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Foodler bitcoin orders growing by 30 percent a month

(@carriekirby) | Published on July 24, 2013 at 16:01 BST

When US restaurant delivery network Foodler began accepting bitcoin payments in April, it formed a natural combination for programmers: code and steaming boxes of delivered food. So it makes perfect sense that Foodler co-founder Christian Dumontet set up the interface to make Foodler bitcoin-friendly during a few late nights of delivery-fueled coding.

“Our Bitcoin integration was written with Thai food,” said Dumontet, a former Cisco Systems software engineer who says he did most of the coding over the course of a week.

In that week, Boston-based Foodler transformed the art of dining on bitcoin from an adventure — in San Francisco, bitcoiners had to trek to a sushi restaurant in an outer neighborhood for a square meal — to a few swipes of a smartphone screen and an exercise in patiently waiting for the doorbell.

Bitcoin users have been eating it up. Bitcoin payments have grown by 30 percent each month since Foodler began offering the option, Dumontet said, with an average of 9 BTC deposited in Foodler accounts each day. Bitcoin still constitutes less than 1 percent of the company’s payments, though.

Dumontet said he opened the food-ordering network to bring bitcoin out of “technical curiosity.” While not a bitcoin investor, Dumontet had read about the cyrptocurrency and wanted to experiment with it. He said:

“We’re software enthusiasts … that was the initial motivation. There are good business reasons for it, but given that it’s such a small percent of our revenue, that’s not that big of a motivation.”

The major business advantage of accepting bitcoin is avoiding paying 2 percent or more in credit card fees. (Instead, Foodler adds .001 BTC to every customer deposit of .1 BTC or more, to cover the mining fee the customer pays.) Bitcoin transactions are also immune to chargebacks, the unhappy situation where dissatisfied customers reverse credit card charges and leave merchants unpaid.

Another, less expected, advantage was the large amount of media attention the experiment brought Foodler. However, not all media portrayals have been helpful. One called Foodler “a credit-card-hating business,” a characterization that Dumontet was quick to correct.

“We value our relationship [with credit card companies] very much. … It’s very difficult to use bitcoin at this point. Credit cards are very easy to use,” he said.

Getting started accepting bitcoin was surprisingly easy for a company that coordinates delivery for more than 12,000 restaurants. That’s, in part, because Foodler insulates its restaurant partners from bitcoin altogether. Customers may use bitcoin to buy Foodler credits, which they then hold in their account and use to pay for meals. Foodler changes the bitcoins it collects into US dollars regularly — usually once a day — and the restaurants get paid and tipped in dollars the same as ever.

Because they are not a money transmission business, Foodler did not need to complete any regulatory paperwork. And because the company is mainly funded by its founders, there were no major investors of whom to ask permission.

“Foodler runs very fast,” Dumontet said.

After the initial implementation, the work was not completely done. Dumontet soon realized that using bitcoin could expose information about transactions to the bitcoin-savvy public via the blockchain, a situation that could violate user privacy and give competitors a window onto Foodler’s transactions. He fixed that with more coding.

“The way around it is to take transactions that come in, and divide them into subtransactions of random amounts. And then you do that a random number of times.”

Accepting bitcoin has not increased the company’s customer service load at all, Dumontet said.

“I think if [bitcoin use on Foodler] were to become widespread, it would be an issue. But right now, the people who have bitcoin already understand it pretty well. So we actually haven’t had any questions on how to use it. The customer service staff has been briefed, but so far it hasn’t come up.”

Massachusetts software tester Ruben Brito recently used bitcoin to order a workday lunch through Foodler. In general he gave the experience the thumbs up, but there were a few hitches.

For one thing, Brito experienced a delay when transferring bitcoin from his wallet to his Foodler account. Foodler says the transfer should be instant as long as you include your wallet’s default mining fee, which it reimburses to make the transaction cost-free to the user. Brito believed the bitcoin wallet he was using included a fee, but a review of the transfer showed that for some reason it hadn’t.

Another hitch: In the suburbs where he lives and works, the choices in the Foodler network are limited. The Chinese restaurant he settled on was a 15-20-minute drive from his office.

“I passed a lot of places to eat on the way there,” he said. Still, Brito said he would order with bitcoin again, especially if Foodler adds more restaurants.

Wondering if pad thai purchased with cryptocurrency tastes just as savory as my usual order, this reporter set out to try a Foodler with bitcoin myself. First I had to acquire some bitcoin, so I opened an account with bitcoin wallet Coinbase, which is incidentally the same company that Foodler uses to convert its bitcoin revenue to dollars.

Setting up the Coinbase account, linking it to my checking account, and ordering 1 bitcoin, for the $88 exchange rate at that time, took about 15 minutes. Sadly, once I was done, I realized that I was going to have to cook that night after all, because Coinbase said my funds would not be available until the following Wednesday. (Coinbase recently introduced instant bitcoin purchases for fully verified users, but I didn’t go through that process so mine took longer.)

While I waited, I checked out Foodler’s restaurant selection in my area. This was a bit disappointing; we usually order Thai food via Seamless.com, but I didn’t see a Thai restaurant in my area on Foodler. In fact, Foodler only lists 14 restaurants when I type in my address, versus 75 on Seamless. I settled on a Chinese restaurant I had never heard of, but which had decent reviews on Yelp.

Once my bitcoin was finally available, I logged onto Foodler and clicked “My Account,” and then clicked the link, “Foodler accepts bitcoin.” This gave me a bitcoin address to send money to. I copied this address, pasted it into the address window of my Coinbase account, and within two minutes, my Foodler account had $97.82 credit.  Foodler sent me an email notifying me of my credit, and saying that the Mt. Gox exchange rate at that moment was $97.72. The extra dime is because Foodler deposited an extra .001 BTC, more than covering my mining fee.

That’s right. I bought bitcoin at $88 and changed it for nearly $98 in Foodler credits less than a week later. Because the dollar value of bitcoin went up that week, I ended up profiting nearly $10 — a free entree and an order of egg rolls. I’d become an accidental currency and Chinese food speculator.

Dumontet said that he has noticed that customers sometimes change more bitcoin than usual into Foodler credits when the bitcoin price is trending down. It appears that some people are using burritos as a bitcoin hedge.

After I chose my food, selecting the option of paying and tipping with Foodler credits was smooth. Really, once I sent my bitcoin to my Foodler account, the transaction was like any other. The delivery man who came to the door never took out his earbuds, so I couldn’t ask, but he didn’t appear to recognize me as a cryptocurrency user.

Both Brito and I purchased food with Bitcoin just to try it out; Brito described his experience on his blog, Bitcoin Bash. But is anyone out there buying their food with bitcoin on the regular?

If they are, they are likely in San Francisco, the sources of 20 percent of bitcoin orders and the largest hotspot in the United States, according to Foodler. Washington D.C. is second at 16 percent, and after that, no other cities really stand out, Dumontet said.

And what do Bitcoin enthusiasts most like to eat? Sadly, Foodler has not yet pulled the data to answer this burning question.

One thing is certain: Anyone looking to eat using bitcoin is likely to depend heavily on Foodler at this point, since so few restaurants accept the currency on their own.

For those who try, it’s not necessary to rely entirely on takeout, Dumontet said. There are a few grocery and convenience stores in the network. You can also hack the system a bit if you don’t feel like always eating by the glow of your computer monitor at home or at work.

“You can just place an order while in the restaurant (and eat in) and that will work just fine. I’ve actually done that,” Dumontet said.

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