Cryptocurrencies

Can Cryptocurrency Save Digital Media?

Ad revenue is way down, but crypto offers an alternative revenue model for online publications. Is it workable?

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With the coronavirus decimating ad revenue, digital media companies are in desperate need of new ways to make money. Blockchain technology offers one—and some companies are already using it.

The pandemic has caused a spike in news readership, which should be a good thing for the news industry. But it wasn't. Many advertisers cut spending in the struggling COVID economy; others refused to allow their ads next to stories about the coronavirus. Revenue plummeted. A slew of pay cuts, furloughs, and layoffs followed in newsrooms across the country.

Social media companies were hit hard too. Facebook is expected to lose $15.7 billion in ad revenue this year due to the pandemic—a 19 percent decline. Twitter and Snap Inc. are expected to lose 18 and 30 percent, respectively.

With print circulation also declining, many magazines and newspapers have shifted to digital subscriptions over the past several years, usually allowing readers a small number of free articles each month before they hit a paywall. Some reports suggest that social media platforms are thinking of following suit. In July, Twitter chief Jack Dorsey said that Twitter is exploring a subscription model for some of its features. 

The subscription revenue model has problems as well. Many readers are not willing to pay for subscriptions at all, let alone shell out $50 to $420 a year for every publication they're interested in reading. That means subscription-funded publications only make money from devoted readers.

But blockchain technology makes digital transactions involving just a few cents economically feasible. In that way, digital media companies could erect a paywall that you needn't buy a subscription to get past. By giving readers the option of paying for a single article at a price that makes sense, publications could recover revenue from casual readers unable or unwilling to subscribe.

Traditional electronic payment systems can't support transactions this small because they rely on third-party intermediaries, such as banks and credit card companies, that have costs. As a result, credit card companies and digital payment platforms such as Venmo, Stripe, and Paypal typically charge merchants 30 cents plus 2.9 percent per transaction, which are then built into the cost of the goods and services they sell. Even Patreon, which now charges merchants a lower rate for pledges under $3, still takes 10 cents plus 5 percent of the pledge. Any potential profits from transactions at such low rates are thus wiped out by the fees involved in making them. 

Cryptocurrencies remove the need for these costly intermediaries, thereby making instant tiny digital payments possible.

For the cryptocurrency that most people are familiar with, bitcoin, microtransactions haven't panned out, mainly because the cryptocurrency's protocol limits the rate at which the network can process transactions. Miners cannot add blocks larger than 1 megabyte to the blockchain, and the protocol adds one new block to the blockchain every 10 minutes, so the system can't process more than seven transactions per second. For perspective, Visa averages about 2,000 transactions per second and has reached as many as 56,000 per second.

For years, bitcoin's block size wasn't an issue, as the network was not large enough to bump up against the size cap. But as the system has become more congested, transactions are taking a long time to process and transaction fees are high. At the moment, it costs about $4 to send bitcoin.

Developers are working to solve this through "second layer" protocols such as the "lightning network," where transactions can be passed back and forth quickly and cheaply before being added to the underlying blockchain. In the meantime, bitcoin isn't the only cryptocurrency.

As bitcoin approached the block limit, developers disagreed about whether or not to increase it. So the cryptocurrency split—or "forked"—in 2017, leaving two distinct cryptocurrencies: bitcoin, which maintained the previous block size, and bitcoin cash, which increased its block limit to 32 megabytes. In 2019, bitcoin cash forked again, and yet another currency—bitcoin SV—emerged, having removed the technical cap on the block size entirely.

Today, both bitcoin cash and bitcoin SV enjoy extremely low transaction fees. For the former, the average transaction fee is less than a penny. Bitcoin SV's is less than a tenth of a penny.

People are building businesses around this technology. For example, Twetch is a social media site similar to Twitter, except that every time you follow someone or favorite a post, you are effectively sending them a few pennies in bitcoin SV. Josh Petty, the app's co-founder, likens Twetch to the old SMS pay-per-text system. Users pay for every action they take on the app: It costs 2 cents to make a post, 5 cents to like a post, and 10 cents to follow another account. Every time one of these transactions occurs, Twetch takes a penny. 

This revenue model means that Twetch doesn't have to sell ads or user data. Because the blockchain allows even the smallest transactions to be split and sent to multiple addresses, Twetch can take its share of a transaction without ever holding users' money. It also allows users to profit from their own content. And it's taking off—Twetch has surpassed 16,000 users, including Danny Trejo.

