At Zaprite, our goal is to contribute to and help accelerate growth in global adoption of bitcoin as money and specifically as a payment rail.

The way we see the world, there are four key layers of the bitcoin payments stack, each being critical to mainstream adoption:

• Protocol layer (onchain, lightning, fedimints, etc.)
• Transactional layer – wallet and node infrastructure (e.g. custodians, lightning service providers, lightning SDKs, onchain wallets, collaborative custody)
• Commerce tools and templates (eCommerce, Invoicing, POS, API integrations, etc.)
• Payment gateway and checkout (interfaces to connect custodial accounts, wallets and nodes and to facilitate payments)

More adoption of bitcoin payments will occur as these layers are knit seamlessly together and as buildout occurs of the less well developed higher layers. Today, bitcoin payments are early but the building blocks all exist to meet the demands of bitcoin-minded business owners. Further tailoring bitcoin payment experiences to the operational needs of businesses and the nature of different forms of commerce is critical to broad-based mainstream adoption and that is our focus at Zaprite.

While Zaprite helps facilitate bitcoin payments, we are not a custodian, wallet or lightning service provider. We allow customers to connect custodial accounts, hardware wallets and lightning nodes to Zaprite such that payments can flow directly to the end customer rather than route through Zaprite as an intermediary. We principally deliver a combination of the third and fourth layers of the bitcoin payments value chain.

Often, consumers and businesses equate bitcoin payments to lightning wallets, not realizing that there is so much more to the successful delivery of a viable bitcoin payments stack for everyday businesses. Not only are commerce templates, reporting tools and payment gateways critical to bridging infrastructure to transactional context and fulfillment, but bitcoin payment rails are also not limited to lightning. Onchain transactions (and wallet infrastructure) are incredibly valuable and well suited for certain types of commerce, particularly high value transactions.

We could not deliver the value that we do without a robust network of wallet and custodial account providers, and the value those providers deliver is amplified by the commerce tools and gateway we provide on top of the transactional layers. Four or five years ago, building Zaprite would not have been possible. Now that the transactional layer is more developed (and diverse), there is a credible foundation upon which to build a bitcoin commerce ecosystem. Our relationship to the transactional layer (and market participants) is highly complementary and one that allows for compounding value by way of specialization.

In certain cases, we invest in delivering our own Zaprite native commerce tools and templates, such as Invoices, Payment Links and a virtual Point of Sale. But, we also make it easy to integrate Zaprite into custom websites via our API and eCommerce tools like WooCommerce, where customers leverage our payment gateway and checkout but utilize their own infrastructure (or third-party) commerce tools to facilitate other transactional workflows.

Rather than be everywhere (or everything to all people), our priority is in investing in payment templates or integrating Zaprite where i) we can provide an exceptional payment experience to help drive bitcoin payments and ii) where there is logical early adoption of bitcoin payments (i.e. in providing tools for customers and markets with a high overlap of willing buyers and sellers).

The way we deliver value is by actually driving bitcoin payments volume. It’s not enough to simply enable the option to pay in bitcoin. Driving growth in transaction counts and volume is paramount. There are no participation trophies. Our advantage comes in building commerce tools that natively integrate bitcoin payment options side by side with fiat rails in one unified Zaprite checkout. If we can integrate Zaprite into a commerce tool provided by a partner that will deliver a similarly exceptional payment experience, placing bitcoin on equal footing as fiat, such that we can drive bitcoin payments, we are certainly minded to do that. But if we cannot control the payment experience, our ability to deliver value becomes limited and most third-party commerce platforms simply do not have any priority on bitcoin today, which makes opportunities to integrate Zaprite into third-party tools less attractive than building great experiences ourselves.

