Blockchain technology can finally make micro payments work

I recently came across the article by Marc Andreessen from 2014 about Bitcoin (BTC). In many ways, it was visionary (no surprise). I’ve been in the industry for four years now, mainly focusing on the social impact of blockchain. It amazes me that in 2014, before there was an institutional presence for Bitcoin – or indeed the widespread understanding of this new technology – Andreessen was able to outline the economic implications and potential society of the future.

Almost eight years after he wrote his lyrics, I’d like to address one of the topics from his work: micropayments. I will explore how blockchain can help transform micropayments, not only enabling the monetization of certain aspects of businesses that need solutions, but also helping society at risk.


Micro is not a new concept. Micropayments have enjoyed varying degrees of popularity since the mid-1990s. By definition, micropayments are transactions whose value is below a certain threshold. It is important that below this threshold the transaction fees incurred make up a considerable part of the total transaction value and are therefore uneconomical. Another important aspect is that micropayments only relate to digital transactions of intangible goods due to the low amount. Any additional processing and shipping costs can multiply the original transaction value a hundred times and thus become completely irrelevant.

Credit card companies offer merchants a variety of pricing plans for the fees they charge. These packages usually contain an amount charged once per transaction and a percentage calculated from it. Unsurprisingly, this information is not publicly available by the card companies themselves, but published by others who compare these tariffs as a merchant service. In this context, let’s take a look at how much a merchant would have to pay for a micropayment.

We assume the following:

● The lowest fee we have found is 1.29% of the transaction value and there are no one-time fees.

● Since the smallest building block of (most) fiat currency is 1/100 of the whole – i.e. USD 0.01 – this is the minimum fee that the credit card company charges, regardless of whether it is higher than 1.29% or not.

The table of the transaction fee rate depending on the transaction value is given in the following table. For example, a $ 0.01 transaction is charged a 100% fee, while a $ 0.10 transaction is “only” 10%. This, of course, shows the irrationality of performing micropayment transactions among these payment platforms.

Blockchain technology can finally get micro payments up and running 5

Blockchain has a solution

However, there is now an alternative. Blockchain technology offers the perfect solution for micro payments for many reasons. It provides the infrastructure for ever faster digital payments, and most importantly, the minimum payment unit of Bitcoin and Ether (ETH) is extremely small, as shown in the following table:

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In addition, cryptocurrency wallets can be easily embedded in any digital device, be it a cell phone, laptop, or other Internet of Things device. And while charges can vary widely across different networks and under different circumstances, charges are not a problem with many protocols and can be up to a few percent.

Last but not the least is user privacy. Due to the asymmetrical encryption of the blockchain, the payer only reveals publicly Address at the cash register and practically gives no information to anyone trying to hack their wallet. Unfortunately, this does not apply to credit card transactions where the payer has to provide his full credit card number and the payment platform is hopefully properly secured.

Related: The crypto industry has completely tightened data protection

Practical use cases for micro payments

Now that the technical aspect has been dealt with, there remains only one question: What do I get for a millionth of a dollar? Well, I’m not sure about parts per million, but there are many use cases for micropayments. Here are some:

Alternative to the subscription model: There is no reason to repeat the economics of the subscription model for consuming online content and its success in recent years, be it video content, music, journalism, etc. For example, what if someone just wants to buy a single item instead of themselves to commit to a subscription? For example, suppose Alice subscribes to two online magazines when she sees an interesting article in the third. She won’t sign up a third time even though she’s only willing to pay for this item. From the magazine’s point of view, the article was there, so why not charge someone for it? Micropayments allow Alice and the magazine to maximize their economic benefits.

Digital copyright, royalties and referrals: As in the previous case, there is no need to explain what copyright, royalties, or referrals are. Micropayments offer a relatively simple mechanism for directly related billing, whereby, in contrast to complex solutions, there is practically no minimum amount limit for the respective amount.

IoT transactions: This use case is obvious, although sooner or later it will likely become as banal and trivial as a light switch. So far, the IoT has barely achieved a fraction of its enormous potential. One possible reason for this delay is the lack of a simple, easy-to-implement monetization model. Blockchain micropayments could be the answer. Think about all the data your car can collect, from road conditions to traffic and more. Exchanging data collected in real time by major users can be invaluable for traffic planning and road maintenance. So why not pay for it? The added value of the blockchain is an improved mechanism for anonymizing data and protecting user privacy – again a winning combination. This can of course work with any other IoT device, from smartwatches to home appliances and more.

Social Influence: This is the easiest use case on this list (and my favorite, of course). Micropayments on blockchain can be revolutionary in two ways. The first is that the recipient of a donation can easily set up an account to receive the money that makes donations possible live for them by leaving out all intermediaries and overheads. However, it’s important to note that this feature is a double-edged sword that can turn out to be its big trap. Scammers easily set up fake accounts to attract donors. There will be a need for ratings and testing, similar to current online services that rate charities on multiple criteria (e.g., since the minimum contribution amount will also no longer be an issue, we can see donations in small amounts. The World Bank ranks a country with a GNI per capita of less than $ 1,025 as “low income.” In other words, a daily wage of less than $ 3. There are 27 low-income countries according to 2020 data constitute an excellent mechanism to be carefully monitored for fraud to raise money for those in need in these countries, and I think you can see that if well managed, this can lead to more effective and direct contributions.

Related: Digitize charity: We can make charity better

In recent years, micropayments have lost some of their original credibility. Although the concept was ahead of its time, technology lagged, preventing it from becoming a reality. Andreessen was right and revolutionary in highlighting the blockchain’s ability to transform micropayments. I barely scratched the surface here in terms of potential and use cases.

Businesses can become more efficient and monetize more of their services. Whole communities can be transformed or brought out of recession with direct and individual help without intermediaries. Kudos told Andreessen about his vision 8 years ago – blockchain could be the breath of fresh air the world has been waiting for.

Netta Korin is a co-founder of Orbs and the Hexa Foundation. Prior to Orbs, Netta was Senior Advisor to General Mordechai Hod on special projects in the Israel Defense Forces and Senior Advisor to Deputy Foreign Minister Michael Oren in the Prime Minister’s Office. Netta began her career on Wall Street as an investment banker and later became a hedge fund manager. She has extensive experience in the field of philanthropy and has served on numerous boards in Israel and the USA in leading positions on executive committees for over 15 years.

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