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I’ve been spending a lot of time thinking about “streaming payments” recently.
As we’ve discussed, one of my core thesis for why Bitcoin and blockchain technology is so important is that these advancements lay the foundation for an automated world. If we anticipate that the world will be dominated by machine-to-machine transactions, it is essential that assets, or base units of value, are digitized (tokenized).
Once value is in a digitally native format, we open up a world of possibilities. There has been plenty of discussion about cross-border payments, fractional ownership, and deflationary vs inflationary monetary policy, but one of the most important use cases is likely to be streaming payments.
This concept is based on a belief that Bitcoin will allow for frequent micro-transactions in a new and unexplored way. Here are a few examples of how this could work in different applications:
Daily income — Hundreds of millions of people around the world live paycheck to paycheck. They experience incredible financial obstacles (overdrafts, increased debt, etc) over things as simple as mismatches between bills and biweekly paychecks. For example, if you get paid on the 1st and 15th of each month, but your rent and cell phone bill are due on the 12th, there is a high number of people who will plan for an overdraft fee every month in their budget. With streaming payments, corporations could pay their employees at the end of each day, rather than every other week. Did you work 8 hours today? — You get your $15/hour minus taxes and withholdings by the time you get home. This would drastically reduce the financial issues that many people living paycheck to paycheck experience.
Subscription services — The rise of Amazon Prime, Netflix and Spotify have made subscription business models popular again. In these scenarios, everyone theoretically pays the same price, but in reality, the people who use the service the least are subsidizing the cost for the people who use it the most. While this works great for the organizations providing a service, it means that a significant portion of people are paying money for a service that they aren’t using. With streaming payments, consumers would only pay for what they use. Imagine being able to pay $0.01 per minute to listen to Spotify or watch Netflix? Companies could even create a descending pricing model (ex: $0.05/min for first 60 mins each month, $0.03/min for minutes 61-180, and $0.01/min for anything over 180 minutes, but capped at $10/month). If you’re a power user, you pay the full price. If you don’t use the service this month, you pay nothing. The pay-as-you-go model will be a hard sell to legacy businesses that are benefitting from the inefficiencies in the existing subscription models, but it ultimately creates a more customer-friendly environment.
New age consumption tax — Governments need revenue in order to provide infrastructure and services to their constituents. Unfortunately, most citizens despise taxes and fail to see a clear connection between these obiligations and their use of governments’ offerings. Take local infrastructure for example (bridges, roads, etc) — streaming payments would allow governments to charge the people who are using the infrastructure, while decreasing the burden on those who don’t use it. Want to use that road? You pay for it. What about that bridge? You pay for it. Never leave the walking distance around your apartment? You pay much less in taxes for roads, but are heavily taxed for sidewalks. Obviously, the idea of pay-as-you-go taxation for public infrastructure sounds cool, but there are many complexities involved. How do you track who is using what? How do you collect payments? Does the car pay by driving over a digital pad in the road or something? Definitely more questions than answers for this application of streaming payments.
The key takeaway for me throughout this thought exercise has been (1) that the technology is now available for streaming payments, (2) there are a few evolutionary applications of streaming payments to Web 2.0 companies/products, and (3) the revolutionary ideas are non-obvious and fairly unexplored. These new business models or applications of streaming payments feel important and disruptive though.
If you want to spend more time on these ideas, you can watch a presentation on YouTube by Andreas Antonopoulos (here), check out Aragon’s streaming paycheck project (here), read about a deeper technical solutions proposal (here), or read the Twitter conversation around daily paychecks (here).
I’m not sure on how this space plays out, but it feels very underestimated at the moment. If you are working on related projects, or know of others, feel free to reach out.
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