This article originally ran in the February 2018 issue; click here to see the digital edition.
Bitcoin has exploded into the spotlight and isn’t likely fading any time soon. In 2017 Bitcoin went from $1,100 in January to more than $19,000 in December of 2017. This meteoric rise brought Bitcoin back into mainstream conversation, though many are wondering if it has truly crossed the bridge into mainstream adoption. With the rise of Bitcoin, and Bitcoin awareness, where does that leave adult entertainment in the mix? What does the future of Bitcoin look like and how does that intersect with the adult industry?
The adult industry is no stranger to cryptocurrency. Many people in adult have been accepting cryptocurrency on their sites for years. I began accepting Bitcoin at 7veils.com as a payment method for social media marketing services in 2013. When people ask me why 7 Veils accepts Bitcoin, the response is simple, I don’t want to limit the ways in which people can pay for my services.
Steven Grooby, founder of Grooby.com, said, “We’ve been taking BTC payments through since 2013. I’m amazed that websites still aren’t taking it, and they always seem surprised when I tell them we make sales on it. We went from making a couple of sales a week, to a couple of sales a day. It’s not huge numbers, but anyway to get a customer to purchase works for me. Over that time we’ve paid producers in BTC, we’ve cashed out some and left the rest in BTC so the growth in capital has really been a boon.”
There are many people in adult that have issues with traditional payments methods. “Institutional bias has made it near impossible for sex tech entrepreneurs to rely on traditional mechanisms of payment and identification,” said Leah Callon-Butler, engagement director at Intimate.io. “The cost of doing business is exorbitant—with some of our clients having told us that they were forced to pay banking fees upward of 20 percent—while many mainstream banks and payment gateways, such as PayPal, won’t deal with retailers in this space at all.
“This stigma and social exclusion has long prevented innovation in the sector, but now, we are launching a new cryptocurrency to revolutionize the future of adult to make transactions safely, reputably and privately through a decentralized network.”
Because Bitcoin is decentralized, meaning banks are not involved, institutionalized bias is irrelevant when making payments on the direct peer-to-peer network. This makes Bitcoin a very attractive payment option for the adult industry. For industry professionals it also makes launching their own coin that may address some of the issues with Bitcoin potentially desirable. In the past, ICOs (initial coin offerings) in adult have been lackluster, such as the rise and fall of Titcoin. With the development of more alt-coins, such as Ethereum and Ripple, and a deeper understanding of what can be accomplished with the blockchain, coin developers are in a unique position to offer an ICO that addresses the needs of specific industries.
“The intimate token is taking the benefits of crypto and tailoring them to the unique requirements of the adult and sex tech industries,” Callon-Butler said about their upcoming ICO.
As a peer-to-peer payment network, using third-party processors is not required to send or receive payments, though many businesses in adult want to use cryptocurrency processors to make handling payments for site memberships easier. This leaves many people in adult still vulnerable to the whims of non-adult processors. Bitpay is one of the largest processors for Bitcoin payments for businesses. You may remember Bitpay as a fairly large presence at industry shows back in 2013 and 2014. CNBC and Coindesk have quoted Tony Gallippi, CEO of Bitpay, regarding the value of processing for high-risk clientele and how his company solves an issue for the industry concerning payment processing and chargebacks; and how the adult industry will bring a high volume of transactions for Bitpay, boosting their business and legitimacy as a payment processor.
“Some of these people [in adult entertainment] have been burned before by new payment transaction companies coming in and taking their money,” Gallippi told CNBC.
At the end of 2017 Bitpay announced they would no longer be working with any merchant that provides sexually explicit content and gave notice to all their account holders in adult that they had two months to find a new payment processor. Bitpay did exactly what Gallippi criticized other companies for doing. Thankfully, there are other crypto processors, such as GoCoin, that are not adverse to the adult industry.
