Micropayments could be a way to make content creation on the internet valuable.

#disclosure: This is an article I wrote 2 years ago, now I stumbled upon steemit and am very impressed. I thought it might be interesting to repost it here:)

Bitcoin will do for value transfer what the Internet did for communication — make it programmable.

Balaji Srinivasan

Bitcoin has big potential for changing how value transfer is being done on the internet, it could reinvent it. Value transfer could be woven into almost any interaction on the internet and bitcoin could change our fundamental understanding of how we exchange value.

Technology has made it so much easier for people to create great content and distribute it. Everybody can make high quality music, videos or articles out of her bedroom and share it to the world through the internet.

The problem is that the ones who earn money with it, are very few compared to the wide range of people who create the content we consume on a daily bases. The primary form of earning money with content right now is advertisement, where value transfer is very indirect. Advertisers sell products to consumers, who then indirectly pay for the content. There is a lot of friction on how value is transferred from the creator to the actual consumer.

The times where everybody expects everything to be free on the internet are already over. People spend a lot of money on digital goods, if it’s simple and convenient. Apple posted $4.6 billion in iTunes revenue for Q4 2014(1). Even content creators, like the New York Times or the Wall Street Journal can get people to pay for articles through paywalls. Crowdfunding showed that monetary contributions can lead to new great products, which otherwise would have never been realized. If the market can express more directly which content is in high demand, more of that content will be created. But there is missing a simple and convenient way for the consumer to value the everyday content they consume, like music, articles or videos.

Digital currency exists in social networks in the form of likes, hearts, stars, favorites and so on. That is the signal the consumer can use to show that they value specific content.

This is also only a very indirect form of value transfer. Through likes, content gets shown to more people but no monetary value is being transferred.

There is a second problem with likes, this time on the user side. They are a very imprecise way of showing how one values something, because there are just two states, liking something or not liking it. There is no differentiation, you can’t express how much you like it, that makes communication in social networks less effective.

Microvalue transfer through bitcoin could be a way to change that.

Wouldnt it be nice if we had a bitcoin tip option instead of a like button under content in the web. You could tip the content you like with a variable amount of bitcoin and express how much you like it. On the other hand you could also support the creator, so the possibility that they create more of the same content is higher. There could be a platform where you can see who tipped how much to what. It could be integrate to sites like soundcloud, flickr or other content networks. With this system, not only could you express how much you like say, a song but also support the artist in proportion to your appreciation of the content they’ve shared. Projects like changetip and coinwidget are working on an idea like this, but we need a big social player to move in to get adoption and they are still missing the expression part of the system. I think likes are just an intermediate step in the evolution of value expression on the internet. Money is a better metric than likes to express and transfer value.

Imagine giving away a couple of cents for a funny meme, 10 cents for a video you enjoy or a dollar for an article that changed your views. If you made a video with 200.000 views and 20.000 people gave you, on average,10 cents; you would get 2000 dollars for the video. I consume a lot on music and articles on the internet. I probably read about one or two good articles a day, and a couple mediocre ones. I would have no problem to pay 50 cent or an euro for a good article if that means that i will get to read more like it. I listen to a lot of music on soundcloud, but if I download a song of an artist on bandcamp, I often voluntarily pay more than the proposed amount to support the artist.

As I earlier quoted Balaji Srinivasan, I think there are strong similarities between what the internet did to communication and what bitcoin could do to value transfer. The internet not only democratized, but also fragmented communication. Instead of only communicating with an insular group of people 100 years ago by means of letters, telephones and person to person interaction, today we communicate with alot more people using shorter more efficient means. Instead of writing one letter a day and waiting a week for it to be delivered, we now can have multiple interactions through email, chat messages and micro communication through signals such as shares or likes in social networks.

I think value transfer will move in the same direction. Instead of buying one album on amazon a month, I can imagine people giving away the same amount of money just to maybe hundreds of people. Platforms like soundcloud could take a cut and solve parts of their monetization problems.

Micropayments, small scale transaction, were very impractical before bitcoin, because the fees for making a transaction, with paypal for example, are too high. I think that micropayments are a big part of bitcoins revolutionary potential. Bitcoin adoption is steadily growing but it still needs to prove its unique value proposition, its missing the killer app. A widely adopted bitcoin tip button could lead the way in this direction.

As the web 2.0 put a social layer over web services and our interactions across the internet, maybe this time we will add a value layer to our networks. This could again be the opportunity for disruptive innovation. New companies could replace current companies, copying their existing services, but with a value layer.

Digital goods are not the same as physical ones, you can reproduce and distribute them without almost any cost. When napstar appeared and revolutionized music distribution, the music industry was too slow in adopting and building a working payment system. Today streaming is the method of choice for consuming music. But the system is still broken. Smaller artists use spotify only as a marketing tool, they don’t get paid enough.

We still haven’t solved the problem for the average person to earn money from producing digital goods. I think part of the problem is that we treat payment for digital products too similar to the payment of physical ones. We need to imagine totally new ways and use all the possibilities that new technologies like bitcoin enable to build new forms of value transactions. Maybe we will move from direct payments, where you pay something and get a good or a service, to a more donation based model.

The suggested combination of the functions of a payment and a like would be a way in this direction. Just like in the real world a purchase could be visible and be a possibility to express. Music distribution might be a good starting point. Music and the purchase of related items like band shirts were always a way to express oneself. A digital record of your tips to artists could be a similar way. With a value layer over the networks, we could build giant decentralized marketplaces for content, content creation will be a lot more valuable and therefore more relevant content will be produced.