Paxful: On-Boarding New Bitcoin Buyers
Paxful is a service based out of Estonia that you can purchase bitcoin and sell the virtual currency to any peer around the world. Founders Ray Youssef and Artur Schaback love Bitcoin and are very passionate about the currency. The site features a simple interface where users can create a wallet, build a reputation, and get access to free merchant tools. The company has been in beta for a few months, but left its soft launch to go public a short while ago. It offers many solutions to people wanting to get into cryptocurrency and various methods of trade.
Also Read: Stanford University Launches Bitcoin Security Education Course
The Bitcoin service has teamed up with website Backpage who have recently started accepting alternate currency after the embargo with credit companies. This gives more access to those who wish to purchase the digital currency implementing it with Backpage services. Paxful has even provided a guide to helping users of the site understand how to purchase and use Bitcoin.
Bitcoin.com got together with Ray Youssef to speak about his team’s passion for boosting the cryptocurrency to higher levels. How they manage the “Backpage Effect” happening, and how their team is motivating new users to gain insight to the virtual money.
Paxful extends the financial democracy of a decentralized currency like bitcoin by creating a peer to peer marketplace especially designed for on-boarding new buyers. Some people call it the “People’s WallStreet”.— Ray Youssef
BITCOIN.COM: CAN YOU EXPLAIN TO OUR READERS WHAT PAXFUL IS?
Ray Youssef: Paxful is a money marketplace where people exchange value using bitcoin and other financial instruments. At its core it is a listing service allowing buyers and sellers of bitcoin to find each other and an escrow service that protects their transactions. We publicly launched a week ago after being in an open beta for over three months. We just wanted feedback from the community so we would know how to best serve the market. We were overwhelmed with amazing support from elite market makers looking for a team that would take measures to protect them from all the chaos in the bitcoin space. We then got flooded with completely new buyers and the feedback they gave us really opened our eyes as to just how much work was to be done to take bitcoin mainstream. It is a tremendous amount of work for any team, but especially challenging for a two man shop. We’ve relocated to Estonia to hire several developers before moving to Silicon Valley.
BC: Do you see any similarities with this business model, in contrast to Localbitcoins?
RY: Paxful like many other services such as Purse.io is an escrow service. The advent of a instantly transferable digital currency like bitcoin has opened the door to an era of escrow services each catering to different niches and with different feature sets. Paxful is a listing service for buyers and sellers much like Localbitcoins except that Paxful does not support in-person local trades, Paxful is online only thus more global than local. Not just anyone can sell on Paxful. We verify our vendors to guarantee buyers safety and we have tailored our reputation system to protect market makers and reward those who give new buyers the support they need. We have a very close community set up for our vendors, it is like family and this allows us to share their immense knowledge base of best practices and protect them and their customers. We are focused on the mainstream market and on-boarding new buyers into the bitcoin economy rather than just otc dealers. Moving forward, we will be launching many new social features to further empower the market makers and give even more options to buyers.
BC: Can you explain all the optional methods your users can wield to purchase Bitcoin?
Artur Schaback, CTO:
One of Paxful’s innovations is that nearly any custom payment method can be added on the fly. This removes any local limits to how market makers can be paid and how buyers can purchase and makes Paxful a truly global platform. Users have made ads to sell bitcoin for everything from cash deposits to prepaid debit cards to “mining gear” and many other things. Paxful is an open platform whose mission it is to usher in an age where fiat currency is no longer needed as communities continue to “close the circle” and become crypto only economies. The only way this can happen is if you give them the flexibility to transact in whatever local payment methods or commodities they may have. Protecting our sellers from fraud and scams is a huge concern, so we are leveraging their immense knowledge-base of fraud detection to create a comprehensive database and education resource for all peer to peer market makers. This keeps the white hats out in front.
BC: Paxful is integrating with BackPage. Can you describe how this manifested?
RY: This happened organically.
When BackPage lost their access to Visa and Mastercard they scrambled to implement bitcoin. The directory they linked to initially had Paxful and a brokerage site listed at the top. The brokerage site began reporting BackPagers to the authorities while we decided to help them in any way we could. We had our number listed on our website to get feedback and in the first day we received over one hundred and eighty calls. We did not sleep until BackPage got Visa back. This lasted a single day until they lost Visa again and we were again flooded with calls.
