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This is an editorial by Ram, a 20-year-old student, soldier, and storyteller.
Image credit: samchills on Flickr under CC BY 2.0 license.
To understand why the New York Times made so much money last year, it’s worth evaluating micropayments in the context of the Lightning Network.
Lightning is usually considered a scalability solution for Bitcoin because it makes everyday payments in Bitcoin viable. Lightning is basically a protocol built on top of the main Bitcoin network, where transaction costs are greatly reduced and payment speeds are greatly accelerated. In fact, Lightning is much more efficient than Visa and Mastercard.
“network (Thunder) It can also handle millions of transactions per second (TPS). This far exceeds Visa’s capacity of approximately 25,000 TPS. Another competitor in the fast and cheap payments space, Solana, can only run 60,000 TPS. So Lightning has a big advantage here. — Nat Eliasson
And Lightning still has plenty of room to grow. The technology is still maturing when it comes to security, privacy and adoption, for example, but it shows very strong network effects. As more people start using this technology, it will become cheaper and faster to pay. And remember: they already cost a fraction of the cost!
One of the most exciting things this opens up is micropayment — there hasn’t been enough talk about how exciting this prospect is, both economically and culturally.
Transferring very small amounts is not possible with traditional centralized payment systems. Depending on what service you’re using and where you’re sending it, you can’t even send 10 cents digitally. There are good reasons for this. A tiny amount doesn’t make sense because the transaction cost itself can be larger than the amount you send.
Lightning, on the other hand, makes it possible to send these small amounts digitally. In addition, since it is a technology that exerts a network effect, the cost will decrease as the number of users increases. Now you can send penny fractions digitally via Lightning. In the future, you will be able to send even smaller amounts.
Now let’s go to the New York Times. Let’s do some simple math to understand why the NYT could make 50% more revenue with Lightning’s maturity.
Some quick facts:
- The publication posted adjusted operating income of $76 million in the second quarter of 2022.
- Let’s estimate that the NYT made about $25 million in profit in one month of 2021.
- In 2021, nytimes.com had 125 million monthly unique visitors worldwide.
- In Q3 2022, it had approximately 9 million subscribers.
- So let’s assume that on average there were 115 million monthly visitors in 2021 who weren’t on the NYT.
- These non-subscribers can read up to 5 articles each month.
(I’ll be conservative in my calculations so as not to overestimate the amount the NYT would have won in a scenario with a mature Lightning Network.)
Of those 115 million visitors, some read two articles, others read up to five. On average, each of these visitors enjoys one article each month. Thanks to Lightning he makes transferring small amounts to the NYT so easy and seamless that every visitor ends up sending her dime for the month. That month, the NYT made her $11.5 million more. This translates to 46% more profit.
The math is rudimentary and incomplete, but the gist is: Micropayments open up many possibilities. The benefits go beyond helping content creators. It also has the potential to perpetuate things like cultural changes. Here are some examples:
- Ordinary people doing charity work.
I think more people would gladly donate $0.01 to a disabled child playing the clarinet on the street, even if they were struggling themselves.
- It is especially nice to tip the bus driver.
- Teachers transfer small amounts of money to students in their classrooms who raise their hands to answer questions.
A child who takes the challenge seriously gets a cent, even if the answer is wrong. If your child gets it right, congratulations! He/she will receive her 5 cents. (Remember that teacher handing out chocolates to students who answered a question correctly? Well, they don’t always bring chocolates, so micropayments might be a viable alternative! ) you may end up seeing more hands floating in the air!
image from teach for america
Now try to estimate the number of industries and sectors that would benefit from such micropayments and their subsequent contribution to GDP. Imagine NYT employees getting a pay rise. Imagine they spend this money on new things. And imagine that the salaries of the people they acquire will also go up.This process repeats itself, and here we see the multiplier effect that economists love, which is amazing for the economy.
Micropayments will drive spending in a whole new way, so to Bitcoin enthusiasts: next time we talk about Lightning, don’t forget to talk about micropayments! Probably easier to digest than “scalability.”
And to Bitcoin skeptical economists: I think you’ll love something like this because it encourages spending. So are you still soft on Bitcoin?
2013 article by Paul Krugman.image from Decentralization today
This is a guest post by Ram. Opinions expressed are entirely his own and do not necessarily reflect those of his BTC Inc or Bitcoin Magazine.
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