A Popularity Contest Drives Coinkite's Digital Currency Decisions
With more than 400 alternative cryptocurrencies in the market, it can be hard for point of sale providers and merchants to know which ones to accept. To determine which altcoins to support in its own point of sale system, Coinkite held a contest.
"When we started we wanted to be coin-agnostic," says Rodolfo Novak, founder and CEO of Coinkite. "One of the biggest challenges around altcoins is that [Coinkite] received hundreds of coin requests per week and it's very hard to decide which one to add."
Toronto-based Coinkite accepts Bitcoin, Litecoin and BlackCoin. Each digital currency has different traits that make it more appealing for certain uses. For example, BlackCoin's hybrid proof of stake/proof of work mining model consumes less energy and confirms transactions faster than Bitcoin and Litecoin, which exclusively use a proof of work model to validate transactions.
"We opened up a contest to the [alt]coins out there to submit the technical specifications of a coin and send money to a specific address to test if there's enough support for the coin," says Novak.
About 10 to 15 altcoins were part of the contest, including BlackCoin, Dogecoin, Vertcoin and Auroracoin. The coins had to adhere to certain guidelines. Then 25 bitcoins worth of that particular altcoin had to be sent to an address.
The currencies that reached the goal within three months would be accepted on Coinkite, says Novak. "Blackcoin reached the goal overnight," he says.
None of the other coins made the goal.
"There are very few coins that are actually supported by real point of sale equipment," says Adam Kryskow, U.S. representative for the BlackCoin Foundation, a trade group helping to educate consumers about the altcoin. "Coinkite was a pretty big push for us because it gave our coin real world usability through retail adoption."
Novak would not disclose the number of Blackcoin transactions that have taken place on Coinkite merchant terminals, but Kryskow says he has seen receipts documenting the active use of Blackcoin.
Litecoin, the second largest virtual currency by market capitalization, and Dogecoin, the digital currency named after an Internet joke, have seen adoption from merchants and point of sale providers.
Part of the money that was raised by Blackcoin supporters went to the Blackcoin Foundation and part stayed with Coinkite for development, says Novak. The money raised for the altcoins that didn't win the contest was donated back to each altcoin's specific foundation.
Merchants using Coinkite's point of sale terminal pay a $30 monthly fee for unlimited transactions without a per-transaction fee. Plus, merchants get residual income (in cryptocurrency) from any new user they connect to the Coinkite platform. For example, if a consumer transacts on a merchant's Coinkite terminal and then signs up for a wallet account at a fee of $10.86 a month, Coinkite will give the merchant back 10% of the new member's first payment and 5% of everything the consumer spends with Coinkite after that.
Merchants who don't want to pay a monthly fee can opt to instead pay a 1% fee on all transactions. Merchants also receive 10% back on the terminals they sell. Terminals, which can be converted into exchange machines similar to Bitcoin ATMs and include a QR code scanner and WiFi, cost $880.
The terminals can accept payment from any third-party wallet account but they do not accept government currencies such as U.S. or Canadian dollars.
"It would have become more complicated to sell worldwide then," Novak says. "Because we only accept cryptocurrency we were selling worldwide from day one."
Coinkite has hundreds of merchants around the world, with about 50 or 60 in the U.S., Novak says. Its clients include Stoney Creek Roasters, a coffee shop in Ohio; Stuntz Family Dentistry in Iowa; and Tivoli Brasserie, a restaurant and bar in The Netherlands.
Coinkite has also created a server-side cryptocurrency wallet that allows for cold or offline storage.
In about two weeks, Coinkite will release a set of application programming interfaces (APIs) that will allow anyone to build and host their own wallet if "they don't want to trust us," says Novak.
This wallet and products like the Armory Technologies Inc. multi-signature wallet build on the decentralized trustless ideals of Bitcoin itself in that the service provider doesn''t have influence over the tools.
Coinkite also makes cryptocurrency chip and PIN "debit cards" that can be loaded with Bitcoin, Litecoin or Blackcoin and used at any Coinkite terminal. The price of a bitcoin is currently hovering around $600.