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Micropayments: How to unlock the digital economy

Medb Kiely-Cuddy




November 22, 2022

Micropayments: How to unlock the digital economy

How many times have you clicked into a fascinating article and been hit with a paywall for a hefty monthly subscription? Imagine if you could quickly pay a few cents to read the article.

No sign-up, no monthly fee, no ridiculous credit card fees that cost more than the transaction, and no providing unnecessary personal information. Just a few clicks, and away you go! This and many other micropayments become feasible and enticing when we integrate them into the open crypto economy.  

What are micropayments?  

A micropayment is an ecommerce transaction involving a negligible amount of money for a service. While the idea has been around since the 1960s, the concept has struggled to grow wings and become a fully-fledged income model. Coined by tech dreamer Ted Nelson, micropayments were just one of many futuristic ideas he envisioned. Many of these, such as hyperlinks and personal computers, have become a reality. So why have micropayments failed to launch?  

High transaction fees

A major barrier for consumers and creators is the transaction fees involved. Credit card companies, banks, and payment processors often apply a minimum fee to any transaction. While this can be as low as PayPal’s micropayment merchant fee (5% of the transaction and $0.05), this is unsustainable for microtransactions of a few cents. Meanwhile, Stripe charges $0.30 plus a small percentage for accepting payments. For a workable micropayment economy, we need a way to reduce or eliminate transaction fees on both ends.  

Big investment, small reward

Adopting a micropayment business model as it stands is a substantial investment with no promise of a worthwhile payoff. You need to integrate a micropayment service (and all the fees that come with it), store and manage customer data securely, and onboard new customers. It can involve contracting another company or hiring new staff to handle the added workload and technology. And if the end result might be just a handful of users paying a couple of cents, we can see why businesses have been hesitant to take the first step.  

Also, for some subscription-based services, such as newspapers, there's a worry that having an alternative pricing model would dissuade users from monthly/yearly subscriptions. Overall, introducing micropayments through traditional finance is a significant investment of resources and money for potentially little payoff. Integrating micropayments needs to be simple, seamless, and affordable to have any worthwhile return.

Paywall conversion rates

To accept payments from users, companies need their data. This often involves creating accounts or at least supplying billing information. Users often don’t want to sign up, create accounts, and provide their personal information for a minor transaction. A micropayment format could become more popular if it didn’t require any of this—users would only have to click a button to pay a nominal fee rather than a lengthy subscription process.

An economy with micropayments embedded into the framework would allow smaller creators to generate additional income and businesses to offer alternatives to expensive monthly or annual subscriptions.

However, any micropayment model needs to be inexpensive to adopt, frictionless, and user-friendly. Web2 has struggled to come up with the right solutions, and many are turning to Web3 and the crypto ecosystem.

How can Web3 offer a better alternative?  

While PayPal and other payment service providers offer micropayments, these are often expensive. They also provide less anonymity which can be problematic for users who wish to keep their income or personal expenditure private.  

While Ethereum has hit the headlines for exorbitant transaction fees (reaching as high as $70), plenty of other blockchains offer a cheaper alternative to credit card transactions. Solana provides a similar range of services with low fees of about $0.00025. With low transaction fees, micropayments can be a viable business model that is affordable for all parties involved.

Web3 offers a frictionless way to carry out micropayments. With Web2, users must create an account, supply identifying information, and enter credit card details. Many individuals have valid concerns about these companies' ability to protect their data safely. Regular data leaks occur on even the biggest platforms. With crypto, users don’t have to connect their identity to their wallets, thereby avoiding the risk of their data being stolen.  

Secondly, the hurdle of creating an account dissuades many potential customers from completing the subscription process. Often seeing a paywall or being asked to create an account simply to read an article causes many people to close the tab straight away.  

If it was as simple as connecting your software wallet with just a click, we might see an increase in users willing to pay a small amount to access exclusive content or services. Independent creators and media outlets could integrate crypto micropayments with a low cost and a potentially high reward. It could provide an additional source of revenue for artists, writers, newspapers, content creators, and many more online businesses.  

Make micropayments a reality with Web3 APIs

There are many projects already tackling the barriers to micropayments head-on. These include blockchain networks specifically designed to scale and handle a constant flow of minute transactions at a minimal fee. Creators can embed a micropayment feature into their websites like a digital tip jar. MetaMask is already available as a browser extension that lets users connect their wallets to a website in just one click.

Many content creators could benefit from an additional source of income that goes directly to them without intermediaries or platforms skimming off the top. There are also industries uniquely suited to a decentralized micropayment model, like the adult entertainment industry. Let’s look at how this micropayment economy is developing.


If there’s one group who has wholeheartedly embraced the idea of micropayments, it’s streamers. Watching any popular Twitch stream, you’ll see tips popping up in the chatbox or on screen. These are often followed by a shoutout or acknowledgment from the creator. Tips or donations have become part of the woodwork for online streaming.  

Twitch and many other streaming platforms also have the choice of subscribing to a favorite creator (with Twitch, this costs $4.99 minimum a month). Users receive exclusive benefits and can go ad-free. These options make the audience feel more involved with the entertainment, much like throwing a coin into a busker's hat.  

However, these transactions involve high fees or third-party services like Venmo or PayPal. These require supplying personal information and signing up. Most importantly, the creator sees little of your donation. For subscriptions, Twitch takes a shocking 50%. And with tips through PayPal, Twitch Bits, or other models, creators can see as little as 25.5% of your donation. Many consumers want a way to give their money directly to the creator.  

