I, like a lot of people on this website, develop games. I was thinking about different payment options, and was considering PayPal. I don't want anything complicated where I have to make calls, verify tax ID number, register locally, etc. I just want a simple system, and I'm not sure if PayPal is what I want.

Would BitCoin be a suitable payment system for a game? The game itself is completely free, but to get a premium account you have to go to the website and register for around 5 USD. This provides a bunch of cool stuff I won't go into. I am just wondering what you think about BitCoin as payment and the legal/customer satisfaction implications of using BitCoin. What about hybrid BitCoin/PayPal? Are there any other CC services that would be relevant to me?

The trouble with Bitcoin will simply be that only a minority of people today use bitcoin for common transactions. It's gaining steam and notoriety, but its not yet embraced by the average person. If this is your only transaction method, you limit yourself to an unnecessarily-small audience, because acquiring bitcoins as an individual is a tedious and time-consuming venture. Because bitcoin transactions are irreversible (that is, there are no charge-backs), no bitcoin exchange accepts payment methods that do have charge-backs in exchange for bitcoins -- so no credit card, paypal, personal check or other convenient forms of payment, only non-reversible payments such as cash, wire-transfer, or cashiers check are accepted and must be cleared before the bitcoins are issued. Unless you know someone local who is willing to exchange bitcoins for cash, this is a process that can take a week or more to turn around. Its no longer viable for the average person to mine their own coins now that bitcoin ASICs dominate mining activities, to mine new coins requires a significant capital investment up-front.

If you can accept the potential volatility of bitcoin value and not be reliant on immediate sales of bitcoin to keep the lights on in your operation, then it can be a wonderful way to diversify your income, and I personally believe that its nominal value is settling into a more-stable long-term growth trend. However, its important to keep in mind that the floor could literally drop out from underneath it, or that simply being beholden to sell to pay the bills may force your hand to sell during a trough in its value. These are good enough reasons alone to not have all your eggs in the bitcoin basket.

As an addendum, there are other "altcoins" like namecoin, litecoin, or peercoin (among many) that at least today carry significant value per coin and with respectable overall 'market caps'. Scrypt-based coins like litecoin are not yet beyond mining by those with recent ATI GPUs, although the ASIC invasion is near, and possibly already begun if certain parties can be believed. I made a little hay with bitcoin, and currently have re-targetted my GPU hardware at mining litecoin on a respectable but modest scale. I think its the most favorable of the 6 or 7 interesting alt-coins, and that it has the most potential upside. Opinions vary of course, but its worth consideration and there's little extra work to be had in supporting secondary altcoin payments if you've already done the work to accept bitcoin.

I don't want anything complicated where I have to make calls, verify tax ID number, register locally, etc.

If you're doing business, then in most countries there's no way out of this (except to not do business). If you sell a product and don't tell the tax office, you'll be committing tax fraud.

AFAIK, if you sell your game for BitCoins, then you haven't actually made any income. When you trade your bitcoins for dollars/etc, then you make income, which must be reported to the tax office.

In either case, you're still doing business. For your own safety, you'd want to be doing this via a registered LLC or similar, so that the business is a separate legal entity from yourself...

I know little-to-nothing about BitCoins, so I won't comment on that, but if you're looking for alternative payment providers Braintree have excellent documentation and are pretty easy to integrate and work with, and have a similar fee structure to PayPal. I think they're a great option because they allow you to provide a much better user experience than most sites get from PayPal (that is, by keeping all of the processing on your own page rather than having to redirect to a PayPal page) with fairly minimal effort on your part -- it is possible to create the same well integrated user experience using PayPal, but I found Braintree's documentation and code samples much friendlier to work with than that provided by PayPal.

Hope that's helpful!

As a fan of bitcoin, I'll mention a couple things without weighing in on all the tax stuff. Speaking purely from accepting bitcoin as an altnerate form of payment:

1) make sure it's not your only method of payment, so as to be more inclusive.

2) I would counter that to spend bitcoin you need to sell them. Tigerdirect, overstock, cheapair, and more are accepting bitcoin as payment, as well as other games and other webistes and even a few brick and mortars.

3) I wouldn't consider the "volatility" of bitcoin a risk. Even when spikes correct themselve, the correction is usually higher than the value prior to the spike. In any case, the general trend has been an increase in value that any stock or currency would be thrilled with.

4) if you want to sell for a fixed equivalent in USD, I'm sure there are services that you could utilize that will dynamically do the math on your site for you.

Just my .02 BTCs :)