Other apps have adopted similar systems. Streamanity, a video streaming platform, uses a "pay to play" framework to let creators monetize their content without relying on ads. Creators can charge as little as a penny per view, and viewers can earn bitcoin SV by sharing videos. Bit.sv, which has yet to officially launch, is a blogging platform like Medium that allows content creators to charge for individual posts. 

According to Ryan Charles, the founder of Money Button—the interface that allows Twetch users to make 2 cent transactions at the push of a button—the technology and the product are all in place for digital media companies to implement a pay-per-article paywall today. But there is still a major non-technical problem to solve before doing so would make sense: Most people don't have bitcoin SV. Most of the hundreds of apps currently using Money Button, including the social media network Powping and the messaging app Baemail, are used and run by bitcoin SV enthusiasts.

There are a variety of ways publications could encourage users to purchase the necessary cryptocurrency. One technique that Twetch uses is to "gift" new users bitcoin SV in order to help them get started. "We give every user three cents to start, and it costs two cents to post," explains Petty.

Another option would be for digital media companies to sell "credits." Publications could offer $10 credits that readers could purchase with a credit card and then spend down on one-off articles. But this approach would fail to capture readers who are unwilling to commit $10 to a publication or are interested only in reading a single article.

Truly unlocking the economic potential of microtransactions would require widespread cryptocurrency adoption. Charles envisions a world in which someone browsing the internet could sign into The New York Times—or any other publication—through their preferred cryptocurrency wallet the same way they can sign in with a Gmail account now.

Some question whether a blockchain can scale to handle a global volume of microtransactions without destabilizing the network. Handling a huge volume of transactions in every block would make mining expensive, which could lead to an "extreme centralization" of the network that would threaten its security. For that reason, many think second-layer solutions like the lightning network are a better approach. Others point out that bitcoin SV can already manage a high volume of transactions. Earlier this year, Bitcoin Association reported that the currency's scaling test network sustained "1,300 transactions per second for a prolonged period, in addition to handling a peak load of 6,400 transactions per second," approaching Visa's typical rate.

It's not clear if either system will ever be popular enough to work in the mainstream media. But with subscription rates remaining low and ad revenue erratic, it may be time to give cryptocurrencies some serious consideration.

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  1. There’s a market out there for the objective reporting of facts, and open analysis of the news. Maybe it’s not a huge market, but I have to imagine it exists. Journalism outside of the bubbles.

    Trying to placate the bubbles and giving them their bias won’t net you journalistic revenue, because that path leads to the gutting of journalism in the race to replace fact with spin and analysis with narrative. It may look like news but it’s not.

    I don’t know how to get there though. It’s the consumers of media who are the problem, as they are driving this. NYT isn’t firing the less than woke because they have some eebil board of directors, it’s because they perceive that their readership wants more wokeness. Ditto for right leaning outlets that hopped onto the MAGA train. They’re giving their audience what they think they audience demands. And for the most part they are.

    1. I would settle for a site which did not censor anything, but implemented a slashdot-style user rating system (registered users can rate comments; those who rate a lot can also rate other user ratings, as meta-moderation; it ain’t perfect, but it eliminated most spam and “first post” cruft). Throw in some system where the first paragraph is always visible, and seeing more adds to a monthly bill, and you’d have a first rate news site.

      1. Slashdot would be great if the articles weren’t dominated by people like msmash

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      2. Reddit is pretty good if you stay away from the main political subreddits.

      3. Slashdot? Check out Gen-X over here.

    2. NYT isn’t firing the less than woke because they have some eebil board of directors, it’s because they perceive that their readership wants more wokeness.

      Totally! It’s really the only logical conclusion they could reach when their revenues keep soaring and the health of the company keeps improving with every step further to the radical left. It’s not like the company would be bankrupt and liquidated today if it weren’t for the massive capital infusion of a radical left wing Mexican billionaire or something.

      You might seriously be the single most brain damaged retarded cunt on this, a site that includes Tony, Buttplug, Sarcasmic and Dumb Mexican. Congratulations man, really.

      1. Right?

        For some, dogma in a vacuum is all the thinking their faith allows them

    3. There isn’t such a market. Knowledge has a very brief window where it s worth a lot and then its value quickly drops to zero. And in a world of mass-everything – where bystanders are both the majority of the population and irrelevant to any knowledge that matters – the actual customer base for that knowledge is elites/technocrats not bystanders. It’s why the major business model for journalism for 100+ years has actually been the well-heeled rich guy who wanted to own the media outlet – not subscriptions/ads.

      For 100 years, there was an argument (Lippmann-Dewey debate, etc) about the purpose of journalism. But that argument was never directly connected to a business model that furthers that purpose. Specifically, the Dewey side of that debate – which was heavy on driving localism and face-to-face community – is exactly what the media spent decades ignoring and thus allowed its ad base to be gutted and its subscription base to have no content worth a shit.