While we expect that to change in the future, broader adoption of bitcoin payments in the mainstream is dependent on growing payments volume today. Having a unified checkout with fiat processors (like Square, Stripe and PayPal) alongside lightning and onchain rails for bitcoin provides the best ability for merchants to convert sales and reduce friction. It eliminates complicated and patched together payment flows, it allows for bitcoin to be on equal footing as fiat and it allows us to help our customers communicate incentives and preference for bitcoin. One of the greatest ways for merchants to do that is by making it clear that bitcoin is preferred and not just by saying it on a website. But by creating an economic incentive at checkout (either with a fiat premium or bitcoin discount).

For every transaction we help facilitate and convert, we deliver value to customers. For every transaction completed in bitcoin, our customers save. Not only does each bitcoin transaction save on transaction fees relative to fiat rails, but our customers get paid in the hardest form of money ever to exist, acquiring it in the most efficient and cheapest means possible by way of accepting bitcoin directly for goods and services.

Value in Return for Value

When we launched subscriptions for Zaprite, it was the first step in monetizing our platform. One challenge of delivering a bitcoin payments solution is the need to build your own billing system. The fiat processing (and fintech) world is so well developed that any individual building a business can easily plug-in fiat rails as an afterthought. But if you are building a platform for those same businesses to accept bitcoin (and fiat), there’s no easy plug and play suite to collect money yourself, almost by definition. That’s why we’re building Zaprite–to make it easy for a wide range of businesses to accept bitcoin but in order to do so, we also needed an easy way to bill our own customers in bitcoin (or fiat).

Initially, we settled on a fixed-rate subscription or account fee ($25/month or $240/year) as the first phase of a longer-term monetization path for several strategic reasons. First, we have a philosophy of making it easy and simple to pay for our service (in either bitcoin or fiat). Given our platform is non-custodial, we are never in possession of customer funds so we are not in a position simply to draft or deduct transaction fees from a customer account. We support connecting both custodial accounts and non-custodial bitcoin wallets and lightning nodes, but we are never in the flow of customer funds. We also help facilitate a combination of fiat payments, onchain bitcoin payments and lightning bitcoin payments. The combination of all three is critical in aggregate to what we view as necessary in driving value through our platform (fiat side by side with bitcoin and support for both onchain and lightning).

While there are nascent and novel approaches to either splitting payments on lightning as one approach to charging transaction fees or for a wallet to authorize automated pull payments, those approaches are nascent, novel and complex. Though it’s possible, the capabilities are not adopted or standardized across the vast majority of wallets and custodians (nor the most widely used). We also facilitate payments beyond just lightning and in ways that are completely non-custodial. Given the nature of our service, the easiest and least complex way to deliver an exceptional service and charge for it was initially as a fixed fee service.

At the monthly fee rate ($25/month), a customer would need to facilitate between $1,250 to $2,500 in bitcoin volume to have the fixed fee represent between 1-2%. Any customer that facilitates more volume has benefited from the fixed fee structure. And as early users of our platform, the incentives aligned. Even for customers that facilitated lower volumes, typically those customers valued having the option to accept bitcoin and viewed the option value and redundancy in rails as a worthwhile investment.

In all cases, implementing the subscription-based service initially allowed us to focus on customers that were actually willing to pay for Zaprite. In the future with the benefit of scale, we hope and expect to be able to serve even very small customers, but as a resource constrained startup, maintaining focus on customers with the ability to pay and the product feedback loops that come from aligned incentives has been a necessary trade-off.

At the time of launching paid subscriptions, our monthly payment volumes were less than $200,000. Since then and over the past 18 months, we’ve launched new products and many new features and payment connections (both bitcoin and fiat), including our API. Our subscriptions and volumes have grown significantly as we’ve made the platform and product more and more valuable. Currently, we are facilitating nearly $4 million per month, a 20x increase in payment volume (over $2-$3 million per month in bitcoin) from when we launched the fixed fee service. And as our platform has grown, it’s become important for us to invest more resources in our billing engine and to become more sophisticated in terms of how we charge for Zaprite (for value added beyond our basic commerce templates).