Almost two months of speaking to their customers, feeling their pain and seeing bitcoin through the eyes of BackPage’s users gave us immense insight into just how broken the bitcoin process was. We began giving BackPage feedback on how to improve the process from their end while working furiously on our own end to simplify the process for the user. In a single month their conversion rate went up nearly 20x. This was a result of listening to their customers and seeing their situation, not just from a technical perspective but from one of compassion and humanity. The sending process was far more painful for people than the buying so we proposed that Backpage could add a button that would link straight to their Paxful wallet and automate the copying and pasting of decimals and public keys. This may sound utterly trivial to hardened bitcoiners but it has cut our support over one third and raised the impression of bitcoin in the eyes of first time users. We have many more innovations planned to ease the on-boarding process and we are confident BackPage can get back 100% of its lost business. Bitcoin is rising to the challenge and emerging as a true alternative to Visa and Mastercard, this will be the tipping point for bitcoin merchant adoption and it all started with a Hello on the phone and a patient ear.
“In ten years we know everyone will have a bitcoin wallet and bits will be the dominant world currency. Our goal is to create the fertile ground for that coming reality. Welcoming first time buyers with a simple on-boarding process, empowering and protecting market makers with the right systems and uplifting the entire space with tools to monetize their work are all apart of that”
BC: Credit Card processors banned Backpage. Why do you think they did that? Why is Paxful willing to help them?
Visa and Mastercard banned BackPage after political pressure was put on them from a sheriff in Illinois. Amex had banned BackPage earlier that year. All it took was one man’s complaint over morality issues, that is how fragile any online business’s revenue stream is. Any networks that run atop the SWIFT banking network will forever be beholden to political pressure and the financial powers that own them. The ability to deny access to these networks can destroy a business overnight and this is the reason why powerhouses like Craigslist abandoned certain niches. Once businesses realize that there is a technological alternative and a fertile enough economy to support it, then we will see radical shifts in society, business and culture. There is so much innovation and disruption that is being suppressed by the fear of being cut off from the banking network. Once that fear dissipates, we will see a golden age of innovation, bitcoin is a yellow brick road towards that and peer to peer markets are laying each block in that road.
BC:How has the initial start with Backpage been so far?
RY: The beginning was rough. Besides a complete and utter lack of sleep we had to deal with immense emotional stress coming from BackPage customers. The 3rd call we had was a lady who chewed me out for a half hour, she was nearly in tears and it felt like she was taking out years of frustration out on us and bitcoin. A few days later she called and apologized. She had spent a few days learning about bitcoin she understood how significant it was and why BackPage began using it.
The buyers we were helping required immense help and education. Many did not have basic internet skills or even computer skills. Most did not have a computer at all, and were using the site on mobile. Many did not have internet access of any kind and were calling from public libraries. Copying and pasting was an entirely new skill for many of them and on mobile it was even more difficult. It was thankless work and it certainly wasn’t making us rich as most purchases were between $5-$20 for an average of a twenty minute call. This was why no other service wanted to deal with them. We knew it was about a lot more than money or even bitcoin.
Towards the end of the second day we got a call from a lady we codenamed “Kelly” she made it clear to us just how important and life or death this entire situation really was. These were single mothers feeding their children and if this did not work they may have to do things that would endanger their lives. That put everything into a new light and recharged our batteries. We doubled up and made plans like a military operation, calculating what upgrades we had to make to simplify the process and lower our support burden just enough so we could make it to the next upgrade. Artur, our CTO was an absolute machine and single handedly rewrote most of the site from a otc trading system to a new user on-boarding system. The intern we had quit along the way from burnout and I had to handle all support. When we finally had time to get some sleep so we began rotating sleeping shifts. It all came together with us barely making it to each day. By the time we had a step by step guide, full walkthrough video and a vastly improved user experience, BackPage came to the rescue with the integration and saved us from total collapse.
We are now at the point where we can begin telling the world what had happened and why it is so important. The BackPage Effect changed everything for us and made us see that bitcoin is a lot more than freedom granting technology, it can be the difference between life and death for the people who need it most. It’s been an amazing ride and the volume is only growing.
