34 Bytes: User-Friendly Point-of-Sale Terminals Will Promote Bitcoin Adoption
Amid bitcoin’s continued and steady advancement as a digital currency, there’s been little movement in the actual adoption of bitcoin in the world of business and commerce. Despite minimal processing fees, chargeback mitigation, identity theft protection and other demonstrated advantages accrued by businesses who utilize BTC as a consumer payment option, surprisingly few point-of-sale systems exist for a seamless consumer transaction experience.
As the founder and president of Los Angeles-based 34 Bytes, Stephen Karlsgodt is on a mission to change this through the development of a solution that allows merchants and retailers to accept payments without the use of dedicated and expensive tablets and smartphones that are often attractive targets for thieves.
Known as the BTC Terminal, Karlsgodt’s newly minted Wi-Fi based device offers businesses the ability to accept bitcoin payments in storefronts as well as at off-premise locations. The terminal only processes bitcoin transactions and works alongside existing debit and credit card payment processors in much the same way. For example, the BTC Terminal has the ability to easily generate a customer receipt, a feature that isn’t logistically feasible with tablets or other types of mobile device which merchants are currently using for bitcoin payments.
The goal with these terminals is to create a means for every merchant storefront, vending machine, parking garage, subway turnstile, taxi cab, and whatever else can be imagined to accept point of sale payments with bitcoin. In doing so, 34 Bytes hopes to promote greater commerce in the new bitcoin economy.
Karlsgodt, who holds a Master’s Degree in Electrical Engineering, first heard about bitcoin in the first half of 2013. “I was fascinated and went on a ‘learning binge’ and read everything I could about the technology. I wanted to get involved somehow, and create a way to bring bitcoin into the ‘real world’. After lots of thinking and reading, I turned my attention to developing a point of sale solution that didn’t require a smartphone or tablet.”
34 Bytes, according to Karlsgodt, was started in early 2014 with the simple goal of offering merchants a cheaper way to make sales, rather than paying the standard 2.5 – 3.5 percent for credit card processing. He says that the void that exists for retailers in terms of BTC payment transaction options has greatly contributed to there being little or no incentive for consumers to spend bitcoin.
“I think right now that most of the people spending bitcoin are doing it because they have a personal interest, not because they are currently benefiting in a significant way. In order for it to gain traction, there has to be some incentive in place to drive consumer spending.”
To that end, Karlsgodt has been working on a built-in ‘Rewards Program’ where the customer will have a rewards account based on a phone number and PIN, and will receive BTC back from a purchase, or even coupons from the merchant. This he says will have the benefits of allowing the merchant to ‘share’ some of the benefits they reap from accepting bitcoin in addition to serving as an incentive for repeat business on the part of customers.
How 34 Bytes Works: The Value Proposition
Here’s how it works: Bitcoin payments are processed by scanning a QR code that’s generated either at the point of sale terminal screen or a printed receipt. A proof of payment message is then issued to complete the transaction.
Karlsgodt is quick to point out that current POS solutions that run phones or tablets are not as simple to use as one might think. Theft of these mobile devices is a major concern, an issue that has plagued the Denver-based restaurant Southern Hospitality, which accepts bitcoin.
In his conversations with a number of merchants, Karlsgodt often hears that sometimes only one person on the staff knows how to process bitcoins properly. An acceptable solution, he says, is a POS device like the one developed by 34 Bytes that’s extremely easy to use, consistent with the way a merchant normally operates and free of any major learning curve.
What makes the processing terminals so appealing though are their built-in WiFi capabilities; retailers will no longer have to rely on wired connections for payment acceptance. Moreover, because 34 Bytes does not serve as a wallet service, the company will never touch the funds being transacted between merchant and customer. Instead, a Coinbase tool has been integrated into the system, allowing retailers to set up their own bitcoin wallet address.
Other features include a terminal keypad for ease in menu navigation and user data entry, monochrome LCD, printed receipt access, and transaction logs.
“We are sort of an intermediate step between the merchant and the bitcoin’s final destination; however, everything is encrypted on the terminal, so we have no way to access the merchant’s funds at any point. We never hold merchant’s bitcoins. Additionally, we are intentionally only processing bitcoin. Actual conversion to fiat introduces many legal hurdles that we don’t want to take on right now, “ says Karlsgodt.
There is a still a cost for merchants: “We take a small 0.75% per transaction fee, and there is a $10 monthly fee. These exact numbers may be adjusted as we continue to get feedback from merchants.”
One of Karlsgodt’s major goals is to expand the back-end integration of 34 Bytes to other services in order to give merchants more flexibility in how they manage their bitcoin income.
“The terminal itself is just the first implementation of a ‘front end’. Other devices will be able to be programmed to access our API. This means that, for example, a payment kiosk in a parking structure would be able to integrate bitcoin payments through our service if it has internet connectivity and the ability to display or print a QR-code.”
He notes that one of the biggest barriers moving forward in terms of payment processing solutions is a lack of knowledge and understanding of how the system really works, both among merchants and consumers. Here, it is his contention that bitcoin is still a little rough around the edges, particularly as it relates to practical, day-to-day usability.
Another looming question is security, especially in the wake of a series of hack attacks that led to CoinKite’s recent decision to back away from the payment processing market.
“I’m not sure about the details of the problems they were facing, but I suspect it has to do with the fact that Coinkite was also acting as a wallet service for the merchants, and for individuals as well. This would definitely make it target for hackers. By design, 34 Bytes never has access to, or ‘stores’ merchant funds, so (hopefully), this will make us less of a target for this type of thing,” says Karlsgodt.
Forward Progression “Byte by Byte”
Karlsgodt says that they will begin beta testing with storefront merchants shortly to ensure that any bugs or kinks that surface are worked out. Once there is some good merchant traction, the company will begin looking at seed money.
A long-term goal for 34 Bytes is to play a major role in building out bitcoin as another payment rail. “Features like the Shift card from Coinbase are interesting, but they still ultimately don’t make good use of bitcoin, as for the merchant the transaction still occurs in the Visa network.”
34 Bytes even has global ambitions “In other economies, such as Venezuela where inflation is rampant, there are a whole different set of financial forces at play that will drive adoption of bitcoin (again, if it is easy to use.) Introducing our terminals and other solutions in South American and other troubled economies is something we are very interested in.”
“At the end of the day, though, we are still a startup in the bitcoin space. We are incredibly passionate about the transformative power that cryptocurrencies have to offer and are looking forward to partnering with others in bringing our technologies to the world.”