The Current State of Micropayments and Web Monetization
As the web enters its fourth decade, its future seems less predictable than ever. Will it continue on its current path? Or change course completely?
The concept of micropayments is one of the earliest web-related ideas. As far back as the 60s, Ted Nelson was using the term to describe a new system of fractional transactions which could be used to monetize online traffic for everyone.
But micropayments have still yet to become an everyday service. The web itself has evolved in a different direction than the one imagined by its early architects.
The web of the 90s was a vast network of user-owned sites — but the current landscape is a different story, the scenery dominated by social network skyscrapers and giant all-purpose stores. Most of the web traffic flows through these mega-sites, not through the independent sectors which the web’s basic architecture was built for.
Advertisements and pop-up ads have become everyday obstacles, disrupting the web experience without being particularly reliable in turning a profit for website owners.
This is not to say that the web is necessarily on the wrong track. As a constantly developing system, it has already gone through many iterations during its development. And this current transitional state may be the start of a chapter where personal monetization is a much bigger part of the story.
In this article, we’ll look at the current state of micropayments, the technology which might power them, and some of the hurdles they might have to clear in the coming years to gain widespread adoption.
What exactly has changed?
In the web’s first decade, there were a few attempts at micropayment-like systems, but none of them were able to catch on. But the situation has gradually changed in the 20 years since.
For one thing, there’s the increase of online sales. In the 90s, barely anyone was making their purchases online, and in the early 2000s, they were seen by some as a possible threat to economic stability.
But in 2020, online sales accounted for more than 790 billion dollars, a huge increase of 32 percent from 2019. As of 2021, at least 15% of all sales are conducted online, a number which is certain to continue to rise.
It’s not just brand-name shopping — aside from marketplaces like Etsy which focus on user-created products, there is an increased popularity in independent content such as online courses, live streams, and podcasts.
There are even a few systems in place designed with online exchanges in mind, including peer-based resources like subscription-service Patreon and payment service Venmo. These give individuals a lot more power to turn a profit on their own, even if they’re still set up primarily with traditional goods and services in mind.
The idea of web traffic as a powerful commodity is still limited to large sites. But some people are beginning to see that there may be other models, which may give even small site owners access to this revenue stream.
Blockchains and Cryptocurrencies
One of the most important developments in recent years is the creation of the blockchain, a type of protocol which, rather than storing all of its values on one computer, stores identical data in countless places across the web.
This approach is generally considered safer than a single, centralized and hackable database. Editing a single part of the blockchain doesn’t accomplish anything, since any difference will be checked against other parts of the chain. This sense of security has led blockchains to become particularly popular for financial exchanges.
The very first blockchain was built by the mysterious Satoshi Nakamoto, as a public transaction ledger for the first cryptocurrency, Bitcoin.
In a little over a decade, Bitcoin has spawned countless similar currencies, which have had a dramatic effect on the current state of web interactions — growing from small experiments into major factors in the global economy.
Crypto is changing the emerging design of the web, the ideas behind how financial institutions should work, and is making it possible for people to build new protocols and ideologies that were formerly impossible.
Some Cryptocurrencies enable smaller transaction fees, providing a means to easily exchange different currencies and enabling global payments. And importantly, they’re particularly well suited to micropayments — without being tied to traditional dollars and cents, they are a perfect fit for fractional transactions.
Cryptocurrencies are also core to a new wave of thinking about alternatives to traditional monetary systems. Currently, some people are preferring to invest in rising cryptos than in traditional stocks, as their growing volume and the promise of being one’s own bank make it easier to move money around and lend money to the market in exchange for interest rates that are better than traditional banks currently offer.
But cryptocurrencies don’t exist in a vacuum — they need a fluid, versatile system to provide a market for them. This is where Interledger comes in.
Interledger is a type of blockchain protocol, which can send payments between users with personal Web Wallets — sort of like digital bank accounts. It can easily translate payments from one currency to another — which gives it massive potential even outside of the web.
It’s a bit like a European service which exchanges Euros for local currencies, except that it can accommodate tiny fractional amounts and work with any currency worldwide. In many ways, it’s a successful micropayment system — to providing traction for countless types of monetization across the web.
