Bitcoin Micropayments with Lightning

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Settlement of small amounts with Bitcoin Lightning

The payment of micropayments is a problem with the classic payment methods. This is due to the costs of payment processing, which make numerous business models unprofitable. With the help of Bitcoin Lightning, Bitcoin Micropayments can revolutionize the payment of newspaper articles, videos and games.

The following article explains why traditional payment methods are not suitable for paying for micropayments. But even Bitcoin itself cannot offer a 100 satisfactory solution. Can Bitcoin Micropayments in the form of Lightning offer the solution we’d expect?

Classic payment methods

The cost of payment processing is a combination of cost per transaction plus a percentage (disagio) on the value of the goods.

PayPal’s fees are 2.9 cents per payment for smaller merchants plus €0.30. Similar conditions exist for the acceptance of credit card payments.

This results in a total cost of payment transactions of at least 50 cents per order.

If, with a value of €1,- 50 are already payable for payment processing, numerous business models become unprofitable.

Even if the costs of standard Internet payment methods such as credit card, PayPal, direct debit or online bank transfer (Giropay, iDeal) would theoretically make payment processing affordable, the costs of fraud prevention, payment defaults, debit fees and collection must also be taken into account.

The standard Internet payment methods do not offer the merchant a 100 payment guarantee and therefore the costs for any chargebacks must also be taken into account.

A supposedly cheap payment method such as direct debit will also make numerous business models uneconomical due to the return debit fees of approx. €5.-. With a chargeback ratio of 10%, which would not be unusual for digital content, the total chargeback fees alone would be higher than the total revenue.

If the merchant wanted to charge the customer for the costs of the chargebacks, measures would have to be taken to prevent fraud in advance of an order.

This includes the collection of customer data in order to initiate collection and dunning proceedings in the event of a possible default.

However, the collection of this data would be met with incomprehension by customers. In addition, complicate the ordering process, lead to numerous cancellations of purchases and significantly worsen the conversion rate.

This has led to the fact that the content on the Internet is preferably made available free of charge and tries to obtain revenue through banner advertising.

Bitcoin

Can you use Bitcoin Micropayments?
A supposed solution to this problem has long been seen in Bitcoin. However, transaction fees have risen significantly as Bitcoin prices have risen in recent years and the increasing use of Bitcoin.

The fees for a Bitcoin transaction are about 50 cents per transaction, which is the same order of magnitude as Payments by PayPal and Credit Card.

Thus, Bitcoin Micropayments are not an alternative to traditional payment methods such as credit card and PayPal for cost reasons.

The main difference, however, is that with PayPal and credit card, the merchant bears the costs of payment processing. For Bitcoin payments, transaction fees are paid by the payer.

Bitcoin Micropayments with Lightning
Bitcoin Micropayments with Lightning

Bitcoin Lightning

Bitcoin Lightning is not a new cryptocurrency, but an additional feature of Bitcoin for the use of microtransactions.

With Lightning, the disadvantages of the classic payment methods and Bitcoin for the payment of very small amounts on the Internet can be eliminated.

With Lightning payments, it is easy to settle micro amounts. In theory, products can be sold for 1 Satoshi. This is less than a penny.

The cost of a Lightning transaction is not borne by the payee (merchant), but by the payer (buyer).

Thus, Bitcoin Micropayments in the form of Lightning can offer a solution.

For more information about Lightning, we recommend the article “Lightning for Users”. The article describes how to use Lightning from a user’s perspective.

What business models are possible with Bitcoin Micropayments via Lightning?

Payment processing for Bitcoin Micropayments is efficient, cost-effective and profitable via Lightning. In the following, we will consider which Internet business models in the micropayment sector are predestined for payments via Bitcoin Lightning.

Banner advertising pay-per-click

One of the first business models established by micropayment was the payment of click commissions to users when they clicked on banners or visited websites.

Advertisers can buy visitors for their own website for a few Satochis (smallest Bitcoin unit). Publisher (page provider) will receive a few Satoshi for the switched banner surfaces.

These business models are called Faucet and advertised under keywords such as “Bitcoin for free” or “Free Bitcoin”.

The Faucet business models became unprofitable with the price increase of Bitcoin. With the help of Bitcoin Micropayments in the form of Lightning, Faucet can experience a renaissance.

Affiliate Programs

Numerous affiliate programs have to deal with the problem of small amounts. Worldwide payouts to affiliates involve very high transfer costs. The cost of the transfer often costs several times the amount of the transfer and is therefore disproportionate to the commission to be paid.

The payment of affiliate commissions by Bitcoin has the advantage that commissions can be paid at low cost worldwide. The Bitcoin payments can be credited worldwide to the affiliate’s Bitcoin account within a few minutes.

As a result, the cost of paying affiliate commissions can be significantly reduced and affiliates from all over the world can be accepted.

Another advantage from the point of view of micropayments is that affiliate commissions can also be paid in the cent range via Bitcoin Micropayments in the form of Lightning. This saves the effort of the credit management up to a minimum withdrawal amount.

