and abbreviate it as BPS.
By operating their own BTCPay Server (BPS), merchants are able to be a Bitcoin payment provider themselves. Thus, there is no further instance between the end customer and the retailer. Any payment goes from the end customer directly and without detours to the merchant.
Thus, the merchant no longer has to wait for the Bitcoin payment provider to forward the payments and there is no risk of missing payments.
The payments go directly to the merchant’s wallet and thus there is no crypto custody business anymore. The merchant does not have to disclose its identity or explain its business model to any entity.
The main advantage is also the non-existent costs for payment processing. Operating your own Bitcoin payment server eliminates the revenue-based transaction fees of up to 1% percent that a Bitcoin payment provider charges for its service.
The advantages for operating your own BTCPay server are:
- Direct payment between end customer and merchant
- No middleman
- No identity check / No KYC
- No transaction fees
- No processing fees
- Merchant has own control over the balance with his own private keys (Non-Custodial)
- Higher privacy
- Higher security
- Support for Bitcoin and Lightning payments
- Integration of further altcoins possible
- Numerous applications possible. See application examples
- Numerous store modules such as WooCommerce, Drupal, Magento und PrestaShop
- API interface – analogous to Bitpay’s API for easy migration
It is possible for a merchant to operate their own Bitcoin payment server based on the BTCPay server.
You can run a BTCPay server as a Virtual Private Server (VPS) at an internet provider / hoster or a hardware node at your home.
The provider LunaNode offers a special BTCPay solution. For under $10,- per month you get your own BTCPay server including Bitcoin and Lightning Node.
Here you can find instructions on how to set up your own BTCPay server at “LunaNode.”
If you don’t want to operate your own BTCPay server as a merchant, a simple BTCPay store is also sufficient? An infinite number of BTCPay stores can be operated on a Bitcoin payment server from BTCPay.
With a BTCPay store you have the same functions and possibilities as with your own BTCPay server. With a BTCPay store you are a subtenant on a BTCPay server. This solution is offered as third-party hosting.
Here you can find a list of some BTCPay third party hosts
Coincharge also offers free BTCPay third-party hosting for testing purposes at: BTCPay Shop.