Acceptance policies
Many businesses accept Bitcoins in exchange for their goods and services. Their policies vary depending on what they sell and their flexibility in pricing their goods. Here are some of the most common policies.
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Cheaper In Bitcoins (CASH)
Goods and services are available for traditional currency, but are priced at a discount when purchased with Bitcoins because the merchant, for philosophical reasons, cost savings, or otherwise, prefers to receive Bitcoins as payment. Merchants may offer goods and services for a discount in Bitcoins for any of the same reasons they might offer a discount in person for immediate payment in cash.
This policy is most favorable to the consumer using Bitcoins and is the most likely to attract business from the Bitcoin community.
Fixed Bitcoin price (FBP)
Goods and services are priced in BTC. Price changes, when necessary, are considered manually. This is common for goods and services that are sold exclusively in Bitcoins.
Fixed Bitcoin price with reserve (FBPR)
Same as Fixed price in BTC, but the merchant reserves the right, during periods of high price volatility, to temporarily suspend acceptance of BTC, or to charge a price that leaves the customer bearing most of the risk.
Liquidation Price (LIQ)
Goods and services are priced in traditional currency (dollars/euro), and Bitcoins are credited strictly for the traditional currency that can be obtained on the exchanges by selling the Bitcoins immediately at the time the trade is made. In many cases, this is exactly what happens, and the credit is equal to the proceeds of the trade.
This pricing is least favorable to the consumer using Bitcoins, but also presents the lowest risk to traditional businesses who have opted to accept Bitcoins as payment. It tends to make payment by traditional currency more favorable, and usually only attracts Bitcoin business in cases where use of traditional payment is undesirable (e.g. buyer wants anonymity, or Bitcoin is the only payment method accepted, or where seller requires a non-recourse transaction as a condition of doing business)
The merchant reserves the right to temporarily suspend acceptance of Bitcoins if liquidation is impractical or impossible (such as due to unavailability of the exchanges).
Proportional price (PP)
Goods and services are priced as a percentage of some other factor. For example, the MtGox trading fee is priced as a percentage of the trading volume. Adjustments due to exchange rates are unnecessary or rare under this policy, often because they are balanced out by some other factor (such as trading volume).
Last Trade Price (LAST)
Goods and services are priced in traditional currency (dollars/euro). Bitcoins are used as a substitute for traditional currency. A price believed to reflect the most recent trade on the exchanges is used. A merchant reserves the right to apply this policy only to “typical” size transactions for that merchant. A price may be locked for up to several minutes to ensure the transaction can be started and completed at a single price. During times of high volatility, price locking will be unavailable.
may present LAST pricing in the form of external images that are automatically updated by a web service to compute a BTC price from the exchange rates in real time.
Last Trade Price with Reserve (LASTR)
This policy is like LAST, where the merchant prefers to use the last trade price for simplicity, except that the merchant further reserves the right to use it only during times of stable trading activity where the bid/ask spread is minimal.
Merchants reserve the right to use an alternate policy (e.g. MID, BB) whenever there is a significant bid/ask spread on the exchanges, and to use LIQ or to suspend acceptance of Bitcoins during times of very high volatility.
Best Bid (BB)
Goods and services are priced in traditional currency (dollars/euro). Bitcoins are used as a substitute for traditional currency. The highest unsatisfied bid price shown on the exchanges is used as an exchange rate. A merchant reserves the right to apply this policy only to “typical” size transactions for that merchant, defaulting to Liquidation Price (LIQ) for abnormally large transactions. A price may be locked for up to several minutes to ensure the transaction can be started and completed at a single price. A merchant may suspend price locking or acceptance of Bitcoins during high volatility.
Websites may present BB pricing in the form of external images that are automatically updated by a web service to compute a BTC price from the exchange rates in real time.
Midpoint between Best Bid and Best Ask (MID)
Goods and services are priced in traditional currency (dollars/euro). Bitcoins are used as a substitute for traditional currency. The midpoint between the highest unsatisfied bid price and the lowest unsatisfied ask price shown on the exchanges is used as an exchange rate. A merchant reserves the right to apply this policy only to “typical” size transactions for that merchant, defaulting to Liquidation Price (LIQ) for abnormally large transactions. A price may be locked for up to several minutes to ensure the transaction can be started and completed at a single price. A merchant may suspend price locking or acceptance of Bitcoins during high volatility.
Websites may present BB pricing in the form of external images that are automatically updated by a web service to compute a BTC price from the exchange rates in real time.
Recent Weighted Trade Price (RWTP)
Goods and services are priced in traditional currency (dollars/euro). Bitcoins are used as a substitute for traditional currency. A price believed to reflect a weighted average of recent trades on the exchanges is used. The actual formula is not defined by the policy, but typically tracks trading activity over the past few hours, and is often calculated by the exchanges.
A merchant reserves the right to apply this policy only to “typical” size transactions, defaulting to Liquidation Price (LIQ) for abnormally large transactions, and to suspend acceptance of Bitcoins during periods of high volatility.
Websites may present RWTP pricing in the form of external images that are automatically updated by a web service to compute a BTC price from the exchange rates in real time.
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