This bootstrapped startup built an ‘eBay for Bitcoins’ and is heating up India’s crypto market
India is headed towards one of its worst economic crises in 30 years, with all projections pointing towards negative GDP growth in 2020. However, over the last two months, local bitcoin trading, especially on peer-to-peer crypto exchanges, has reached record-breaking volumes.
This is believed to be a direct impact of the Supreme Court lifting RBI’s “unconstitutional” two-year ban on cryptocurrencies in March, a few weeks before India went into a lockdown.
It also coincided with one of the biggest depreciations of the Indian rupee — the yearly inflation rate is 9.66 percent now — leading to an overall rise in interest in alternate forms of money.
As a result, bitcoin (BTC) volumes traded in India have surpassed the spike of December 2017, when the digital currency was enjoying a bull run globally.
One of the biggest gainers of this recent spike is, a US-based P2P bitcoin exchange marketplace and cryptocurrency wallet.
It is one of the newest entrants in India’s crypto economy, but has already surpassed other BTC exchanges in the market.
Bitcoin volumes on Paxful surged to a single-day high of $1.48 million on May 10, according to UsefulTulips, a crypto analytics firm. This is the highest for any platform in the country, ahead of closest peer LocalBitcoins.
Ray Youssef, Co-founder and CEO of Paxful, tells YourStory,
“People in India are betting big on bitcoin and seeing it as a tool for great financial returns. The growth is driven by the local entrepreneurial community, which has great talent and drive, and the will to figure out the platform. They are building their own cash cows, and we’re blown away by how creatively they are using it.”
What is Paxful and what it offers
Paxful, which calls itself the “eBay for Bitcoins”, was founded in 2015 by Ray Youssef and Artur Schaback. It is, what the founders call, a “people-powered marketplace” where users can buy or sell bitcoins or even transact with over 7,300 vendors anywhere in the world.
“Unlike Coinbase, we don’t buy any bitcoins ourselves. We’re a listing and escrow service. The whole platform is built on trust. Even if you don’t have a bank account, you can make a payment in the US, UK, China, or anywhere else.”
On Paxful, users can create their own cryptocurrency wallets to send, receive or store bitcoins. These transactions may happen between friends and family or traders and vendors. Money transfers can be done between two parties (P2P) by simply scanning a QR code or through a virtual payment address.
The startup’s goal is to democratise access to bitcoin and drive financial inclusion in emerging economies like India and Africa.
“Paxful is a universal translator of money, which means that any form of money can be turned into any other form of money instantly,” says the co-founder.
The platform supports all major international currencies and more than 300 payment methods, including cash deposits, debit and credit cards, bank, IMPS and UPI transfers,and wallets, Amazon gift cards, PayPal, etc. As per latest exchange rates on Coin Dance, one bitcoin is worth Rs 7.37 lakh.
The Paxful app, which launched in 2019, allows users to stay abreast of their transaction history and global exchange rates in real time. The Android-only app has already crossed 100,000 downloads on Google Play Store, and is said to have ushered in an all-new ease of use for customers.
Growth and business model
Coinciding with the rise in bitcoin trading in India since March-April, Paxful has witnessed record volumes on its platform.
In May, it recorded BTC trading volumes of $6.2 million, a 41 percent increase. It also grew new user signups from India by 12 percent for the month. For 2020, Paxful’s average monthly user sign-ups have grown by 28 percent, while average trading volumes are up $4.4 million.
“In the beginning, bitcoin was all about speculation, and people wanted to get rich. But now, they are seeing it as a secure medium of exchange and as a pathway to the financial world. It is the best product in the entire fintech space right now.”
Paxful claims to have over three million users across the globe. The user base is growing at 40 percent year on year, while revenues are growing by 24 percent. Globally, it reported a 10x increase in bitcoin trading volume (from $2.2 million to $22.1 million) in H1 2020 over the same period in 2019.
The platform charges an escrow fee to sellers. The percentage is undisclosed, but CoinDesk estimates it to be 1 percent of every transaction.
Interestingly, a large section of Paxful users are women. It is because this segment of the population, especially in developing economies, is largely unbanked or underbanked.
“The more you make bitcoin visible, the more normal people will be able to use it. We are educating our traders that you don’t need a lot of money to start,” says the co-founder. However, some operational challenges remain.
“The biggest challenge in P2P is controlling fraud. So, we’re trying to build a fully localised KYC solution, launch new safety initiatives, and make the product more responsive,” Ray states.
Future roadmap and industry landscape
Paxful is riding the popularity of bitcoin, the most well-known cryptocurrency in the world, according to surveys. (The next popular crypto is Ethereum.)
“Bitcoin is being validated right now,” says Ray. “We're focused on the key players, the entrepreneurs who are building crypto communities around them. Some of them are 20-year-olds, who're already making six-figure profits.”
The 300-people startup is also looking to open its India office in Hyderabad by 2021. “We were planning to launch this year, but it has been delayed due to COVID-19,” the co-founder shares.
Paxful also wants to expand its B2B network in the country, and make bitcoins more acceptable in merchant payments as they provide the highest margins.
The startup operates in a market that is witnessing phenomenal growth. In the first quarter of 2020, $8.8 trillion was traded in cryptocurrencies globally, according to TokenInsight (a blockchain and crypto research firm).
In India, Paxful’s competitors include LocalBitcoins, Coinbase, Binance, WazirX,, , BitBuddy, and others. Not only are more global crypto exchanges entering India now, but VCs are also ramping up their investments in local crypto startups.
Ray signs off by saying, “The Indian market holds great potential and importance for the future of the crypto-economy. We are actively focusing our efforts on bringing cryptocurrency to the masses to aid in the eradication of poverty, boost economies, and create jobs, especially post-COVID-19.”
(Edited by Teja Lele Desai)