I am posting this for Tom @donkeypong whose account was hacked. Until he feels comfortable using his account again, I am helping him out. Tom and I have collaborated in the past, including on the Steemit 101 e-book. https://www.amazon.com/Steemit-101-Discover-Social-Content-ebook/dp/B01HC47NLU
Note from Tom: Like some others, my Steemit account was hacked recently. I can get in and vote, but do not have full control. Someone has been draining my balances. I look forward to having full security implemented soon. To anyone who has been locked out during this time @stellabelle @kevinwong @rok-sivante @the-alien and others, I will help you get back on your feet once we have full security on the site. –Tom @donkeypong
The Missing Link: Has Steemit Revolutionized Micropayments or Made Them Obsolete?
Micropayments are small amounts of money that can be transferred. For years, we have been hearing that micropayments are the next big thing. Dying newspapers have been hoping that micropayments would give them new life, allowing people to pay small amounts for online articles they like. Charities have believed they can leverage micropayments to get a large quantity of smaller donations instead of having to shake down donors for large donations.
A charity that needs money to feed starving people, save the whales, or build a medical facility in a developing country would not need to find donors willing to give $50 or $100 each. What if they could find 50 or 100 people willing to donate $1 each? A lot of people would gladly give $1, right? Similarly, no one wants to pay $100 a year for a newspaper subscription, but would they pay 50 cents for an article or a video they liked?
In theory, the answer is ‘yes’, but…
There are Two Reasons That Micropayments Have Failed So Far
Unfortunately, micropayments haven’t worked. There are two main reasons for this:
(1) Fees. If you want to send $1 to someone but have to pay a transaction fee of 26 cents, then WTF? Transaction fees make micropayments impractical in most situations. In the end, the Visas and Paypals of the world always need to make a profit. On large transactions, people are comfortable paying the fee, but on small transactions, these economics make no sense.
(2) People don’t like micropayments. As with the fees, they take too much time and trouble, considering their small value. For charities, it takes too much time and energy to get someone to make a $1 donation, and by that time they could have just asked for $25 or $50. If you have not seen this article by Clay Shirky that is quoted in the Steemit Whitepaper, then it has a good explanation of why people do not like to use micropayments: http://www.openp2p.com/pub/a/p2p/2000/12/19/micropayments.html
Bitcoin was supposed to help with micropayments. It doesn’t cost much to transfer money through cryptocurrency. There are several promising startups that have worked on enabling micropayments through crypto. But Bitcoin can’t even handle its own transaction load, it depends on mining that uses as much energy as a large city, and it often takes 40 minutes to confirm a transaction.
Bitcoin is a first generation cryptocurrency. Faster and sleeker alternatives exist now, some of which would be better alternatives on which to build a micropayment infrastructure. But until Steem and Steemit came along, no currency had solved both of the above problems at once.
Steem and Steemit Have Eliminated the Two Main Obstacles
Steemit gets attention for its social media platform and financial rewards (rightfully so). But I don’t think people have given proper attention so far to some of the other potential use cases for Steem and Steemit. Can you imagine if every charity in the world used Steem for its fundraising? Can you imagine if every news organization had a presence on Steemit as the way to fund its articles and videos? We could be headed in that direction.
Steem and Steemit have solved the two underlying problems with micropayments.
1.) Problem: Fees. Solution: Steem has no transaction fee.
2.) Problem: People don’t like micropayments because they are too much trouble. Solution: Can you upclick on an arrow button? That’s how simple it is to “micropay” someone using Steemit.
It’s So Simple. And Free. And Secure. And Instant.
Let’s talk about the back door first, which is Steem. Have any of you transferred Steem or Steem Dollars yet using your account? It’s free and it’s carefree, as long as you don’t take up serious bandwidth with a huge quantity of transactions. It’s instant. It’s secure. The security issues we have seen this week involve the web interface and a big-time security fix is being implemented. There are no security issues with the blockchain and with Graphene, which power Steem and Steemit.
Have we been so caught up with Steemit that we don’t realize what Steem (the currency) has achieved?
Visa, Paypal, and Western Union have nothing like this. They can’t, because their infrastructure is far more expensive than ours. Steemit is just one piece. Can you imagine what will happen when third parties are able to come in and build apps and layers and businesses all around us that use Steem? Some of these, no doubt, will help provide infrastructure for micropayments in a big way.
Steemit Has Either Killed Micropayments or Revolutionized Them Forever
I don’t know which of these statements is true: Steemit either has killed micropayments forever or it has revolutionized them. But the fact is that micropayments will never be the same after Steemit. Anyone else working on payment software or apps needs to drop what they are doing and understand this platform first. Because Steemit has changed the game for micropayments, permanently.
Micropayments have been reduced to one click. How ‘inconvenient’ is that?
Now there’s a fine line here, because the Steemit community does not appreciate begging. No sob stories, please. But we have seen small-scale crowdfunding already for people who hope to develop apps or help market Steemit. If you have a good reputation and your project brings value to the community, we will micro-pay or micro-fund you with our mighty upclicks.
If a verified charity with a good reputation on Steemit was to come on here and explain its mission to build a new medical center in a disease-ridden part of a developing country, asking the Steemit community for its support, don’t you think that might get funded with some upvotes? And anyone who wants to post an original news article or video can monetize it here by getting upvotes. We have not even seen original news on Steemit yet, which remains a HUGE untapped avenue of development. And frankly, I’ll be glad if smaller organizations and individuals stake out this opportunity before the Rupert Murdochs of the world get here.
Mass Adoption of Micropayments: The Door is Wide Open
Steem and Steemit are very young. These use cases are still in the near future. But anyone excited about micropayments should look no further than Steem and Steemit, because they have broken down the key barriers that prevented mass adoption of micropayments. Other micropayment infrastructure is now obsolete.
If I had a role in an organization that could use micropayments, I would be getting them onto Steemit right now. Developing a good reputation in this community is very, very important. And if I was an entrepreneur with a passion for helping people, I would solidly focus my sights on building infrastructure that enables others to use Steem and Steem Dollars.
The barriers are down and this beast has been released. Learn to love the beast.