Inside the Wild West World of Gift Card Bitcoin Brokering
(The Intercept) ERIC BECAME FASCINATED with bitcoin while using it for offshore gambling sites. That led him to his trading business, which he’s operated for over three years.
Here’s how it works: Eric sells bitcoin to buyers all over the world through a peer-to-peer marketplace called Paxful, charging a premium for the cryptocurrency. When Eric started his business a couple of years ago, he could charge a 100 percent markup — selling $300 in bitcoin for $600 — because buyers expected the cryptocurrency’s price to elevate, and had few options to obtain it. Nowadays, with more volatility and more competition among traders, that has dropped to around 30 percent. Paxful takes a small slice of each transaction on their service, usually about 1 percent.
In exchange for the bitcoin, the buyers typically swap gift cards, which are less traceable than dollars or yuan and, thanks to globalization, broadly useful all over the world. No physical card changes hands; Eric will get the number from the gift card and load it into an app called GiftMe, which generates a barcode that can be used at a checkout counter.
Sometimes the transaction stops there: Eric can use a gift card to buy essentials. But repeated trading requires an endless stream of bitcoin, more than he could mine or purchase on his own. So he has to use the gift cards to acquire more bitcoin, making his money on the spread between what he’s charged to buy it and what he charges to sell it.
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