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  2. media can die and be reborn as truth-tellers pleaseandthankyou.

  3. I don’t have any strong opinions on crypto currency and news. But I do have strong feelings about ads, especially youtube. In the last few months, their ads have basically made all but embedded videos unwatchable. Someone will send a link to a 15 second video, and youtube expects me to sit through anywhere from 15 seconds to 2 minutes of ads first. Other videos are interrupted two minutes in for the first ad; I have no idea how long those ads last, or when the next one comes up, because I immediately shut the tab.

    They also plaster the video with their own overlays to sign up with youtube premium with no ads, for something outrageous like $45 a month. I haven’t kept track of their price; for all I know, it’s changed, but I wouldn’t pay $5 a month. They are so obnoxious that I have zero faith that paying would eliminate the barrage of nagging and the censorship.

    Youtube has become almost unwatchable except for embedded videos, and I don’t doubt they would close that loophole if they thought they could get away with it.

    1. Get youtube premium. It’s $12 per month, but totally worth it. No ads, ever. Plus you get all the music on youtube for free.

  4. If these outlets received more money, would they use it to buy better writers? A lot of articles that I read are not worth two cents.

    Political hacks with little logic and no understanding of fallacies.

    1. The whole article is so pathetic. It’s like they’re one step away from offering nickel BJs with their content.

      Just imagine, once crypto becomes prevalent enough to support the nickel transactions that credit cards won’t support… nickel BJs!

  5. Traditional electronic payment systems can’t support transactions this small because they rely on third-party intermediaries, such as banks and credit card companies, that have costs.

    As opposed to cryptocurrencies which have no costs?

    “If we slice the pennies up small enough, we can make it up on volume!”

    1. Of course cryptocurrencies have transaction costs, everything does. The point is the transaction costs are so small that they can be considered to be negligible compared to traditional payment methods.

      1. The point is the transaction costs are so small that they can be considered to be negligible compared to traditional payment methods.

        That may be your assertion, and absent any evidence whatsoever calling it an assertion is generous, but the article doesn’t even make that assertion.

        Moreover, you idiot fanboys are missing the more central point. Pennies aren’t worthless simply because credit cards charge processing fees, they’re worthless because of pricing and inflation. Changing the currency to make pennies or fractions of pennies worthwhile is the very sort of manipulative inflation that cryptocurrency was (supposedly) designed to avert. And to do so to prop up a media industry that isn’t self-sustaining smacks of all the same currency controls that any given dictator (and not evena
        very good one) would use to prop themselves up.

        Last I checked, cryptocurrency was simply to replace fiat currency, when did aspire to replace banks simply because banks charge fees? Are banks supposed to not charge fees? Is that only certain fees or are all banks supposed to generally operate at a loss? Sounds like someone slipped a heaping dose of socialism into your capitalist cocktail.

        1. And, being clear, I’m not at all a fan of big centralized banks. I would like to see the Fed dissolved. However, taking the power away from the nameless and faceless droves of bureaucrats that currently run the Fed and turning it over to the nameless and faceless droves of bureaucracts who run cryptocurrencies hardly constitutes anything reasonably constituting dissolution.

        2. Making microtransactions of less than one cent possible is not an increase in the money supply.

          1. Making microtransactions of less than one cent possible is not an increase in the money supply.

            I didn’t say anything about increasing the money supply. I said altering the currency to match the supposed value of media is currency manipulation on par with any tin-pot dictator. The supposition in the article is that these articles are worth some fraction of a cent and that if we could only divide the currency up more finely, people could profit from those fractions. But, as you so deftly point out, you can currently divide $1 into 100M micro-pennies without altering the money supply. The issue is that the articles can’t attract even generate 1M micro-pennies worth of value or attract 1M micro-pennies worth of interest. The division/denominator is arbitrary. In the pursuit of ever more dwindling evidence of value that’s not there, you can continue to increase it.

            You are trying to conceal the notions that simply because people put in labor, they should get some return on that effort. That’s a theory that’s got nothing to do with the money supply and everything to do with socialism.

            1. You are trying to conceal the notions that simply because people put in labor, they should get some return on that effort. That’s a theory that’s got nothing to do with the money supply and everything to do with socialism.

              Labor theory of value is not just ‘socialist’. The ancap notion of land ownership is based on a labor theory of value applied to land. That if your great granddaddy peed on a tree, you now properly own the land.

              1. The ancap notion of land ownership is based on a labor theory of value applied to land. That if your great granddaddy peed on a tree, you now properly own the land.

