Before you know it, your browser will have a cryptocurrency wallet extension that you will use for micropayments across every form of the web.
Think of all of the pennies that are lying under your rug, on your nightstand, and in your car. Millions of sad pennies lie scattered across the globe, unused but waiting to get back to work fueling the economy rather than sitting behind your couch.
However, in today's world, it really doesn't make sense to use pennies... or for that sake, even nickels or dimes. In-person, you're not going to carry these small forms of payment around. Online, small payments can't occur digitally because of the exorbitant fees.
Ever encountered the following situation? I'll bet you a nickel you have...
You go to a store, get a small item to purchase, and pull out your credit card to pay, only to have the cashier reject you: "Sorry, you need to purchase at least $5 of items to use your credit card." This scenario occurs because the store has to pay a fee when you swipe your credit card. And this fee occurs because the processor (Amex, PayPal, etc.) has to pay for the overhead of running an electronic payment system. PayPal charges users 2.9% + $0.30 per transaction.
For micropayments, which it deems as $12 or less, PayPal charges 5% + $0.05. Whether it's an in-person purchase or an online purchase, the company that processed the transaction has to pay for fraud prevention and errors in a system that involves massive amounts of people and businesses.
The problem with all of this stems from one underlying issue: the minimum transaction size needed to make the transaction profitable for the processing company is too large.
Here's another scenario:
You're scrolling through Business Insider articles, when you come across one that you really like. But, as soon as you start scrolling past the intriguing opener, the dreaded paywall pops up!
Now you're faced with a decision, do you take out your credit card and pay $99.00 so you can read this article and hope that Business Insider continues to put out more articles that you'll enjoy?
Ehh... If you do what most do, you'll realize that your credit card is in the other room and/or that you don't want to pay $99.00 to read an article so you close the screen and move on, frustrated with the paywalls that seem to jump out at you on nearly every content website you visit.
But, don't take it from me. Listen to what Jakob Nielsen, the former VP of Research at Apple, said about subscription fees in 1998... yes, 1998... pre dot-com bubble, pre-USB stick, pre-camera phone, pre-Facebook... okay, you get the point. People have hated subscription fees for awhile.
The main problem with subscription fees is that they provide a single choice: between paying nothing (thus getting nothing) and paying a large fee (thus getting everything). Faced with this decision, most users will chose to pay nothing and will go to other sites. It is rare that you will know in advance that you will use a site enough to justify a large fee and the time to register.
In general, the media today is in a poor shape. From clickbait to fake news, everyone is sick of publishers pushing sub-par content in our faces. Why does this happen? Because based on the current ad model, clickbait = virality and virality = money. Great content exists, but often times it exists only with a subscription, and not many people want to get locked into a long term subscription to a single publisher.
20 years later, we finally have a solution!
If we've been talking about this stuff since 1998, why hasn't anybody done anything about it? Good question! Because until now, we have needed 3rd party intermediaries to facilitate the transaction.
And that's where blockchain comes in. More specifically, cryptocurrency micropayments.
Because there isn't a 3rd party intermediary facilitating the transactions, the fees of these micropayments decrease drastically. But, peer-to-peer payments on the blockchain can get expensive and can take a long time to process. That is, until the Lightning Network came along.
It is the Lightning Network and micropayment channels that will open up a whole new world of micropayments.
If micropayment channels mean nothing to you, take a couple minutes to skim our Lightning Network explainer
So people are actually going to use these micropayment channels?
Yes! Let's look go back to the content use case. Micropayments give readers the ability to support high-quality content without locking them into a single, long-term subscription.
Rather than paying $99.00 for a yearly subscription just to read that Business Insider article, what if you could pay a very small amount to view it... say, $0.17? Paying per article would incentivize publishers to produce consistent, high-quality content.
Don't like the recent paywall articles Business Insider has been posting? Don't pay $0.17 to read the next one.
And how about other forms of content, such as videos, music, or games?
