The Pros and Cons of Bitcoin: a Merchant’s View

Online music store Digital Tunes started taking bitcoin a year ago, CEO William Coates shares his experience so far.

AccessTimeIconFeb 11, 2014 at 7:08 p.m. UTC
Updated Feb 9, 2023 at 1:24 p.m. UTC
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William Coates is an entrepreneur and self-confessed 'tech nerd' with a background in software development. Currently based in Helsinki, he is CEO of Digital Tunes – an online music store which began accepting bitcoin early last year. Here, Coates tells of his experiences with the cryptocurrency and whether you should take your company down the same route.

We starting accepting bitcoin at at the start of 2013, and so far it has been an overwhelmingly positive experience. Bitcoin is now our third biggest payment provider by revenue, after credit cards and Paypal, and in front of ClickAndBuy and Skrill (previously MoneyBookers).

Over the last six months, 2% of our sales came via bitcoin, and on a good month the digital currency can account for as much as 4% of our total sales. logo

To be honest this is much, much more revenue than we thought we would see with the cryptocurrency. At the start of 2013, and still to some extent today, the common perception is that people only use bitcoins to buy drugs online.

We’ve found that this is clearly far from the truth – there is a growing and vibrant community of users from all across the world who want to trade their bitcoins for all kind of things.

Over the last year, we have discovered some important pros and cons with accepting bitcoin payments and have now made them the basis of this article. If your business is considering accepting bitcoin for the first time, we hope you can learn from our experiences.

The good things

Zero fraud

Fraud is currently a massive headache when accepting payments online. Chargebacks not only cause loss of revenue, but also an incredible amount of extra administrative work.

This is immensely frustrating for us: when we get chargebacks from non-European credit cards, we end up footing the bill – our credit-card processor doesn’t cover us.

The beauty of bitcoin is that fraud has been rendered an impossibility: due to the nature of the bitcoin protocol, all transaction are irreversible. Once you get paid, you get paid. This isn’t some short-term special offer or sleight of hand, this is baked into the code at the heart of the digital currency.

This is wonderful, as it means the responsibility for combatting fraud is not shouldered by the merchant, but instead lies with the bitcoin wallets – the ‘banks’, if you will, of digital currencies.

Low transaction fees

Transaction fees are fairly horrible with traditional payment providers, especially when it comes to smaller transactions, as there is often a minimum fee.

Let us, for example, consider the purchase of a music track costing 1.49 euro from our store. Paypal charges us 3.4%, plus a 35-cent fee for each transaction. So, in this case, Paypal would get 40 cents from this transaction: a 27% fee.

Now charges that high aren’t going to be sustainable for any low-margin business (they are probably fine if you are selling Bolivian marching powder, though!). To get round the problem, we at charge our customers a 35-cent surcharge on Paypal payments, to help us offset the exorbitant fees.

With bitcoin, transaction fees are entirely optional. The currency’s protocol allows you to set the transaction fee to zero if you so wish, however this might mean it takes a bit longer to process.

The idea behind bitcoin transaction fees is that the computers running the network (in an entirely distributed manner) get to keep the transaction fees associated with the transactions they have successfully processed.

It’s quite likely that, in the future, we will see the fees be determined by the market, and if you want your transaction processed as fast as possible, you will have to pay a premium. Currently, transaction fees are not the primary motivation for people to run the network, but that’s an entirely other topic. A useful graph showing the fees charged by the entire network over time can be viewed here.

In practise, most merchants would be wise to use an existing bitcoin payment processor because, due to the irreversible nature of the transactions, you need to make sure your security is rock solid. With bitcoin, the thieves can enter your store, steal every single bitcoin, and even if you know who did it and where the money went, you probably will never get it back (at least you won’t have been physically attacked, though – one of the joys of running an online-only store).

To process our bitcoin payments, we use BitPay, who take a flat 1% transaction fee (or 0%, if you opt for their $30/month fee option). Even a 1% fee is a huge improvement over the traditional payment providers today and, in addition, opens the door to micropayments, as there are no minimum fees.

Easy setup

If you use a bitcoin payment processor like Blockchain or BitPay, the actual implementation of payments is child’s play, and for us, took just one day. There are even services such as Shopify who have bitcoin integration built in, it’s just a matter of signing up for the service.

The bad things

Volatility, part 1.

Probably the biggest problem with bitcoin is the volatile nature of its value relative to fiat currencies such as dollars or euros.

We price the tracks on our store in euros, and the bitcoin value is calculated from the current exchange rate. This means that, if someone spends the equivalent of 100 euros in bitcoin on our store, then the value of bitcoin halves before we get a chance to convert it to euros, we lose 50 euros. Ouch.

However, BitPay provides a simple solution to this issue. If you choose to receive all payments in the fiat currency of your choice, such as euros, BitPay will instantly convert the payment to euros at the time of the transaction.

As a result, you will always receive the exact euro amount (minus fees) that your product was priced at. In this manner, it is possible to completely remove the volatility risk for merchants accepting bitcoin.

Volatility, part 2.

Although it’s easy enough to eliminate the volatility risk for merchants, we also have to think about how volatility could affect our customers’ buying behaviour.

One hypothetical problem is that, when the value of bitcoin is rising, people will be more likely to hold on to their coins rather than spend them. This ‘hoarding’ could obviously affect sales, at least in the short term.

On the flip-side, if the value of bitcoin crashes, you would also expect to see sales affected: a customer who converted 100 euros to buy tunes on our store will only have 75 euros to spend if the exchange rate has dropped 25% in the meantime.


Looking at our sales data for bitcoin, it’s quite clear that volatility does have an affect on customer behaviour.

During periods when bitcoin is quickly rising in value, no-one wants to spend their coins. This makes sense: why would you shop today, if tomorrow you can get a 10% discount? However, after these surges, we often see a spurt of bitcoin transactions: presumably since people suddenly have some spare cash to play with.

It’s worth noting, though, that even after crashes we do still see transactions occurring. So it’s clear there is an underlying level of demand that is not entirely correlated with the current exchange rate value of bitcoin.

Is it worth the plunge?

At, we are really happy with our experiences with taking bitcoin for payments. It can be super simple to set up, and the low transaction fees and zero fraud risk make the digital currency an attractive option.

Volatility is definitely the biggest issue at the moment, but I’m sure that as bitcoin grows, the volatility will taper off. It feels like we are witnessing bitcoin’s growing pains right now.

Even with the volatility as it is, there is a real opportunity awaiting merchants who accept bitcoin, and we were positively surprised with how many payments we’ve received in the cryptocurrency.

The truth is, bitcoiners aren’t just a bunch of nerds wanting to buy drugs online – out there is a vibrant international community of consumers who have realised the advantages of this new kind of money, and it’s growing day by day.

Disclaimer: CoinDesk founder Shakil Khan is an investor in BitPay.

Buying music and Volatility images via Shutterstock


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