Marc Andreessen’s 2014 article on Bitcoin (BTC) was recently discovered by me. It is visionary in many ways (no surprise). Since I joined the industry four years ago, my main focus has been on the social impacts of blockchain. It’s amazing to me that Andreessen was able in 2014 to describe the potential economic and social impacts of Bitcoin before there was an institutional presence.
Nearly eight years ago, he signed his words. I’d like to discuss one of his topics: micropayments. I will discuss how blockchain can transform micropayments. It could allow for the monetization and monetization of certain business aspects that are in desperate need of a solution, as well as help society’s most vulnerable.
Micropayments aren’t a new concept. Micropayments have enjoyed varying degrees of popularity since the mid-1990s. Micropayments, by definition, are transactions with a lower value than a threshold. The transaction fee is a significant percentage of total transaction value, and therefore, micropayments are not economically viable. Micropayments are only applicable to digital transactions of nontangible goods due to their small monetary value. Shipping and handling costs can add up to a hundredfold to the transaction value. This makes it completely irrelevant.
Merchants have a variety of options when it comes to pricing credit card companies. These plans typically include a flat fee per transaction as well as a percentage. This information is not available directly from card companies, but it is made public by merchants who are able to compare the rates. Let’s now examine the micropayment fee that merchants would have to pay.
The following is what we assume:
* We found that the transaction value was only 1.29%, with no lump sum fees.
* The smallest building block (most) of fiat currencies is 1/100 — that is $0.01 — so this would be the minimum credit card company fee, regardless of whether it is higher or lower than 1.29%.
Below is a chart showing the percentage of transaction fees as a function transaction value. A $0.01 transaction will incur a fee of 100% while a $0.10 transaction will only cost 10%. This demonstrates the absurdity of micropayment transactions on these payment platforms.
Blockchain is the solution
There is an alternative. For many reasons, blockchain technology is the ideal solution to micropayments. It is the infrastructure that allows digital payments to be made faster and, most importantly, the minimum amount of Bitcoin and Ether (ETH), are extremely small. As you can see in the table below.
Additionally, any digital device can easily embed crypto wallets, such as a smartphone, laptop, or other Internet of Things device. While fees can vary across networks and at different times, they are generally not an issue for many protocols. In fact, they may be as low as fractions a cent.
Privacy is the last, but not least, concern. Blockchain’s asymmetric encryption means that the payer only exposes their public address to pay. This makes it virtually impossible for hackers to access their wallets. The same is not true for credit card transactions. This requires the payer share their full credit card number in order to ensure that the payment platform remains secure.
Related: How the crypto industry has ruined privacy
Micropayments: Real-world use cases
The technological aspect of micropayments is now covered. But, there’s one remaining question: Can I get anything for a tenth of a penny? Although I’m not certain about the millionth, there are many uses for micropayments. Here are some:
Alternative to the subscription model Although there are many benefits to this model, some drawbacks remain. What if someone wants to purchase a single item instead of committing to a subscription? Let’s say Alice subscribes to two magazines online and discovers an interesting article about a third. Although she won’t subscribe to a third magazine, she will pay for the article. The magazine sees the article as already available, so why not charge someone? Both Alice and the magazine can maximize their economic utility by using micropayments.
Digital copyrights and royalties, referrals, and digital copyrights: This is the same as in the previous case. It is not necessary to explain what referrals, copyrights, or royalties are. Micropayments are a simple way to settle immediate issues. There is no minimum amount that can be charged for each one, as opposed to more complicated solutions.
Transactions in IoT: Although this use case is very visionary, it will likely become as routine and trivial as an ordinary light switch, sooner than expected. IoT has only reached a fraction its immense potential. This could be due to the absence of an easy-to-implement monetization system. The solution could be micropayments on blockchain. Consider all data your car may collect, including traffic conditions and road conditions. Data collected in real-time by mass users could prove invaluable for road maintenance and traffic planning. As such, it makes sense to pay for it. Blockchain’s added value is a better way to anonymize data and protect privacy. This is a winning combination. This could be used with any IoT device from smart meters to home appliances, and many more.
Social Impact: This is my favourite use case (and the easiest on the list). Two aspects of micropayments using blockchain technology can make a difference: First, donors can easily create accounts to receive funds. This will make it possible for them to donate directly without the need for intermediaries. This feature can be a double-edged weapon that could prove to be its biggest problem. Fraudsters could also set up fake accounts to lure donors. Rating and auditing will be required, in the same way as current online services that rate charities based on multiple criteria (e.g. Charity Navigator Smart Giving Council of Nonprofits, Council of Nonprofits, etc.) to provide donors with better visibility. We may also see micro donations, since a minimum donation amount is no longer an issue. According to the World Bank, a country with a per capita gross national income less than $1,025 is considered “low income”. This means that a person’s daily income is below $3. According to 2020 data, there were 27 countries with low income. The possibility of micropayments, which should be closely monitored for fraud, could be a great way to give money to those in need in these countries. If managed properly, you will see that this could result in more efficient giving and more direct results.
Related: Digitalizing charity: We can be better at doing good
Micropayments have lost some their original prestige over the past few years. Although the idea was revolutionary, technology was behind the times and it didn’t materialize. Andreessen was right and revolutionary when he highlighted the potential of blockchain to transform micropayments. This is just a small sampling of the possible use cases.
Businesses could be more efficient and able to monetize their products more effectively. Individual and direct assistance could transform entire communities or lift them out of economic depression. Andreessen deserves credit for his vision eight years ago — blockchain could be what the world needs.
This article is not intended to provide investment advice. Every trade and investment involves risk. Readers should do their research before making any decision.
These views, thoughts, and opinions are solely the author’s and do not necessarily reflect the views or opinions of Cointelegraph.
Netta Korin was a co-founder and director of Orbs and Hexa Foundation. Netta was a senior advisor to General Mordechai Holod, who worked on special projects for the Israeli Ministry of Defense. She also served as senior advisor to Michael Oren, the Deputy Minister of Diplomacy in the Prime Minister’s Office. Netta started her career as an investment banker on Wall Street and then became a manager of hedge funds. Netta has extensive experience in philanthropy. She served for more than 15 years on numerous boards in Israel and America.
Eileen Wilson –Technology and Energy
My Name is Eileen Wilson with more than 5 years of experience in the Stock market industry, I am energetic about Technology news, started my career as an author then, later climbing my way up towards success into senior positions. I can consider myself as the backbone behind the success and growth of topmagazinewire.com with a dream to expand the reach out of the industry on a global scale. I am also a contributor and an editor of the Technology and Energy category. I experienced a critical analysis of companies and extracted the most noteworthy information for our vibrant investor network.