                At this point, I don’t even think you know what the words you’re stringing together even mean. Show me the official ancap definition of labor theory of value, then show me its official definition being ascribed to origination of ownership and I might believe you aren’t full of shit. Otherwise, this comes across as “Labor theory of value isn’t just socialist it applies to pickup games of basketball as well!”

                1. Murray Rothbard Confiscation and the Homestead Principle

                  The homesteading principle means that the way that unowned property gets into private ownership is by the principle that this property justly belongs to the person who finds, occupies, and transforms it by his labor. This is clear in the case of the pioneer and virgin land.

                  There are dozens of other examples. Like it or not, this is a labor theory of value with respect to land.

          2. Moreover, your claim is maybe theoretically true but pragmatically false. Even for bitcoin one supposed solution to the scaling problem is microtransactions (which still don’t achieve the throughput of Visanet), but even then the operation of these microtransaction channels includes fees assessed by downstream processors, ‘invoicers’, and ‘channel managers’. So, what we have is a system that performs at less than 1:10th the rate of Visa, with greater anonymity (and inherently less fidelity in the end users), that’s already beginning to assess fees as pretty much the same relative level that Visa does (and for pretty much the same reasons).

  6. This would be a huge step in the right direction. The problem with media now is that the public aren’t customers, they are marks for pre-paid propaganda.

    Remove all the barriers between journalist and paying customer, and we’ll have a market built on a solid foundation.

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  8. Ethereum is the way to go here—it’s easy to get started and the already-huge dev community can get you up and running. You can also easily get access to the infrastructure for free or very low cost with services like Pokt or https://rivet.cloud.

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  9. I think we’re looking at this the wrong way. There is no ‘digital media’. There is legacy media, and new media, and legacy media exists in the old, printed form, and the digital arena. What this article seems to be asking is, can legacy media that exists in the digital world be saved with crypto-currency.

    I believe the problem is that “digital media” as we tend to define it in the mainstream, is media that cropped up in the internet era, but has done everything in its power and business model to act like legacy media. They’re in the same trouble legacy media is in.

    It doesn’t matter if you’re on a screen or on a paper thrown on my front porch– it’s the model that’s the problem.

  10. There’s probably a near book-length article in why Bitcoin’s price has remained high, but no one is really transacting in it (or any crypto-currency on a wide scale).

    I’m reluctant to assert why, because I just don’t have the time or inclination to look further than I already have. I do have my suspicions, but they’re probably no more valid than a bitcoin fanboy who believes the end of fiat currency is just around the corner.

    But if I might muse outloud, I suspect that BC has become a kind of investment for its own sake, propped up by its own internal holders– a market that is essentially what my father used to describe as “group of men in a burlap sack, trading hats for a living.”

    1. Every discussion I have about crypto, I’m very much reminded of the notion, “Put three libertarians in a room and ask them to come up with the definition of libertarianism and you’ll get five different answers.”

      First it was going to displace fiat currency and centralized banking. Then it was going to replace credit. Now it’s going to replace banking and money services altogether and somehow save digital media in the process. I don’t understand what’s taking it so long to get around to killing seven giants with one blow.

    2. But if I might muse outloud, I suspect that BC has become a kind of investment for its own sake, propped up by its own internal holders

      Yes that is exactly right. And it all gets back to a misbegotten idea about the origin of money. About what IS money?

      A notion that money originates in barter is very different from and leads to a different place than money originating in an IOU. The instability of those two notions also leads to the different functions of money – as store of value v medium of exchange.

      And though the technology of blockchain can deal with both of those, none of the current iterations can. They are entirely focused on the store of value function and will for as long as they have either a mining model or an ICO-type model.

  11. Our traditional currency exchange business were also affected, will money changers use digital means

  12. Or maybe every single media website can stop adding obnoxious autoplay video and other ads, thus reducing the need for people to use adblockers or avoid the site altogether.

    People aren’t going to buy cryptocurrency to read articles.

    1. People aren’t going to buy cryptocurrency to read articles.

      Nobody’s has to. You’ve seen Office Space? This is the same scheme except they’re going to save all of digital media with it.

  13. For years, bitcoin’s block size wasn’t an issue, as the network was not large enough to bump up against the size cap. But as the system has become more congested, transactions are taking a long time to process and transaction fees are high. At the moment, it costs about $4 to send bitcoin.

    The transaction cost has nothing to do with why bitcoin won’t work for digital media.

    For digital media to replace advertising, they need micro transactions (under $0.10).

    The real problem for bitcoin in this field is that the smallest transaction, 1 bitcoin is worth $11K. a $4 transaction cost on a $11K transaction is not bad.

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