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BTCPay Server vs. Payment Provider

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What does BTCPay Server offer?

BTCPay Server is a solution to accept Bitcoin payments in your own business. But how does BTCPay Server differ from other solutions? To better understand this, you have to deal with the confusion of the term of payment gateway, payment provider, payment server or payment provider.

What is the difference between the services of a BTCPay server and why do you need a Bitcoin Payment Gateway, a Bitcoin Payment Server or the services of a Bitcoin Payment Provider?

Everyone has already paid by us on the Internet or in the store with PayPal, credit card or online bank transfer. But what actually happens, how does it work and who is involved?

To describe this, the analogy from the real world helps.

If you want to pay as a buyer at the supermarket chain, then you get a box pushed by the cashier. In this box you put your card, maybe enter a PIN and after a few seconds you get your purchases handed out.

What does a Bitcoin Payment Provider do?

The activities carried out in the background of the above box is the activity of a Bitcoin Payment Provider.

The Bitcoin Payment Provider acts as an intermediary and ensures that the money gets from the buyer to the seller.

A Bitcoin Payment Provider takes over the technical payment processing and payment of the funds.

A Bitcoin Payment Provider uses a Bitcoin Payment Gateway for technical payment processing.

In addition to technical payment processing, the Bitcoin Payment Provider accepts the payments of the end customers (payers) and forwards the funds to the merchants (payees).

The Bitcoin Payment Provider acts as an intermediary between the end customer and the trader.

The Bitcoin Payment Provider is in possession of the funds from the payment for a certain period of time and thus poses a potential default risk for the trader.

Since the funds, or Bitcoin, are held by the Bitcoin payment provider for the trader, this is a form of crypto custody. Since January 2020, the crypto custody business in europe has been an activity subject to authorisation, which requires a special license.

The requirements of the license oblige the Bitcoin Payment Provider that the traders must undergo a so-called Know Your Customer (KYC) check.

To do this, a trader must be checked for business model and identity verification.

This administrative burden in the run-up to payment processing makes it difficult to try out and experiment with Bitcoin and Lightning as a payment method.

In addition, Bitcoin Payment Providers charge a fee for payment processing from the merchant. This fee is between 0.5 and 1 of the turnover made, depending on the provider and the turnover.

Bitcoin Payment Provider or Bitcoin Service Provider For more information about the tasks of a Bitcoin payment provider, see the post “What does a Bitcoin payment provider do?

What does a Bitcoin Payment Server (BPS) do?

As already briefly stated above, a Bitcoin Payment Provider operates a Bitcoin Payment Gateway to handle the technical payment processing between the end customer and the trader.

But can you not also operate your own Bitcoin Payment Gateway and thus dispense with the services of a Bitcoin Payment Provider?

This approach is behind BTCPay Server. A BTCPay server is an open source payment gateway for Bitcoin and Lightning. This Bitcoin Payment Gateway runs on a server called Bitcoin Payment Server (BPS). We use the term Bitcoin Payment Server and BTCPay Server analogously and shorten it with BPS.

By operating their own BTCPay Server (BPS), merchants are able to be a Bitcoin Payment Provider themselves. There is therefore no further instance between the end customer and the merchant. Any payment will go directly from the end customer to the retailer without detours.

As a result, the merchant no longer has to wait for the Bitcoin Payment Provider to forward the payments and there is no longer any risk that the payments will be missing.

The payments go directly to the merchant’s wallet and therefore there is no more crypto custody. The merchant does not have to disclose his identity or explain his business model to any entity.

The main advantage is also the non-existent costs for payment processing. When operating your own Bitcoin Payment Server, the transaction fees of up to 1 percent, which a Bitcoin Payment Provider charges for its service, are eliminated.

The advantages of running your own BTCPay server are:

  • Direkte Zahlung zwischen Endkunden und Händler
  • No middleman
  • No identity verification / No KYC
  • No transaction fees
  • No processing fees
  • Merchant has his own control over the balance with his own private keys (non-custodial)
  • Increased privacy
  • Increased security
  • Support for Bitcoin and Lightning payments
  • Integration of additional altcoins possible
  • Numerous applications possible. See application examples
  • Numerous shop modules such as WooCommerce, Drupal, Magento and PrestaShop
  • API interface – analogous to Bitpay’s API for easy migration

For a merchant, it is possible to operate their own Bitcoin Payment Server based on the BTCPay server. You can run your own BTCPay server on your own hardware. Further information can be found at: “Hosting a Bitcoin Payment Server

If you as a merchant do not want to operate your own BTCPay server, just a BTCPay shop is enough for you? An infinite number of BTCPay shops can be operated on a Bitcoin Payment Server from BTCPay.

With a BTCPay shop you have the same functions and possibilities as with your own BTCPay server. You are a subtenant on a BTCPay server with a BTCPay shop. This solution is offered as a third-party hosting.

Here you will find a list of some BTCPay Third-Party Hosts

You can find out how to set up and manage a BTCPay Shop with a BTCPay Third-Party host, you can read at: “Set up BTCPay Shop” or under BTCPay Shop administrate.

Coincharge also offers a free BTCPay third-party hosting for testing purposes at: BTCPay Shop.

This post is also available in: German