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Cryptocurrency-payments platform BitPay Inc. is betting its HODL payment option will make it easier for investors to spend their digital currency without first having to sell their crypto assets to make a purchase or pay a bill.
Launched earlier this week, HODL Pay enables consumers to borrow stablecoins against their crypto assets, then use the stablecoins to pay merchants or billers, such as credit card issuers, within the BitPay network. Payment can be made online, via email, or through physical point-of-sale terminals. HODL Pay is available across tens of thousands of merchants, including Atlanta-based BitPay’s direct-merchant partners, its network of gift card brands and retailers, and billers, the company says.
To initiate a stablecoin loan, HODL users must have a funded account on Aave, a decentralized cryptocurrency lending and borrowing platform. Aave, which operates on the Ethereum, Arbitrum, Base, Polygon, and Optimism blockchains, initiates the loan and sets the repayment terms.
“Crypto usage is evolving beyond simple buying and selling. HODL Pay brings on-chain functionality into real-world spending, allowing customers to unlock liquidity without selling,” BitPay chief revenue officer Bill Zielke tells Digital Transactions News by email.
For merchants, HODL Pay provides access to consumers who tend to generate higher-than-average tickets. “For merchants, [Hodl Pay] means access to a high-value segment of crypto users who prefer to borrow rather than liquidate. These customers often spend more and are deeply engaged in on-chain finance,” Zielke adds. “HODL Pay also positions merchants at the forefront of the shift toward a decentralized, on-chain commerce. All without additional layers of complexity.”
The decentralized finance, or DeFi, ecosystem is built on blockchain technology and offers financial services such as lending, borrowing, trading, and investing, without intermediaries. DeFi leverages so-called smart contracts, which are computer programs or transaction protocols intended to automatically execute, control, or document events and actions according to the terms of a contract or an agreement. The term “hodl” originated as a misspelling of the word “hold” in a 2013 post on a Bitcoin forum.
Processors like BitPay see this kind of financing taking off fast. “By linking DeFi lending to real-world commerce, it bridges the gap between on-chain finance and traditional spending behaviors,” says Zielke. “While the product currently appeals most to more advanced crypto users, we expect decentralized finance to become increasingly popular and widely leveraged in the years ahead.”
For merchants, linking DeFi to real-world commerce “creates new incentives for merchants and companies to accept crypto by expanding access to long-term holders and increasing transaction volume,” Zielke adds.