The seamless nature of Interledger means that once it is set up, it becomes an invisible technology that can be used without thinking about. Instead of entering payment details every time we need to pay for something, we can have that info stored safely on a blockchain, where it can be safely accessed by different sites for each sale.
Coil is just one example of a service designed to use Interledger to monetize websites in a peer-based model. Members pay a five-dollar monthly fee, which is in turn used to send money towards participating sites which that member visits. It’s an approach which encourages users to think of the web as a large community event, rather than as an impersonal collection of large websites.
Sites using Coil can offer bonus content to subscribers, a way of giving incentive to support sites without disrupting the experience. For example, there are Coil enabled browser games which give special content or secret levels to subscribers — which helps Coil feel like an inside club, where VIP members get to experience more than casual visitors.
In the indie gaming community, both js13kgames and Defold held gaming competitions which feature web monetization categories. Cinnamon is the first video hosting platform to support web monetization. Developer community dev.to, and developer blogs Hackernoon and Hashnode all added support for web monetization for individual blogs and each site became web monetized itself.
These systems are still evolving rapidly, and may look completely different in a few years. Until recently, one of the issues with Coil was that it was very limited in the kinds of payments it supported — no subscription-like recurring payments or direct transfers of funds were enabled.
But in May 2021, Coil announced Rafiki — a new open-source Interledger extension which gives users many more options as to how they want to pay other parties.
Coil is likely to evolve in other ways as well. The Web Wallets used in Interledger transactions are usually third-party plugins, but it seems inevitable that blockchain systems of the future will incorporate wallets into the program itself.
I hope to see more browsers support native web monetization. Having Interledger tools like this built directly into the browser helps make online transactions much more secure, as well as enabling even more innovative approaches to supporting creators. Notably, Puma is the first browser with native support for Coil.
If you’re interested in using Coil to support yourself or others, check out this post.
Non-Fungible Tokens are a recent innovation which uses the same decentralized methods as cryptocurrencies. NFTs are designed to ensure there is only a limited number of a particular set of data, while also ensuring the original creator is credited each time the file changes hands.
This has led to some high profile NFT stories which, to an outsider, might seem like practical jokes. Twitter CEO Jack Dorsey sold an NFT of his first tweet for almost 3 million dollars — despite the fact that tweets are short text strings which can be easily copied, making them a poor fit for the NFT format.
Ancient memes such as “Charlie Bit My Finger” have returned from the dead to be sold as high-profile NFTs. John Cleese has mocked the whole concept by selling a rough sketch of the Brooklyn Bridge, as a play on the old expression “if you believe that, I’ve got a bridge to sell you.”
This hardly presents NFTs as a game-changing innovation, making it hard to convince non-believers that NFTs can, or should, have value.
But in contrast, there are some very inventive ways NFTs are being used:
- “The Switch” is a piece of 3D artwork which will be expanded and edited by the creator in the future — allowing the owner of its NFT to watch the work as it develops.
- Comedian Todd Montesi incorporates his NFTs into the plot of his webseries PN & Friends. The idea is to give the pieces extra value to his fans, by expanding on the backstory of each using jokes and storytelling.
- Music services like Rarible and Mintbase are exploring the idea of letting artists mint their songs as NFTs — which hypothetically could create a system where musicians are fairly compensated any time their work is played.
- Friends with Benefits (FWB) is a social community using ethereum-based tokens for access and rewards.
In addition to these innovations, many charity organizations have been capitalizing on the popularity of NFTs by using them as fundraising tools. DADA is a collaborative art platform that sells NFT artwork to help raise money and awareness for artists in underexposed communities.
If NFTs in their current state seem like a joke, there are many who hope that the punchline will be something much more serious — an increased ability by individuals to control their personal data.
Regardless of what NFTs are being used for in these early days, the technology which drives them has far-reaching implications which have the potential to completely change the way we think about digital ownership.
The rapid rise of NFTs has already led to equally rapid invention — systems like Filecoin have risen largely out of the need to store NFTs on the web using a different, blockchain-friendly method. Environmental concerns about the energy use of NFT systems has led to new platforms which don’t require approaches like crypto-mining.