Updates to Zaprite Billing Model

As we onboard larger customers, deliver more value and drive greater payment volumes, it is important to continue to align incentives with our customers. Our ability to deliver increasing value consistently is ultimately tied to aligned incentives. As we deliver more value, we have a need as a platform to share in that value. And customers that value Zaprite have an incentive for our interests to be aligned.

With economic alignment as our goal, we will be introducing a transaction-based fee to our billing structure for certain higher value added products. Initially, this will be applied to our API, which has been hardened over the past 18 months (now out of beta) and our just recently released native Event Tickets feature, as well as e-commerce integrations such as WooCommerce. To align interests long term, a simple fixed fee does not make sense nor does a simple flat percentage fee applied to all transactions, regardless of transaction size, product or connection.

As an important note, transaction-based fees will only be applied to transactions and volume paid in bitcoin (i.e. we will not charge any transaction-based fees on fiat transactions incremental to fees charged by fiat processors) and only if a customer utilizes certain advanced Zaprite products to which these fees apply (e.g. our API, Event Tickets, and e-commerce integrations initially). For every bitcoin transaction we help facilitate, we help drive savings for our customers. This is how our incentives ultimately align. We deliver value by enabling bitcoin rails as a redundancy to fiat, helping drive aggregate payments volume, and for each transaction facilitated in bitcoin, saving customers on transaction fees. We don’t deliver value by charging customers more to facilitate fiat payments.

As our customers facilitate more volume in bitcoin, they save more and directly on a per transaction basis, which means we’re only compensated incrementally as the customer receives a direct benefit. For products to which transaction fees apply going forward, the standard transaction-based fees on bitcoin will be 1.00% of volume paid in bitcoin with a cap of $15 per transaction, which was set based on a combination of industry comps, the value and nature of our service directly (including cost structure + incentive alignment) and savings relative to fiat alternatives such as a typical credit card processing fee of 3% and typical wire fees for large transactions of $25-$30.

	API	Event Tickets	E-commerce Plugins	Invoices	Payment Links	Payment Requests	Virtual POS
Minimum Account Fee*	$25/month minimum account fee, which is deducted from or netted against transaction based fees.
Payment Volume % of transaction	1.00% (cap of $15/tx)	1.00% (cap of $15/tx)	1.00% (cap of $15/tx)	n/a	n/a	n/a	n/a

Importantly, the base account fee will be credited against transaction fees rather than transaction fees being incremental. If transaction fees exceed the base account fee, the net amount will be billed in arrears at the end of the month. For example, no incremental fees would apply in a scenario where a Zaprite customer had $2,500 in monthly payment volume paid in bitcoin (with a monthly account) or $30,000 in annual payment volume paid in bitcoin (with an annual account), assuming no transactions reached the individual transaction cap. The table below shows various scenarios and the illustrative savings relative to fiat credit card processing.

Zaprite customers will only pay incremental net transaction fees as more value is delivered (and only if utilizing our API, native Event Tickets feature, e-commerce integrations or other advanced features we add in the future). And as Zaprite delivers more value in facilitating payments in bitcoin, we help our customers save incrementally relative to fiat processing fees which fully aligns interests. Importantly, for existing customers, no changes will occur until current annual plans expire or for six months, whichever period is longer. All existing users with large payment volumes that would incur incremental fees after the grandfathering period (based on current volumes) should also already have received direct communication from our team.

For context, we’re most focused on the wave of growth to come as we onboard more customers, needing to have the right fee model in place going forward, than we are focused on charging existing customers more. That’s why our highest priority is to make sure existing customers understand the changes and if we need to customize, either by delaying when the changes take effect or mutually agreeing on a customized fee rate, we’re happy to have those conversations to make sure current customers are happy and value for value is aligned. We also plan to add flexibility that allows customers to pass on fees and thresholds that stair-step down (and reduce) standard fee rates as volume increases to continually drive further alignment over time.

If you have any questions about these changes, if you would like to discuss them or if you are interested in any of our products, you can reach out to me personally at parker@zaprite.com.

Best,
Parker