Understanding Micropayments & Their Role in the Web 3.0

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Micropayments have entered the spotlight following the rapid proliferation of Bitcoin’s Lightning Network (LN), and the subsequent exploration of its potential design space.

Although the ‘Web 3.0’ is more of an abstract reference to the future development of the Internet, it can provide a useful prism for projecting what new content platforms, paywalls, and monetization strategies may come to dominate in the next several years.

There are several overarching trends that are poised to play a prominent role in the future web stack including an emphasis on improved privacy, decentralized/open protocols, and AI/ML growth.

Relative to cryptocurrencies, the onset of micropayments should play a pivotal role in the broader Web 3.0 ecosystem, particularly when it comes to new monetization models for content distribution.


Larger narratives of the Web 3.0 aside, focusing on the potential of micropayments at the convergence of cryptocurrency, a renewed vigor on privacy, and a transition away from ad-based models offers a glimpse of a compelling new web.

What Are Micropayments?

Micropayments are ostensibly any form of digital value transfer with a low enough transaction cost to overcome the mental accounting barrier of legacy payment paradigms. Such transactions need to maintain the same properties of regular payments but are so small that they can facilitate dynamics such as automated M2M payments for IoT devices without transaction overhead making the transfer cost-inefficient.

Bitcoin’s LN is an apt example of micropayments for numerous reasons, particularly because of its extraordinarily small unit of account for transactions.

For context, the smallest unit of account in Bitcoin (on-chain) is one satoshi (1 millionth of one Bitcoin), and the LN is capable of transferring values through open channels that are one-thousandth of one Satoshi — called a millisatoshi. The ‘cheapest artwork in history’ sold using an LN payment was the equivalent of $0.00000004143 and was roughly congruent with the cost of a single grain of sand.

Bitcoin’s LN is still very young, and its fee market is still immature, so projecting how it will develop is uncertain at best. However, we can expect the average cost per in-channel transfer between two parties to be drastically lower than legacy payment rails, which is sufficient for projecting the potential of new applications and monetization schemes that can result from networks of micropayments between people on the Internet.

Should Bitcoin’s LN acquire the necessary liquidity providers to scale effectively, we can expect developments such as LightningJoule and Casa’s Web Extension to become, at least early iterations of, highly practical micropayment tools for web-based services.

New Paywalls, Monetization Strategies, and Content Platforms

New types of paywalls should develop hand-in-hand with monetization strategies that leverage the power of micropayments. Imagine pay-per-click or pay-per-view subscription models that settle nearly instantly, have low fees, remove common privacy intrusions, and enable new forms of fundraising and content monetization.

We are already seeing some of the earliest forms of such paywalls, especially when it comes to digital content. For example, Y’alls is an experimental LN-based publishing web application where users have to go through a micropayment paywall to read the content published on the site. Similarly, writers have to pay a small micropayment to publish content on the site.

Based on Lightning Labs’ lnd Go implementation of the LN, Y’alls represents an early form of a new monetization model that many content platforms may come to adopt. Picture the NYT using a micropayment pay-per-click model on a per article basis for their mobile version rather than blocking you from reading an article unless you sign up for a one-month minimum subscription. Such a dynamic would require much broader adoption of Bitcoin and the LN, but it presents some compelling advantages for the platform and its users.

The predominant revenue-generating model for content sites today is advertising, which has repeatedly revealed its proclivity for privacy intrusions. Additionally, while it may bring in lucrative income for massively popular online personas, ad-based revenue models often preclude smaller content creators from earning substantive revenue from their work.

A good example is with YouTube, whose smaller content creators are largely locked out of the YouTube Partner Program that has a high barrier to qualify for, and has opened opportunities for competing platforms. Innovators that want to challenge YouTube’s dominance are not just sitting idly by either; platforms like DLive have already secured Internet celebrities, and in the case of DLive, it is PewDiePie.

Similarly, content platform LBRY incentivizes content creators to base their monetization on a pay-per-stream or pay-per-click model rather than advertising. No hefty cut is taken by an intermediary (i.e., YouTube), and funds are received directly from the supporters of content creators. LBRY uses its own native token, which will likely need to change once the reckoning of online micropayments pushes a universal unit of account (i.e., Bitcoin) to the forefront — but the model is still useful for demonstrating micropayment potential.

Another open-source project, FileBazaar, utilizes an LN paywall for buying and selling digital files. Based on Blockstream’s Lightning Charge, files such as images, videos, PDFs, and audio can be transferred using the LN. FileBazaar is possibly the beginning of what may eventually turn out to be vast marketplaces for digital files based on micropayments.

How could users trivially leverage micropayments through a web browser?

Simple, web extensions for LN payments are already available.

Check out LightningJoule or Casa’s Node Extension and you will see that you can send or pay LN invoices with a few simple clicks. The process of buying Bitcoin and depositing it into an LN-compatible wallet, then opening a channel, and finally closing it is still a cumbersome process for the mainstream user, but it’s a promising start. It’s not hard to imagine sometime in the near future when LN-based micropayments via a web browser are as simple as sending a PayPal invoice, without the absurd fees and account censorship.

The potential of micropayments to redefine content distribution is also immense. Streaming services can tap into more efficient revenue streams without the high transaction overhead, and digital tipping services may influence content creators to produce more ad-hoc content. Authors could independently publish books via crowdfunded micropayments using a simple link, and bloggers could bypass the ad revenue model that characteristically bleeds income to intermediaries.

Micropayments don’t even need to be that small. As long as they facilitate a censorship-resistant and low-cost transaction between counterparties on a flexible basis (i.e., per article), they perform the job. Going back to NYT, subscriptions paid in credit/debit cards cost them processing fees, take days to settle, and are subject to chargebacks. Those fees are also subject to arbitrary fee raises by payment processors. Micropayments would reduce costs on their end by leveraging a P2P currency where people need to go through the process of repeatedly filing personal information in a checkout page — a critical privacy improvement for personal information.

Micropayments can also play an important role in social media platforms. And of all the social media platforms today, Twitch probably provides the optimal projection of micropayment potential.

Based on a tipping mechanism called ‘Bits’ that are used to cheer on live streamers of popular games like Fortnite, leading streamers can often pull in lucrative sums just from Bits. Twitch takes a sizeable portion of these tips, highlighting how a P2P tipping mechanism could become even more profitable for leading content creators and potentially a sufficient additional revenue stream for smaller creators.

Tipping is not the most appealing draw of micropayments but it serves as a useful example for how straightforward they can be — even if instances of online tipping like BAT token seem irrelevant.

The Web 3.0 in all its hype is not definitively any unified vision of a future web landscape. However, the early developments of multiple technologies indicate that monetization methods and the overall topology (i.e., decentralized vs. centralized) may come to change quite radically. Add in technologies such as AI and the snowballing course towards open-source projects, and the Web 3.0 is poised to look very different than what we’re accustomed to.


Blockchain writer, web developer, and content creator. An avid supporter of the decentralized Internet and the future development of cryptocurrency platforms. Contact brian@blockonomi.com

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