“This happened organically. When BackPage lost their access to Visa and Mastercard they scrambled to implement bitcoin. The directory they linked to initially had Paxful and a brokerage site listed at the top.”
BC: How does your company feel about the current rate of Bitcoin adoption?
RY: Bitcoin adoption is doing great. Considering how broken the process is for a first time buyer it is an absolute miracle it has gotten this far. We all owe this to the passion and dedication of the bitcoin community. It is time we shifted priorities. While the bitcoin tech community is infighting and the venture capitalists are worried we are focusing on simplifying the new user experience. There are so many things that we take for granted as power users that the normal person sees as a massive chasm. We are now building these bridges and talking with the leading content creators in the space to recruit them into the adoption process in a way that enables them to improve their content and value even more.
Once BackPage integrated our Pay with Paxful wallet we noticed some surprising behaviors. While most of the ads on BackPage are around a dollar we began noticing users send large quantities of bitcoin to BackPage, around 2-4 BTC. These represent very large ad purchases. Ease of use is tied to trust and consumer adoption. Besides a lower support volume and rising average purchase price we are noticing even new users have a much easier time as the knowledge of bitcoin spreads peripherally throughout.
BC: Which Bitcoin Brokerage model do you think will succeed the most? Operations like Paxfuls or models like Coinbase and Circle.
RY: There is no doubt that a peer to peer currency like bitcoin will reach the people through peer to peer marketplaces like Paxful and the others to come. Brokerages have been a vital part of the ecosystem and will continue to provide a valuable service for investors and suppliers, but there is no doubt that as bitcoin floods into the mainstream it will be by people helping people through direct trade. Bitcoin as a phenomena naturally leans towards peer to peer distribution and all the statistics prove it. Our experience has shown us that roughly half of new buyers do not have a bank account, they engage with the banking system through prepaid debit cards bought with cash and their mobile phones; right here in the USA. Only a peer to peer marketplace can service this segment of the population. Ultimately bitcoin brokerages will be bought out by banks and people will flock to peer to peer marketplaces to get their bitcoins en masse. The BackPage Effect is only the first ripple.
BC: Do you think Bitcoin can overcome financial censorship?
RY: We know bitcoin can overcome financial censorship. We see it every day. The key here is to realize that bitcoin as a technology cannot do it without the human element. Intellectually understanding how money actually works is rather simple yet emotionally it is akin to climbing Mt Everest with one arm, one leg and one lung. We have been so conditioned not to ever question where the value of money comes from that we need emotional support to see the true value of bitcoin and how it can protect the value of our work, which is ultimately what money is for. Banks used to be a customer support industry, serving lemonade and crackers and knowing you buy first name, this is no longer the case and that is a huge opportunity for bitcoin if startups can rise to the opportunity. People want to feel secure about their money and even more than armed guards a warm smile and real human support can go a long way to making people feel secure. Us crypto geeks need to understand how vital this point is, people don’t care about how amazing immutable ledgers like the blockchain are or how cryptography can help humanity. The thought of keeping money on their computers scares people as does the irreversibility of bitcoin, yet all these negative impressions can be overcome and the monumental advantage in bitcoin can be made clear to everyone as long as we put forward a human face to the numbers.
“These were single mothers feeding their children and if this did not work they may have to do things that would endanger their lives. That put everything into a new light and recharged our batteries.”
BC: What the future for your business or its ultimate goal?
RY: In ten years we know everyone will have a bitcoin wallet and bits will be the dominant world currency. Our goal is to create the fertile ground for that coming reality. Welcoming first time buyers with a simple on-boarding process, empowering and protecting market makers with the right systems and uplifting the entire space with tools to monetize their work are all apart of that. It is several immense projects in one but they must all come together with a unified vision for this to work. We got this vision by listening to the people and we will execute it by continuing to keep to our core values of empowering those who need it most.
With Paxful giving more options to Bitcoin buyers and sellers the business is going in the right direction with the community. Teaming up with Backpage seems to be a great choice for the company and are helping the flood we call the “Backpage Effect”. Introducing new users to the currency has been a positive outcome for the service. In Paxfuls world all they aim to do is offer a “simple on-boarding process” to the decentralized money.
What do you think of the service Paxful? Let us know in the comments below.
Images courtesy of Paxful, Shutterstock, Pixbay, and Redmemes
