PayPal vs Bitcoin Comparison Of Online Payment Methods

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Here’s no denying that, when it comes to online payments, PayPal is still king these days. However, bitcoin offers several advantages over this online payment method that could eventually allow the cryptocurrency to establish dominance. Is it really possible?

Perhaps one big thing going for PayPal is that it hasn’t really been heavily linked to illegal dealings the way bitcoin did with Silk Road. This sets bitcoin back by a number of notches, as the cryptocurrency has to prove its legitimacy and security before gaining mainstream adoption.

Competition from Bitcoin

But while PayPal has been an established company for quite some time, processing majority of online transactions in the past few years, both PayPal and bitcoin are actually almost on a level playing field when it comes to security. Both systems can still be vulnerable to penetration, as PayPal and bitcoin strive to strike the balance between accessibility and confidentiality.

When it comes to ease of use, PayPal was already off to a running start, as the company has been able to fine-tune its operations and user interface, even developing a peer-to-peer system of transactions called PayPal.me. This service is similar to bitcoin wallets, although identities still need to be confirmed for PayPal.

Bitcoin also has price volatility going against it, with some customers hesitant to trade their cash for a cryptocurrency that fluctuates largely in value. Similarly, there is a bit of friction for some merchants accepting bitcoin payments since there is no guarantee that they can liquidate those funds at similar rates during which they received them.

When it comes to online merchants, both payment schemes have made considerable progress in integration. Several startups in the cryptocurrency industry have focused on creating platforms and developer kits that could pave the way for seamless implementation on the merchant’s website while PayPal has offered various options for payment processing as well.

For now, it’s too early to tell whether bitcoin can eventually overtake PayPal and even more difficult to predict when this might take place.

 For most people using PayPal is an acceptably secure way to pay online. Importantly the service shields your financial details from the seller and they offer both Security Keys and MTAN. However, PayPal is a common target of phishing emails which can be very sophisticated and easy to fall prey to. If your account is compromised, it will likely be sold on the black market to the highest bidder and worse could leak your bank account or credit card details.

Security

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At its core Bitcoin promises to be the most secure Payment method available, there is no database to leak or accounts to be hacked. However, Bitcoin transfers a lot of the responsibility for Security into the hands of the User which can be dangerous for those who don’t know what they are doing. A Bitcoin wallet holds all the information needed to make transactions from a particular account and is now a target for thieves and viruses. However, with the advent of encrypted Wallets and a new breed of online-wallets such as My Wallet it is now much easier for the average user to keep their wallet safe and secure.

PayPal has had years to refine its user interface and checkout procedure. Payments can be made instantly with any credit or debit card and requires no intermediary or exchanged. PayPal also has a chargeback policy, which favors Buyers over Sellers providing more protection for Users in event of problem with their purchase.

PayPal has a large advantage here.

For Customers

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The usability of bitcoin is severely hampered by the need to exchange the User’s domestic currency into Bitcoins before a purchase. As Bitcoins do not support chargebacks this typically makes it difficult for exchanges to accept deposits by instant payment methods such as credit card or PayPal.

However Bitcoin has made improvements in other areas recently, the client is now much easier to use for the average user and with services like My Wallet you can manage your bitcoin’s with an easy to use familiar interface.

PayPal provides a full range of Merchant API’s and is supported by all major shopping cart software. However, PayPal’s chargeback policy can unfairly penalize merchants who sell digital goods or other virtual items. A plethora of horror are available from merchants who have had malicious chargebacks cripple their business or who have had their funds frozen by PayPal for no reason.

Famously PayPal blocked donations to the whistleblowing site Wikileaks which made it difficult for them to fund their operations. Fortunately, they were able to begin accepting bitcoin donations soon after.

For Merchants


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Services like bit-pay make accepting bitcoin’s as easy for merchants as accepting PayPal, funds can be immediately exchange for domestic currency so exposure to exchange rate fluctuations is minimal. The advantage for merchants is that as bitcoin is digital cash it does not support chargebacks, funds cannot be frozen and payments cannot be blocked.

Big win for Bitcoin.

PayPal accounts are tied directly to your bank account or credit card and PayPal is a regulated financial institution in many countries. PayPal payments are not in any way anonymous and it is not recommended you make purchase using PayPal that you would not be comfortable with the authorities knowing about.

Anonymity

 

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A history of every bitcoin transaction ever made is available right here on this site. However, transactions do not need to be tied to a bank account or individual and they are essentially anonymous if some basic precautions are taken. My Wallet can hold up to 1000 unique bitcoin addresses and it is recommended you change addresses regularly to avoid leaving a trail.

And the winner is: Bitcoin!. A new technology which is just beginning to come into it’s own.

Sure there are some hurdles to jump but the ability to truly take control of your own finances is

worth some minor inconvenience. If you value liberty, then you should value bitcoin.

Jalal Nasser

Web Developer and IT Support