"Pay with Coinbase": What It Is and Why It Matters

Coinbase's merchant services products have flown under the radar for a while now, and I think they've been vastly underestimated. Here are some bullet points:

• 100% free to accept payments in any cryptocurrency that is supported by Coinbase.
• 1% fee subject to a minimum of $0.15 for the "instant exchange" option, which is basically merchant-side TenX: accept crypto, receive fiat, assume no timing risk whatsoever. For comparison, it costs merchants an average of about 2% to accept credit card payments.
• Merchants can opt to convert only a portion of their receipts and leave a percentage in crypto if they happen to have been bitten by the Bitcoin bug.
• Custody is handled by a third-party specialist with a proven track record. Say what you like about Coinbase, but they have never been hacked. Most merchants don't want to have to fuck with hardware wallets, mnemonic seeds, or the moral hazards associated with trusting retail employees. They outsource cash handling to specialized services like Brink's, and will surely want to do something similar with crypto.

Something else to bear in mind: we're effectively talking about a second layer solution here. If merchants can convince their customers to use Coinbase wallets, those transactions are instant and free.

I wouldn't trust Coinbase with all of my crypto, but I'd 100% trust them with a small amount of spending money if it meant that I could finally do instant and free Bitcoin transactions at my local coffee shop. Lightning might offer nearly the same functionality, but it comes with significant limitations that might not be tolerable to the average consumer or the average small business. Merchants accepting Lightning/Raiden/Trinity/whatever payments would still need to manage custody on their own, and do it separately for every cryptocurrency they want to be able to accept.

At this point, I give Coinbase (or a similar centralized solution) about a 50/50 shot at beating out Lightning as the "second layer" that actully manages to achieve mass adoption. Obviously only time will tell, but I truly do think it's a real possibility that almost everyone seems to be overlooking.

P.S. Peer-to-peer transfers between Coinbase wallets are also already instant and free, whether or not you have a merchant account.