Bitcoin – Yea or Nay in the Web Hosting Industry?

Pay with Bitcoin?Recently, I started some threads on various web hosting forums about the viability of using Bitcoin as a method of payment and was surprised by many of the replies, most noticeably at how many providers offered Bitcoin and endorsed it, even though it’s no secret that Bitcoin is widely used for fraud and criminal activity.

Bitcoin associated with fraud because of its anonymity?

What I was expecting was more of a discussion on how Bitcoin is associated with fraud and ransomware, simply because of its anonymity.  As a cryptocurrency, there isn’t a whole lot of information on hand to verify who your prospective clients might be.

Bitcoin fraud as compared to credit card fraud

What if you’re a spammer (and there are plenty of them out there), and you’ve paid for hosting with a credit card? I suspect you’d be flagged for fraud and wouldn’t be able to just reorder another server, as with Bitcoin, that is possible depending on the type of verification the provider has in place. How do you pre-screen a Bitcoin prospect?

Verification issues?

Of the providers that accept Bitcoin, most of them indicated that they perform some sort of verification and if anything appeared out of sort or strange, they’d turn down the order. Surprisingly, they also said, based over time, that they didn’t face the risk of chargebacks as compared to credit cards.

Termination issues

One of the reasons that these providers alluded to was that if Bitcoin clients started spamming or launching DDoS attacks and were terminated, they could not file a charge back, but in all fairness, even with credit cards, their accounts would be terminated, and no refunds would be allowed.

The reality of spamming

Most spammers don’t even care about the cost of the server itself, which makes Bitcoin very appealing. So what if they cannot chargeback? They make their money many times over by sending out their spam over clean IP addresses and once those are burnt out, they move on to another server.

BitcoinAt issue is the percentage of abusive Bitcoin clients as compared to abusive PayPal or credit card clients.

I think most providers will agree that there are fraudsters everywhere, but the perception by providers that don’t offer Bitcoin is that it’s too risky and not worth the hassle whereas providers that do offer Bitcoin counter that the numbers are very similar between the two forms of payment.

Privacy issues?

So far as verification, providers that offer Bitcoin generally still require information for their records and invoices. While Bitcoin offers privacy in terms of anonymity, and could enter fake information, verification processes like MaxMind and phone verification are utilized by many providers to weed out fraudulent transactions.

Additional overhead?

Aside from dealing with users who many providers perceive as bad neighbors, there’s the issue of increased accounting overhead. With cryptocurrency, you’re dealing with exchanges, and even though you could use programs like BitPay, businesses generally don’t pay their bills in Bitcoin, and those are the types of clients that providers cherish.

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