\nHowever, many factors, technological and economical, have hindered its widespread adoption. But, the dawn of Blockchain technology and the growing adoption of crypto<\/a> and digital currencies have solved many of the longstanding issues with micropayments, leading to its increased acceptance<\/a>.<\/p>\n
Evolution of Payments<\/span><\/strong><\/h4>\n![\"Evolution](\"https:\/\/s3.amazonaws.com\/static.the-next-tech.com\/wp-content\/uploads\/2020\/08\/19152100\/Evolution-Of-Money-1-1024x357.jpg\")
Evolution of Payments. Source: wexinc.com<\/figcaption><\/figure>\nPaying for goods and services in cash or kind has existed for centuries, since the barter system in 9000 B.C. With the advent of online payments in the last decade of the 20th century, a new concept became popular – Micropayments.<\/span><\/p>\nThough micropayments commonly refer to online payments made in small amounts, the word existed decades before the World Wide Web. <\/span>Ted Nelson<\/span><\/a>, an American sociologist, and pioneer of information technology, first coined the phrase micropayment in 1960.<\/span><\/p>\nNelson formulated the concept of\u00a0<\/span>micropayments as a potential mechanism for royalty payments<\/span><\/a>\u00a0to the authors of the then-nascent online publishing.<\/span><\/p>\nIn the late 1990s, World Wide Web Consortium (W3C) started creating the standards for embedded micro-transactions requests along with <\/span>the ‘402 Payment Required<\/span>‘ HTTP error code. <\/span><\/p>\nHowever, the W3C did not continue its efforts in the area, and soon the concept of embedded micropayments fizzled out.\u00a0<\/span><\/p>\nFirst generation micropayments<\/h5>\n
First-generation micropayments were an anachronism as the Internet and e-commerce had not yet matured to reap the benefits of micro-transactions. <\/span><\/p>\nFor instance, Digicash, founded by David Chaum in 1998, was a form of electronic payment that allowed users to anonymously make small fiat payments by using cryptographic methods. <\/span><\/p>\nThe company struggled to increase its user-base and eventually filed for bankruptcy, citing the immaturity of e-commerce systems as the reason.\u00a0<\/span>
\nAlso read:<\/span> Top 10 Best Software Companies in India<\/a><\/span>\nSecond generation micropayments<\/h5>\n
Micropayments garnered interest again in 2010 with the advent of the digital subscription model. Various online service providers – publications, video, and gaming services – were exploring options to attract customers to use their digital services. <\/span><\/p>\nConsumers found the paywall model where they pay monthly, quarterly, or yearly fees to access the offered content, very attractive. Companies employing this model gained significant growth both in the number of subscribers and in their revenue. <\/span><\/p>\nIn the first quarters of 2020, the New York Times reportedly <\/span>added 587,000 new digital subscriptions<\/span><\/a>\u00a0with the digital subscription business revenue accounting for over 46 percent of the total subscription revenue.<\/span><\/p>\n Similarly, in 2019, the streaming service, Netflix increased its subscription revenue by over 1000 times from that a decade ago.\u00a0<\/span><\/p>\nThis revenue eventually surpassed the revenue generated from other streams. By 2012, the subscription revenue of the New York Times exceeded its advertising revenue and has continued to exceed since.<\/span><\/p>\n![\"New](\"https:\/\/s3.amazonaws.com\/static.the-next-tech.com\/wp-content\/uploads\/2020\/08\/19152055\/New-York-Times-Revenue-1024x752.jpg\")
<\/p>\n
Problems with the subscription model<\/h4>\n
But, consumers do not always find the subscription model lucrative. Often users are unable to read all the subscribed articles in a week or watch all the subscribed online content in a month. <\/span><\/p>\nConsequently, they end up paying more than what they can consume. In the whitepaper titled,\u00a0<\/span>Micropayments and Mental Transaction Costs<\/span><\/a>, Nick Sabo states that when the consumers feel they are paying more for the services they use, their mental transaction costs mount up. <\/span><\/p>\nEventually, the cumulative costs will dissuade the consumers from continuing the subscribed services.<\/span><\/p>\nWhat-if instead of paying $4 for all inclusive access, the user gets to pay less than a cent for every page they read or for every minute of the streaming content they watch? <\/span><\/p>\nA payment option where the users have to pay only for what they consume sounds more attractive to them and hence reduce their mental transaction costs. The service providers will have lesser churn rates as consumers tend to stick with the subscription for longer.\u00a0<\/span>
\nAlso read:<\/span> 10 Top-Rated AI Hugging Video Generator (Turn Images Into Kissing Instantly!)<\/a><\/span>\nService providers’ take on fiat micropayments<\/h4>\n
However, digital content providers <\/span>do not always benefit from this \u00e0 la carte model<\/span>. Firstly, the vendors find it too expensive to invoice individual payments. <\/span><\/p>\nThe fees they need to pay the banks and payment processors for facilitating transactions would be higher than their earnings. For instance, while Visa charges around 1.5 percent plus $0.10 for every swipe of the customer’s credit card, Paypal, Amazon, and Stripe charge 2.9 percent plus $0.30 per transaction.\u00a0<\/span><\/p>\nSecondly, for the startups in this space, the capital is usually limited, and high transaction fees often results in delayed profitability. Increased expenses for cash-crunched startups often put them out of business.\u00a0<\/span><\/p>\nThirdly, if the consumer has to go through the hassle of setting up an account for the one article they read, they might not return to the website. Finally, these micropayments enormously increase the transaction volumes, thereby clogging the payment networks.<\/span><\/p>\nHow can Blockchain handle micropayments?<\/span><\/strong><\/h4>\n