It is possible that every time a commission claim is made, the commission will be paid immediately via Lightning.

Publishers

Publishers in particular face the challenge of transferring a newspaper’s business model to the Internet.

While a print edition can be sold at the kiosk or by subscription, the content is made available free of charge on the Internet.

Either you only offer a slimmed-down version on the Internet to show presence or you hope for a small additional income via banner advertising.

Publishers try to convert the reader to a permanent subscriber. But on the Internet, readers don’t want to sign up if they only want to read a single article.

With Bitcoin Micropayments, publishers can meet the new reading behavior on the Internet.

With the help of Lightning, publishers can now sell individual newspaper articles for a few cents. However, hourly or daily access can also be marketed.

Publishers can generate new readers via such offers and later also convince them to buy a cheap monthly subscription.

Donations / Tips

For a good performance you also like to give a little something.

Be it the street musician or the friendly service in the restaurant.

On the Internet there are numerous help, explanations or instructions, which are provided free of charge.

Wouldn’t it be great if you could reward this commitment with a few cents?

For the author of the contributions, a small donation is a nice side income, but also a nice thank you.”

With the help of a Bitcoin Donation button, a few Satoshi can be quickly transferred as a tip.

Music / Songs

Selling individual songs can be a business model. This is at least demonstrated by the success of iTunes & Co. These vendors were successful because the individual purchases were aggregated into a large order and were collected via the deposited credit card in the store.

With the help of Bitcoin and Lightning, individual songs can be sold over the Internet. Even hobby and school bands can sell the songs to their fan base and market themselves.

Software

The distribution of software has been repositioned by the app store. Basic software costs a few cents and in-app purchases can be used to purchase additional features. Billing is carried out using the payment methods stored in the app store.

These distribution options do not exist for more complex software packages. A one-time software license still has to be paid for a lot of money. There are no price differences here, whether you use the software daily or only occasionally.

With the help of Bitcoin Micropayments, it would be possible to sell the software depending on your usage.

Instead of purchasing a professional image processing program for an advertising agency, private users could rent the same software solution if needed and pay depending on the duration of use and the type of use.a

Video portal

Video portals are revolutionizing television behavior. Instead of gathering in front of the TV at fixed times, the trend is to watch television when needed. With Bitcoin Micropayments, TV stations can offer their own programmes and reports for a fee for a few cents on the Internet.

But also private hobby channels can offer their own YouTube channel for a fee or get supported by donations.

Erotic providers

Payment by Bitcoin offers users the advantage that the services offered can be used anonymously. Registration or identification with personal data is not required at any time. Similarly, you do not need to submit confidential account or credit card information to an unknown provider.

Providers of erotic services can offer individual video films instead of monthly subscription models. Billing models such as pay-per-video or pay-per-download can be billed efficiently.

LiveCam providers can benefit from Bitcoin payments in such a way that there is no chargeback risk. Users pay prepaid via Bitcoin to the cam portal and then use the offer per minute.

The risks of fraud due to performance fraud or back burdens are completely eliminated.

Games

Games are offered as either low-cost app or browser games. In addition, the games are available on consoles or as a software version for the computer.

As with the software, games can be marketed via Bitcoin. Especially for additional functions or items, which are offered additionally for small amounts, the sale by Bitcoin Micropayments is predestined.

More and more games are also being played in a worldwide community via the Internet.

This is a common global currency, Bitcoin. Tournament and eSports event organizers can bill entry fees or prize money with Bitcoin and Lightning.

Tournaments can be organised to play worldwide. The entry fees are paid in Bitcoin, as well as the tickets to watch the games. The prize money and winnings can also be paid out accordingly.

At such international events, the advantages of Bitcoin as a cross-border and international currency are evident. Bitcoin can be accepted or paid for worldwide. This in a few seconds and at very low transaction fees.

Gambling

The gambling industry has been one of the first to discover the benefits of Bitcoin for itself and is the furthest in using Bitcoin as a payment method.

In the gambling industry, there are providers that offer Bitcoin as a payment method within an entire payment mix. If a player wants to top up a credit account with €100,-, then this can be done alternatively with Bitcoin, but the €100 will appear on the game accountagain,-. Bets and winnings are also settled in the fiat currencies, i.e. euros.

But more and more pure bitcoin providers are establishing themselves. Here, the game account is also held in Bitcoin and the bets and the winning sily payments are also made exclusively in Bitcoin.

The advantage of a pure Bitcoin betting offer is a more customer-friendly registration process.

The player can quickly bet on the result of a football match and any winnings are paid directly to the deposited Bitcoin address.

Conclusion

Especially in the micropayment sector, Bitcoin Micropayments with Lightning is seen as a huge development potential. In the past, the implementation of interesting business models failed due to the lack of payment methods.

With Bitcoin Micropayments and Lightning, completely new business models can be realized on the Internet. It will become clear who has the edge at an early stage and implements the most innovative concepts.

This post is also available in: German

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