When it comes to accepting Bitcoin payments, there are concerns that many people share, processing needs that need to be filled, and tech/security requirements that need to be met. Can Bitcoin solve all these issues? “Being online and global, there is a need to provide users with as many payment options as possible; increased options for your customers means increased conversions and sales,” said Paul Armstrong, CEO of Lit3.com. “Bitcoin hasn’t hit mainstream just yet. While there are several large organizations that have discussed offering it as a payment option, these large organizations have the budget to maintain risk, whereas small businesses must limit as much risk as possible. If you’re considering Bitcoin for your customers, there are some upsides and downsides that should be considered. It’s great from the point of view of having zero charge-backs—you can set transaction fees (priority) and anonymity for the user. But there can be security concerns and the market is also volatile to the point that it can impact profit margins. Some of this can be avoided by selecting a processor and currency that can automatically convert payments to local currency, avoiding inflation issues.”
The biggest issue concerning implementation is that most people still don’t understand how the core transaction processes work and thus how to go from incorporating it into their site to money in their bank account.
“Now that cryptocurrencies are gaining a foothold in modern day use, there will soon be a point where it is combined with AVS or other necessary tech services so that the barrier to entry and ease of implementation in Adult will be accessible to all,” said Mike Ackerman of Actually Helping.
Interest in Bitcoin has significantly increased but many consumers still don’t realize that it is a transactional currency and not just an investment with the potential for high return. Problems for adoption “include high transaction fees and slow processing times (ironically, these are issues that the cryptocurrency was designed to solve) as well as a clunky, non-intuitive user experience for people trying to buy crypto for the first time,” said Leah Callon-Butler.
Bitcoin is still dominated by the tech savvy. People who are new to it tend to get overwhelmed with the buying process and are unclear in how to use the Bitcoin once they have it. Though many websites are trying to improve the user experience, it remains a barrier to entry. To increase Bitcoin payments, the community needs to do more to encourage Bitcoin to be used as a payment method. This may require an education push from websites to their users.
From a business perspective there are still a lot of questions that people have. In 2018 we will likely see more sites integrating Bitcoin payments into their websites. JuicyAds recently added cryptocurrency payments.
CEO Juicy Jay said, “We decided to start accepting Bitcoin out of curiosity mostly. We are the first advertising network in adult to accept Bitcoin, Litecoin, and Ethereum rather than just Bitcoin. With Bitcoin (most likely) in a bubble, we felt the other cryptocurrencies were a bit more interesting. There are affiliates who want to get paid in Bitcoin (and I am sure they have their own personal reasons) but potentially to stash them away and see if they inflate more in value.”
Cryptocurrency has the potential to be a payment method for all aspects of the adult industry, from paying for content, paying consultants, writing paychecks, to paying affiliates.
“I see a lot of potential for cryptocurrency in the adult industry,” said MacKenzie Peck, founder and editor-in-chief of Math Magazine. “In an era when companies and individuals are being crippled by morality clauses, terms of service changes, and the whim of sites, credit card companies and transaction services—protected, stable, anonymous transactions going mainstream could be a big win for porn creators, providers, and consumers.
“Cryptocurrency has the potential to make it easier for people to pay for their porn, for performers to pay for groceries, and for production companies to accept payment easily and without fear of being shut down by Visa or Paypal.”
Until Bitcoin stabilizes again, we are not likely to see a lot of people using it as a payment method. However, alt-coins such as Litecoin and Ethereum are a lower cost per coin, which can lower the mental barrier to entry of purchasing a Bitcoin for $15,000 (price of Bitcoin at the time of writing). Even though you can purchase fractions of Bitcoin (aka satoshi’s), meaning people can buy in at any amount, there is a mental barrier that says they are spending $15k, even though they are only spending 0.00132447 BTC which is $19.95. Many consumers still feel there is an opportunity cost for spending their Bitcoin and not holding (or HODLing for the crypto folks).
2018 should see a lot more adoption of Bitcoin, and alt-coin’s, into business. This year has the potential to herald some significant developments in payment processing with Bitcoin, as well as developments in user interface to encourage beginners to get into crypto more easily. We are not likely to see crypto falling away from headlines for quite some time.
