Bitcoin Payment Gateways & Percentage Based Fees

[g-uid]

Why do the payment gateways have percentage-based fee's?

Let's assume I'm fine with a transaction happening within an hour or two, perhaps even a day or two.

With this assumption, isn't the cost to transfer 500 BTC the same as 5 BTC?

If so, why the 0.5% to 1% fees from the payment gateways like Bitpay and Coinpayments?

If not, how does one accurately calculate the cost?

[Iranus]

The basic act of receiving a Bitcoin payment is free.  The payment processors are charging you for the service of handling these payments in a simple manner for the merchant to understand.

Some payment processors (such as Bitpay) also allow merchants to receive fiat rather than BTC, converted with no risk of exchange rate fluctuation.  This can also justify the cost of the service.

With this assumption, isn't the cost to transfer 500 BTC the same as 5 BTC?

Yes.  But the cost of keeping 500 BTC secure and/or exchanging 500 BTC to fiat is not the same as the costs for 5 BTC for a service like Bitpay.

Due to the high fees of credit cards, PayPal and other current systems, these payment processors can quite easily get away with charging a fee of 1%.  You could even argue that that fee is very low compared to what a lot of merchants have to deal with (PayPal give a fee of 2.9% + $0.25 in the US).

[g-uid]

Understood, thanks Iranus.

It feels like charging a rate dependent on the amount of BTC received and stored (so no fiat conversion) goes against the very spirit of Bitcoin.

[teilwalL05]

I really think it is necessary to pay the fees provided by miners, and even if you think it is unfair to have a large amount, the question look at the price back then and now that the price pump up that is why they deserve to have their share in what they do best,

And I think the amount on the fee can not hurt anyone, because it is still little compare to the things they do to roi and the number of translator.

[Iranus]

I really think it is necessary to pay the fees provided by miners

The payment processor does not have to pay that fee.  The user does.

It feels like charging a rate dependent on the amount of BTC received and stored (so no fiat conversion) goes against the very spirit of Bitcoin.

Maybe so, but that's what has naturally happened in the free market.  Capitalism is weird sometimes.

If a merchant wants to set up their own payment infrastructure or use their own personal wallets (perhaps even cold wallets for optimum security), they're more than welcome to do so.

[g-uid]

Totally agree to pay the mining fee, that makes sense.

But to be clear, the mining fee on transferring 500BTC vs 5BTC is the same right?

[Iranus]

But to be clear, the mining fee on transferring 500BTC vs 5BTC is the same right?

The transaction fee is dependent on the size of the transaction in bytes (after all, what you're paying for is storing data on the Bitcoin blockchain).

The size of the transaction in bytes can change depending on how you received that 5 BTC or 500 BTC that you're spending (how many inputs the transaction has).  It can also change if you intend to send the 5 BTC or 500 BTC to multiple recipients (having multiple outputs).

In theory, you could send a 500 BTC transaction that cost less to send than a 5 BTC transaction, but you're more likely to have accepted a large number of payments in order to spend that 500 BTC, so the transaction is more likely to be larger.

It's certainly not percentage based, anyway.

[g-uid]

It's certainly not percentage based, anyway.

Thanks, makes perfect sense and is exactly how I understood it.