Paying for goods and services in cash or kind has existed for centuries, since the barter system in 9000 B.C. With the advent of online payments in the last decade of the 20th century, a new concept became popular – Micropayments.<\/span><\/p>\n Though micropayments commonly refer to online payments made in small amounts, the word existed decades before the World Wide Web. <\/span>Ted Nelson<\/span><\/a>, an American sociologist, and pioneer of information technology, first coined the phrase micropayment in 1960.<\/span><\/p>\n Nelson formulated the concept of\u00a0<\/span>micropayments as a potential mechanism for royalty payments<\/span><\/a>\u00a0to the authors of the then-nascent online publishing.<\/span><\/p>\n In the late 1990s, World Wide Web Consortium (W3C) started creating the standards for embedded micro-transactions requests along with <\/span>the ‘402 Payment Required<\/span>‘ HTTP error code. <\/span><\/p>\n However, the W3C did not continue its efforts in the area, and soon the concept of embedded micropayments fizzled out.\u00a0<\/span><\/p>\n First-generation micropayments were an anachronism as the Internet and e-commerce had not yet matured to reap the benefits of micro-transactions. <\/span><\/p>\n For instance, Digicash, founded by David Chaum in 1998, was a form of electronic payment that allowed users to anonymously make small fiat payments by using cryptographic methods. <\/span><\/p>\n The company struggled to increase its user-base and eventually filed for bankruptcy, citing the immaturity of e-commerce systems as the reason.\u00a0<\/span> Micropayments garnered interest again in 2010 with the advent of the digital subscription model. Various online service providers – publications, video, and gaming services – were exploring options to attract customers to use their digital services. <\/span><\/p>\n Consumers found the paywall model where they pay monthly, quarterly, or yearly fees to access the offered content, very attractive. Companies employing this model gained significant growth both in the number of subscribers and in their revenue. <\/span><\/p>\n In the first quarters of 2020, the New York Times reportedly <\/span>added 587,000 new digital subscriptions<\/span><\/a>\u00a0with the digital subscription business revenue accounting for over 46 percent of the total subscription revenue.<\/span><\/p>\n Similarly, in 2019, the streaming service, Netflix increased its subscription revenue by over 1000 times from that a decade ago.\u00a0<\/span><\/p>\n This revenue eventually surpassed the revenue generated from other streams. By 2012, the subscription revenue of the New York Times exceeded its advertising revenue and has continued to exceed since.<\/span><\/p>\n But, consumers do not always find the subscription model lucrative. Often users are unable to read all the subscribed articles in a week or watch all the subscribed online content in a month. <\/span><\/p>\n Consequently, they end up paying more than what they can consume. In the whitepaper titled,\u00a0<\/span>Micropayments and Mental Transaction Costs<\/span><\/a>, Nick Sabo states that when the consumers feel they are paying more for the services they use, their mental transaction costs mount up. <\/span><\/p>\n Eventually, the cumulative costs will dissuade the consumers from continuing the subscribed services.<\/span><\/p>\n What-if instead of paying $4 for all inclusive access, the user gets to pay less than a cent for every page they read or for every minute of the streaming content they watch? <\/span><\/p>\n A payment option where the users have to pay only for what they consume sounds more attractive to them and hence reduce their mental transaction costs. The service providers will have lesser churn rates as consumers tend to stick with the subscription for longer.\u00a0<\/span> However, digital content providers <\/span>do not always benefit from this \u00e0 la carte model<\/span>. Firstly, the vendors find it too expensive to invoice individual payments. <\/span><\/p>\n The fees they need to pay the banks and payment processors for facilitating transactions would be higher than their earnings. For instance, while Visa charges around 1.5 percent plus $0.10 for every swipe of the customer’s credit card, Paypal, Amazon, and Stripe charge 2.9 percent plus $0.30 per transaction.\u00a0<\/span><\/p>\n Secondly, for the startups in this space, the capital is usually limited, and high transaction fees often results in delayed profitability. Increased expenses for cash-crunched startups often put them out of business.\u00a0<\/span><\/p>\n Thirdly, if the consumer has to go through the hassle of setting up an account for the one article they read, they might not return to the website. Finally, these micropayments enormously increase the transaction volumes, thereby clogging the payment networks.<\/span><\/p>\nFirst generation micropayments<\/h5>\n
\nAlso read:<\/span> Top 10 Best Software Companies in India<\/a><\/span>\nSecond generation micropayments<\/h5>\n
<\/p>\nProblems with the subscription model<\/h4>\n
\nAlso read:<\/span> 10 Top-Rated AI Hugging Video Generator (Turn Images Into Kissing Instantly!)<\/a><\/span>\nService providers’ take on fiat micropayments<\/h4>\n
How can Blockchain handle micropayments?<\/span><\/strong><\/h4>\n