Providing a solution to these issues would increase revenue for the creators. By integrating crypto donation options, donors can tip creators simply by connecting their wallets. Creators would receive payments directly with a minor network fee.

Basic Attention Token

An innovative use for micropayments is ascribing value to the countless interactions that take place online. Every day we’re bombarded with adverts incessantly—before videos, in banners that take up the whole screen, and in every possible spot of real estate that a web page can spare. Our data is collected and sold to advertisers to target us at every turn. Meanwhile, we receive nothing. Our attention is valuable, so why should advertising be a one-way street?

With crypto micropayments, we could receive a small return on the attention we give adverts without forking over our personal data. Imagine if you received 10 cents for watching that YouTube ad before a video. It might make the entire process a little less frustrating for the end user and create potential customers for the advertiser.  

The Basic Attention Token (BAT) network is working hard on making this a reality. The BAT network works through the Brave browser. The browser was launched in 2015 by Brian Bondy and Brendan Eich (co-founder of Mozilla Firefox). Like Mozilla, it comes with in-built ad-blocking software and blocks trackers, cookies, and malware.  

The founders wanted to create a way to deliver advertisements with respect for the user and their privacy. Advertisers can pay in BAT to have adverts shown to any users who opt-in. The user then receives a portion of this fee based on their engagement with the advert. Brave also reports engagement statistics to advertisers.  

The browser has an built-in wallet for storing BAT tokens and can support the Tor network. Some user data is stored securely on the blockchain without any identifying information. BAT uses this anonymous data to target ads for advertisers.

A part of this advertisement fee also goes to the publisher of the website hosting the ad. This is a way for content creators to be rewarded for the traffic they bring to the website. The more sustained user interaction and engagement they generate, the more they receive over time. Users can also support creators by donating their tokens monthly or once-off. This incentivizes quality content and creates a new digital advertising landscape that benefits everyone.

Adult Entertainment Industry

The adult entertainment industry has always been quick to experiment with new technology. This is partly to do with being excluded from traditional platforms. Social media giants like Facebook often remove any adult content from their websites. Many larger Adult Entertainment companies usually charge a high fee to host content. As a result, online sex workers (SWers) often turn to alternative platforms that can safely provide them with a source of income.  

Secondly, innovative technology can often provide greater privacy and security. Many SWers remain anonymous for safety reasons, and mainstream platforms often require identity verification. While this is often (rightly) born out of concern for abuse, it can place at-risk SWers in further danger if the information is leaked. Smaller independent platforms may not require verification. Clients also want anonymity, especially as some employers look through a potential employee's social media history.

Through these platforms, consumers pay small one-off or monthly fees for access to videos, photos, custom orders, or exclusive content. However, to receive micropayments through any platform online, SWers and customers must provide their identity to one group—payment processors. Handling payments or micropayments through traditional finance requires linking a bank account or credit card. This can be a serious issue for SWers if payment processors refuse to handle any payments coming from sexually explicit content.  

In October 2021, OnlyFans announced they would no longer support sexually explicit content due to pressure from payment processors. As OnlyFans had gained popularity due to being perceived as a safe haven for adult content creators, many members were angered and disheartened. Many creators were set to lose their entire source of income and face increased personal risk, including POC (persons of color) and trans creators (who already experience disproportionate levels of danger). These creators relied on OnlyFans for a safe way to choose the content they create.  

In response to a huge backlash, losing creators, and after discussions with their payment processors, OnlyFans reversed the decision. However, the situation sparked a debate about the control payment processors have over the lives and income of many disadvantaged people. Anyone who relies on the internet for their income could have it away at any moment if payment processors deem it unpalatable/unsavory.  

This sort of overarching power over who can and cannot receive payment through traditional means has made payment processors the de facto police of the internet. If you’re restricted from receiving income for a type of work, it essentially bans it from the internet. Having all revenue generation go through a handful of centralized payment processors and banks creates a chokehold online.  

As we’ve seen, many social media giants are wary of rocking the boat by hosting explicit material, and payment processors can pressure others into removing content. A decentralized, well-run micropayment network could provide greater privacy, remove the potential censorship by payment processors, and remove the need to entrust a website with your personal details (all you need is your keys).  

However, it’s vital to design this with the workers at the center. This is needed to protect them and avoid potential harassment on an immutable network. Anything else would endanger an already vulnerable group.

Micropayments and the peer-to-peer economy

The micropayment economy has been a distant dream for many years with the hurdles of traditional finance impeding progress. While developers and independent creators are leaping headfirst into exploring micropayments, our centralized payment network has been hesitant to jump the gun. How do we get to the homestretch?

Many content creators advertise ways to pay them the price of a coffee or become super followers for a low fees. However, these solutions often come with high transaction fees and lengthy signup processes. Meanwhile, the platform skims a sizable portion off the top. Low-cost, peer-to-peer micropayments can become a viable reality using high-quality decentralized blockchain networks. Crypto and DeFi could be key to unlocking the micropayment economy.

Imagine you could easily tip a creator with the click of a button and no signup. Users could enact micropayments seamlessly at low costs during a livestream, when creators post, or to access exclusive content. Web users could be rewarded financially for their exposure to marketing. This would create a frictionless way to monetize online interactions and create a more lucrative source of income for both the creator and the user.

Streaming websites, blogs, and any online content creation could easily embed a tip jar using APIs. This could create the Web3 version of patronage, a decentralized, low-cost way to support your favorite creator in just a few clicks. No hassle, no signups, just a direct peer-to-peer transaction between you and an artist. From patrons to Patreon to the future.