By reducing payment friction, micropayment channels will make it easy for consumers to pay small amounts directly to the artists/creators.
Picture this... your chrome browser has an extension that is loaded with $5 in crypto per week. Your wallet will automatically pay the creators of YouTube videos for every 10 seconds of their video that you watch or the designers of games for use of virtual assets in their virtual worlds, all without the need for ads or difficult credit card subscriptions.
Want to keep your ads on and not pay per second of YouTube that you watch? Totally fine! You can just pay $0.04 to skip that 30 second YouTube ad. You know those 90 second Hulu commercials that you can't skip? Well now, you can either watch the commercial or pay $0.11 from your wallet to skip it.
Don't believe it? This is already happening. Blendle has already demonstrated that consumers will spend money for the content they want. Patreon, a platform that allows "patrons" to donate a set amount of money every time a piece of content is published, has funded over $50 million to its content creators.
I'm intrigued, tell me more.
Content is just one of three main types of micropayment use cases, which include:
- Resources on Demand
- Content on Demand
- Services on Demand
Resources on Demand are essentially pay-as-you-go business models. These include any resource where you typically pay in bulk, like per year or per month, but where you could be charged based on metered usage.
I was on a flight yesterday and had two emails that had to be sent out asap. There was only one WiFi option and because it was a 6 hour flight (gotta love that SF to NYC red eye flight), it cost $19.99. So, because of my poor planning and because of the inability to pay as you go, I had to spend $19.99 to send two emails.
Now why couldn't I just pay for the amount of WiFi needed to send those two emails? Micropayments allow for companies such as Boingo to charge small amounts such as $0.37 and $2.12 since the transaction costs are small enough to make charging for such amounts possible. This helps you and me because we can pay for as much WiFi as we need and it helps Boingo because it gives them access to a new set of customers. Win win.
How about a traveler who needs a little bit of internet to download emails and text their family? Rather than paying for a monthly internet phone bill, micropayments and the peer-to-peer network will allow users to sell access to their Internet connections via hotspots created from their phones. The traveler could connect to the Internet via a local's hotspot and pay that person per megabit, maybe paying them $0.60 for 6 minutes of use. This is much better than signing up for a monthly subscription via an ISP!
Content on Demand was discussed above, but to recap, think about the old iTunes business model. Instead of purchasing the whole album or subscribing to Spotify, with micropayments, the customer has the ability to purchase just one or two songs. The most popular implementation of this would be news sites that are torn between paywalls and ads.
Services on Demand (SoD) allows people to transact with other people for microservices. Have you ever tried to message some big executive on LinkedIn and were sent to Earn.com? Earn works like this. Alice is very busy. Alice doesn't want 50 people/day messaging her on LinkedIn. She sets up an account on Earn.com. Bob wants to reach Alice, so much so that he is willing to pay for a response. Bob reaches out to Alice on Earn.com. If Alice replies to the email, Bob will pay a small sum to Alice. The fact that Bob is paying a small fee per email reply will limit spam to Alice's inbox. In fact, Coinbase recently acquired Earn.com for $120 million, helping bring crypto to the micropayments scene.
Finally, micropayments can be used for online tipping, or saying thanks for a small task. When you think of it like this, the use cases are endless. Imagine tipping an online chef for a helpful online recipe, a Quora respondent who helps you solve a problem, or a blogger that puts out content that you love. What if you received 3 cents for every 'upvote' you received on Quora or 5 cents for every like you received on YouTube?
I'm in, Micropayments are the future! How do I start?
Within the next couple of years, we will be using browser-based cryptocurrency wallets. And, because of the Lightning Network, we will be able to seamlessly make dozens, or even hundreds, of these smalls micropayments daily.
Cruising past paywalls, paying for a couple minutes of WiFi, skipping your Hulu ads, tipping a blogger... All of this will be possible when storage and bandwidth costs fall and the Lightning Network is implemented. Once this happens, micropayments will become a viable option and for the first time ever, money will move around the Internet in a frictionless manner.