Bitcoin and other virtual currencies are under heavy scrutiny from regulators worldwide, and Twitter has a history of blocking any payment system that it views as running afoul of its terms of service. But two Aussies who currently reside in San Francisco have developed a Bitcoin payment mechanism called TipperCoin that may be able to navigate these rough waters.
The payment method allows users to send bitcoins by posting a Twitter message containing the hashtag #TipperCoin (a hashtag is a word or phrase preceded by the # sign, which makes it easily searched on Twitter). Users cannot send bitcoins through retweets and are encouraged not to store too many bitcoins in the account, which is meant for tipping.
"Twitter is a good public platform to display that you've tipped/donated to someone," says Scott Li, co-founder and front-end developer of TipperCoin. "When bloggers/publishers start accepting bitcoin donations, there will be a day when they would think, 'I no longer need to spam readers with Google ads anymore.' This could be the end of advertising."
The concept was inspired by BitcoinTip, a system that allows users of the discussion site Reddit to tip other users of the site.
Li and cofounder Sidney Zhang chose Bitcoin because it has lower transaction fees than card purchases, making it a better fit for micropayments such as tips.
BitWall is another Bitcoin-based business trying to facilitate micropayments for content monetization. The San Francisco-based company recently launched a social "paywall" with The Dish Daily, an online technology and entrepreneurship publication. BitWall allows readers to view articles after they have tweeted a link to their followers. It also supports more conventional paywalls.
Li and Zhang launched TipperCoin this week. Their Twitter account has 385 followers and has posted 498 tweets so far. The account posts a tweet every time a user initiates a payment. It also tweets an automated reply when users send it a message.
TipperCoin does not charge transaction fees; the developers consider it a side project rather than a dedicated business.
"From what we've seen…there is value in being able to send bitcoins via Twitter," Li says. "If this grows to a significant size, we will contact Twitter in working with them more closely and being compliant with their rules."
The pair has not contacted Twitter apart from using its application programming interface (API), and Twitter has not yet contacted them.
"Social payments haven't taken off in a significant way yet … there's a lot of work to be done in terms of getting people thinking about payments in this way," says Gil Luria, an analyst at Wedbush Securities in Los Angeles, Calif.
But tech-savvy Bitcoin users are probably the best group of consumers to launch social payments to, Luria says. "The innovators that handle bitcoin are much more likely to be open and understanding to the opportunity in social payments," he says.
However, based on Twitter's history of enforcement, TipperCoin may suffer a temporary or permanent shutdown when the microblogging site takes notice.
Twitter has been particular about which companies facilitate payments on its service. Twitter has taken action against companies such as Flattr and Ribbon for running payments services that violated the company's terms.
"Any payment company working with any large company needs to know how to comply with the regulations," Luria says. "There's so much controversy with large companies dealing with money transmitters and bitcoin businesses are part of that."
Companies that currently facilitate payments via Twitter include Chirpify, American Express and Dwolla.
Twitter also hired its first head of commerce, Nathan Hubbard, formerly of Ticketmaster, in August. The move may signal the company's plans to take a more active role in payments.
Another issue for TipperCoin could be that it is facilitating money transfers without registering with the Financial Crimes Enforcement Network or obtaining the appropriate state licenses.
American Express and Dwolla are both registered as money services businesses with Fincen in all 50 states. "Chirpify uses acquiring bank partners who are fully compliant with money transmission licenses in each state," says Chris Teso, founder and CEO of Chirpify.
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