Streaming payments are going to be important


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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.

-Pomp


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THE RUNDOWN:

Delay in Crypto Regulation May Allow More Freedom for Technology: A commissioner of the United States Securities and Exchange Commission said the delay in establishing crypto regulation may allow more freedom for the industry to move on its own. Heister Peirce, who is widely known as the “Crypto Mom” in the community for her dissent against the SEC’s decision to reject a Bitcoin exchange-traded fund proposed by the Winklevoss twins, made the comments in a speech on the issues of state regulation at the University of Missouri School of Law. Read more.

Intercontinental Exchange CEO: Bakkt Will Launch Later This Year: The CEO of the Intercontinental Exchange expects the firm’s digital asset platform Bakkt to launch later in 2019. The comment was made by ICE CEO Jeff Sprecher during an earnings call Thursday, Feb. 7. Sprecher explained that the company spent over $1 billion on strategic initiatives, including on the launch of the digital asset platform. ICE operates 23 leading global exchanges, along with the New York Stock Exchange. Read more.

Crypto Tax Bill Clears First Hurdle in New Hampshire Legislature: A proposed law in New Hampshire that would allow residents to pay their taxes with cryptocurrency is seeing some early traction. House Bill 470, which would allow state-level agencies (including New Hampshire’s tax office) to accept cryptocurrencies for payment if approved, cleared its first minor hurdle last week after being passed unanimously by a subcommittee on the House Executive Departments and Administration Committee, with amendments. Read more.

Crypto Exchange Bithumb Launches OTC Trading Desk for Digital Assets: Bithumb Global has launched an over-the-counter trading desk for digital assets. The firm said that the new Hong Kong-based venture – Ortus – is a “block deal, matchmaking service” for institutional clients. In an OTC deal, two parties trade directly with each other, unlike on an exchange where orders are matched between buyers and sellers. “Ortus will operate to allow institutions to buy and sell digital assets through a network of global liquidity providers and benefit from a competitive and best price execution service,” said Rahul Khanna, Bithumb’s director. Read more.

Credit Suisse Arm Sees Blockchain Benefits After Fund Distribution Trial: A subsidiary of Swiss multinational investment bank Credit Suisse has completed a blockchain trial for fund transactions. Fundsquare, the fund distribution arm of the Luxembourg Stock Exchange and the project’s technical partner, announced the news on its blog Thursday, saying Credit Suisse Asset Management and Portugal-based bank Banco Best have “successfully processed live end-to-end fund transactions” using blockchain technology. For the trial, the firms used the FundsDLT platform, developed in a partnership with professional services firm KPMG and software provider InTech, for cross-border distribution of an investment fund. Banco Best developed an API integration and created a custom app for the effort. Read more.


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