Bitcoin-Friendly Web Hosting

You’ve got a lot of options when it comes to purchasing Web hosting. Credit cards, PayPal, checks, and money orders enjoy wide acceptance. And with the rise and spread of Bitcoin—a new kid on the economic block that’s billed as “the world’s first decentralized digital currency”—hosting providers are slowly coming to embrace it as a payment option as well. However, since adoption of the new method is far from universal, just how easy is it find a provider who’ll let you pay for hosting with open-source, virtual cash?

How Bitcoin Works

Unlike bills, coins, or even gold ingots, Bitcoins are not created with a serial number or other identifying marks. Instead, every transaction is sent to the Bitcoin network as a whole as a chunk of code. These chunks are known as “blocks,” and every transaction is attached to the ever-growing universal log of all Bitcoin transactions. The Bitcoin network is continuously evaluating the log for consistency, and since all transactions are encrypted using a method known as hashing, both information theft and counterfeiting are extremely difficult (but not impossible).

Mining for Virtual Gold

Bitcoin relies on a vast peer-to-peer network of user computers that perpetually create new bitcoins in a complicated process called “mining.” This process produces around 300 coins an hour, on average, but due to the structure of the mining algorithm, this number is expected to fall to 12.5 by around 2030, when the maximum number of Bitcoins (approximately 21 million) will be reached. As with mining in the real world, eventually the lode vein will be tapped out.

Paying with Bitcoin

Bitcoin users store their virtual currency in applications known as “wallets.” Coins can be stored in wallets on mobile devices, with third parties, or on the user’s local hard drive. These applications vary in security, capacity, and features. Some are quite basic, while others, such as Bitcoin Armory, offer advanced features and offline storage of currency (to help protect against loss of assets in the event of server failure).

To pay using Bitcoin, you create a Bitcoin address, which in turn is assigned a pair of keys (long strings of numbers and letters)—one public, one private. The public key is used to identify the transaction in the public Bitcoin log (where all transactions are recorded), and the private key is used to authorize the transfer of funds. Because all transactions are recorded and part of the chain of blocks in the Bitcoin log, most users create a new Bitcoin address for every transaction they conduct in order to help protect their personal information.

Bitcoin-friendly Hosting Providers

Given its complexity, lack of centralization (and associated support for asset value), and fluctuating exchange rate, Bitcoin is not yet considered a reliable method for certain transactions, such as storing money long-term. However, it is growing in popularity with consumers eager to embrace electronic currency exchange, and Bitcoins can now be used to pay for everything from software development to pizza to, well, human companionship.

Motivated by support for open-source technology, and seeking to circumvent some of the limitations inherent to payment methods such as PayPal, Internet giant WordPress has also embraced Bitcoin. Other major hosting providers, such as NameCheap, have also begun accepting Bitcoin for hosting accounts and services.

And it’s not just the big names that have taken a shine to the newest currency on the Internet. While you’re still far more likely to find PayPal as the preferred electronic payment method when shopping for a provider, support for Bitcoin is growing. In fact, some providers accept Bitcoin as their only method of payment, (although this is still rare).

Paying for your hosting with Bitcoin works just like any other Bitcoin transaction. You’re provided a Bitcoin address created especially for your purchase, and submit the required amount using your wallet app (you’ll need to have a Bitcoin wallet set up and ready before beginning the transaction). Once your payment is confirmed, you’ll receive an email welcoming you to your new hosting provider.

Bitcoin Benefits—and a Few Caveats

Bitcoin’s anonymous, decentralized, and open-source nature make it an attractive alternative to traditional payment methods for anyone looking to avoid high transaction fees, sharing their personal information, or the banking system as a whole. And because every transaction is electronic and in a closed system, transfers can be processed in as quickly as a few seconds.

However, it’s important to keep a few things in mind when using the Bitcoin system to pay for your Web hosting (or any other good or service):

• Bitcoin values are extremely volatile. As an open-source currency that exists and has value only within the electronic network that supports it, Bitcoin is worth whatever the sea of users believe it to be worth on any given day. A run on the virtual bank or a widespread rejection of the currency by vendors could crash the currency in minutes—taking your investment with it.
• Bitcoins are ephemeral.While various wallet applications have built-in security features, as a virtual currency, Bitcoins exist only so long as whatever hard drive they’re stored on continues to function. Whether stored on your own hard drive, your mobile phone, or a third-party Web service such as Coinbase, a hardware malfunction or a power surge might be enough to wipe you out.
• Some services might not be available to you.Because users are encouraged by Bitcoin to use each address they create only once, features like recurring billing or one-click add-on services (such as increasing the capacity of your hosting account’s resources, for example) may not be available. You may need to conduct a discrete transaction, with a new address, for every purchase (or for every month’s hosting, in the case of recurring billing).

Not everyone needs or wants to pay for their hosting with bleeding-edge, open-source currency, and it’s unlikely that Bitcoin will unseat the Federal Reserve, or even transfer services like PayPal, anytime soon. But if you understand Bitcoin’s limitations and risks, paying your way with digital gold may be just the ticket.

Keep up with posts like this by subscribing to our RSS feed, or following @WhoIsHosting on Twitter.