San Francisco-based web and mobile payments provider Stripe has announced that it is now testing bitcoin support with one merchant partner, online data backup service Tarsnap.
Founded in 2010, Stripe has so far garnered $120m in public investments, most recently in January when it capped an $80m Series C round from major investors including PayPal founder Peter Thiel's Founders Fund and Sequoia Capital. Tarsnap, in turn, is helmed by Colin Percival, credited with creating the password-based key derivation function scrypt now widely used in digital currency.
The announcement is notable as it indicates that Stripe is poised to enter the bitcoin space as a competitor to fellow San Francisco-based startup Coinbase and Georgia-based merchant processor BitPay, should it follow through and making the service publicly available.
Stripe rose to prominence due to its popularity with developers, who favored the company's APIs, as they allowed merchants to accept credit cards without devoting significant resources toward adding to their site's code.
The company charges a 2.9% fee plus an additional 30 cents on traditional charges, a fee structure similar to PayPal, though with more free services.
Stripe is now allowing interested merchants to enroll for beta testing via a dedicated bitcoin portion of the website.
Behind the partnership
Tarsnap founder Colin Percival spoke at length about its decision to accept bitcoin in a blog post paired with Stripe's announcement. Percival indicated that bitcoin owners currently use Tarsnap to back up their bitcoin wallets, and that as such, he is not surprised that his clients would like to pay in bitcoin.
"There is a significant commonality between Tarsnap and Bitcoin — both rely crucially on strong cryptography."
Rather than use an existing bitcoin payment service, however, Percival indicates that he was excited to work with Stripe due to their "simple and clean API".
How Stripe bitcoin payments work
Percival indicated that when he receives a bitcoin payment, Stripe's bitcoin service tells him the amount of bitcoin he should ask for, as well as the address they should be sent to.
"Stripe then gives me the dollars I asked for (minus a small processing fee, of course)."
Percival then used a publically available iframe-generator to create a QR code that redirects the web browser and submits a Stripe "bitcoin receiver token" to the provided address.
Still, while the news is no doubt exciting for the ecosystem, many unanswered questions about the service remain.
For example, it is not yet known how the company itself plans to hedge against volatility, whether it's working with any third-party services or whether Stripe's app will integrate new features available in the most recent update of Bitcoin core.
Further, given that it also allows merchants to accept payments via mobile phones, it is uncertain which phones, if any, may be able to use the service.
CoinDesk has reached out to Stripe for more details.