Unlock Protocol has a particularly inventive approach to NFTs — using them as customizable membership keys for certain sites. This allows people to set a length of time for the membership, or access to certain features like private Discord channels.
Content creators can place paywalls and membership zones in the form of “locks” on their sites, which are essentially access lists keeping track of who can view the content. The locks are owned by the content owners, while the membership keys are owned by site visitors.
It’s a system where creators are in control of how much they charge and who they let into their membership group. Unlock allows creators to own their own part of the system — as opposed to the current approach, where sites often have to use third-parties like Patreon or Youtube to control their memberships — and visitors have no say over how their information is used or who it is shared with.
In the beginning, powerful technologies can look like toys. When the iPhone came out, the bestselling “Fart App” was just a crude joke. But it showed that a 14-year-old could not only create content on this new platform, but they could do it in a way which allowed them to make money.
It was one of the best demos Apple could have hoped for — it was funny, universally understandable, and something people could experience viscerally.
It’s only a matter of time before we see NFTs with that kind of simple, universal appeal. Right now, so much of the conversation is focused on one-of-a-kind, completely unique, and incredibly expensive NFTs, that it drowns out other important parts of the concept.
Not everyone is buying NFTs, but almost everyone is talking about them. They’re opening up new ideas as to how audiences might support creators, while keeping a constant record of ownership of work.
NFTs are a signal, not a trend. There are big changes coming which will hinge on these innovations — even if the name and framework around NFTs changes in the future, this current period will be notable as a time of rapid experimentation and innovation.
Micropayments in Action
With all of these micropayment-adjacent technologies being developed, the field is ripe for new forms of monetization.
Skittish, a Grant for the Web awardee, is an interactive chat program which lets users explore a 2D space as cartoon animals, while interacting with an audio chat which changes volume depending on how far characters are from each other.
Using Philip Rosedale’s audio platform High Fidelity, it mimics the feel of wandering from room to room in a crowded party, an important part of networking which is missing from camera-based chats featuring large, constant groups.
Skittish allows users to put their Interledger payment ID into the site, allowing Coil subscribers to pay to support the platform or featured creator during the use of Skittish. These Coil payments don’t entirely cover Skittish’s High Fidelity licensing fee, but just enabling this kind of payment on a platform like this is a fascinating step forward.
The potential uses of this approach are endless. We might see online swap meets where users can buy and sell items while also socializing, a nice antidote to the solitary feel of online shopping.
Ideally, micropayments can help create a climate where the giant all-purpose sites of today (Facebook, Amazon, etc) are replaced by more specialized, more personalized, experiences.
Plausible Analytics is looking to do just that — providing an alternative to Google Analytics. While Google Analytics allows users to track site traffic, it wasn’t developed with monetization in mind, and it gathers a lot of re-sellable data in exchange for its service.
Plausible, on the other hand, ensures that information will remain secure, while also offering tools that are specific to Interledger-based services. Users can see how much they’re making from Coil subscribers or other contributors to the site, giving them much greater control over their own sites.
Of course, not everyone is going to be interested in web monetization technologies the first time they hear about them. As with any new solution, it might take a few years until the average person has heard about these concepts enough times to understand their potential.
As I see it, there’s one clear hurdle ahead of mass adoption of micropayments and web monetization, and it’s entirely cultural.
The current web landscape is still dominated by social networks and other large sites, rather than independent content on domains owned by individuals. While users have already started to leave many of those large sites behind, it might take a mass-migration towards user-created content to see micropayments become the peer-supporting resource they were always meant to be.
But we are seeing the seeds of the shift, as we move from centralization towards decentralization. This is a path paved by cryptocurrencies, Interledger, new types of services like Coil and Unlock, and a constantly growing audience with an interest in an inventive, inclusive web.
The most exciting part of this next chapter is that we all get to be a part of it. The iteration of the web where we simply scroll down and mindlessly consume content is nearly over. I’m looking forward to seeing just how the web experience will evolve, as user control over monetization continues to grow in unpredictable ways.
This is the second article in a series of articles on Web Monetization and creative compensation. Also see Who Killed the Micropayment? A History.
Amber Case is a Mozilla Fellow researching web economics and creator compensation. They are also an advisor to Puma Browser and Unlock Protocol.