Peer to Peer Bitcoin Exchange Reaps Reward Of Backpage Fallout

Backpage hosts online classifieds, much like the ever popular Craiglist, and is the second largest provider of this service in the US. On the site people buy and sell items such as furniture, cars and other items. However, the site has come under fire for its adult service section.

The site became the market leader in adult service advertising after Craigslist was pressed into shutting down its adult division in 2010. Backpage became the new go-to for the sex trade, and it did not go unnoticed.

“Sheriff Dart wrote to Visa CEO Charles Scharf and MasterCard CEO Ajaypal Banga to brief them on the role their companies played within the sex trafficking industry and urge them to immediately cut off all association with Backpage’s so-called ‘adult’ section and its less prominent imitators. By Tuesday afternoon, MasterCard agreed to disassociate itself from Backpage, with Visa following suit Wednesday morning.”
— – Cook County Sheriff’s Office

According to the Cook County Sherrifs Office, Backpage.com is the sex industries leading profiteer in America. Their primary revenue stream comes through the adult pages, which in April published 1.4 million adult services ads in the US, with an estimated $100 million in revenue for the company.

“Backpage has significantly lowered the barrier to entry for would-be sex traffickers, giving them easy access to millions of johns while cloaking them in anonymity and putting all risk on the shoulders of their victims. Raising that barrier will lead to less would-be sex traffickers entering the business and ultimately fewer victims,” said Sheriff Dart. “I commend Visa, MasterCard and American Express for doing the right thing in defunding this criminal enterprise and joining us in the fight to seek justice for sex trafficking victims across the globe.”

The ads cost anywhere from $5 to $17, depending on the market. “With Visa and MasterCard’s move, there is now just one payment option for adult ads on Backpage: Bitcoin,” said the Cook County Sheriff’s Office.

Many sexworkers have spoken out regarding the limitations placed upon them, and are sharing their knowledge of Bitcoin. The Lovely Corrine, an online escort, has shared her knowledge of bitcoin with users of Backpage and Cracker, the Australian version of the site.

“Bitcoin is a type of currency that is virtual, you might hear it called cryptocurrency. Think of it as internet money. You can’t hold it in your hand or stuff it under your actual mattress but it works online on sites that are set up to take bitcoin like any other money. Luckily for us backpage.com and cracker.com both accept bitcoin.”
— – Lovely Corrine

Backpage was quick to tell their users of the payment alternatives for US customers, naming a small peer to peer exchange dealing with bitcoin, called Paxful.com, as a option on the sites billing page. “We’ve experienced some amazing growth helping an entirely new class of the freelance economy get their first bitcoins,” states a Paxful post explaining the event.

“Having launched in an open beta seven weeks ago we were content to quietly get feedback from the community to improve our product and find where we could create the most value. When the flood of calls came in we barely survived the first 3 days. Exhaustion took ahold of us and we all crashed for a few hours only to continue again for almost two more days.”
— – Paxful

The frustrated Backpage users are still pursuing alternative payment options in order to maintain their trade. “The flood of backpagers continues unabated and the calls last till 4:00AM. A video will be coming soon as we are working around the clock to streamline this process. We have collected an immense amount of feedback from the buyers of backpage and for the first time we have seen bitcoin through a beginners eyes in a real commerce experience. Here is what we have learned,” said Paxful.

According to the company, the biggest hurdle it faces is the education of their new customers about digital currencies. The majority of backpage users approaching the exchanges struggle with the new payment option, and the high demand for one to one service was not something Paxful was prepared for. “We have collected an immense amount of feedback from the buyers of backpage and for the first time we have seen bitcoin through a beginners eyes in a real commerce experience,“ explained the company

Backpagers are frustrated, confused and many are very concerned that they won’t be able to feed their families.
Many of these folks barely use computers at all, making support extremely difficult.
About 60% of them only have mobile phones. The biggest hurdle besides buying bitcoin is using it. The billing flow from wallet to web wallet is nearly impossible for 95% of the community to accomplish without one on one phone support.
— – Paxful

The team at Paxful had all members on deck, taking phone calls, servicing their clients and continuously updating their systems to contend with the onslaught. “A mentor of mine, always said a good CEO knows their customers but great ones do customer support on the phone one day a week. Now I understand why. The insight we got into our product and the practical flow of bitcoin was invaluable.” – Ray Youssef, CEO and Founder at Paxful

“The opportunity we have before us will define bitcoin as a real contender. If bitcoin can restore even 50% of BackPage’s revenue within six months then it will have emerged as a truly viable alternative to Visa and MasterCard. The world will change in ways we cannot imagine.”
— – Paxful

Backpage have since obtained a restraining order against Thomas J Dart, granted by Judge John Tharp. Since Visa and Mastercard pulled their resources, Backpage claims to have lost millions in revenue. Paxful advises business is not slowing down and continues to steadily rise.