For many years I have been a listener and reader of Seth Godin’s work. In July 2020 I took the chance to contribute to his Akimbo podcast, which is one of the most popular podcasts by adding some technological information about Bitcoin and the Lightning Network. Seth is an author, teacher and is blogging about marketing, tribes and respect on a daily basis for many years now. Seth wrote 19 bestselling books and I recommend listening to all podcast episodes by Tim Ferriss with Seth as guest, if you are interested in marketing, self-development and how to be different. I am so pleased that he added my contribution to his show, that I want to share it with you, too.
Seth Godin talked several times in different contexts about Bitcoin in his podcast. Then in July 2020 in series 7 ep. 8 of the “Akimbo” podcast he released an episode about micropayments as a payment method for content creators on the web. The historical context, the problems that are existing, his past ideas and at the end he is talking about the challenges with bitcoin for microtransactions. He mentiones three reasons, why bitcoin is no solution for microtransactions. Here is what he is saying starting at minute 16:55
Well, most people who say what about the blockchain are really saying I don’t understand the blockchain does it have something to do with Bitcoin? The challenge with Bitcoin is too volatile for something that people will trade because that fake ID that you bought 10 years ago on Silk Road for $6.00 ended up costing you $10,000 in today’s money. That’s not really a micro transaction anymore second. – Seth Godin
It’s not optimized for fast tiny transactions. The size of the block is too big to make that easy and comfortable. So lots of people are working on new blockchain alternatives for microtransaction, but the problem which is the opposite of what an airline’s did when they invented frequent flyer miles. – Seth Godin
The problem is we don’t want multiple formats difficult technology for micro payments that the magic of buying a newspaper for a nickel is everyone has nickels in their pocket. Everyone knows what a nickel is once you get a nickel it’s easy to trade in a nickel for food, but once we start creating these Arcane systems that are hard to get into not that easy to use and very difficult to understand we’ve put barriers in between us and the micro payments that would enable people to create interesting forms of content for a living that aren’t based on interrupting people with ads so I don’t have the answer for you today. I think it’s worth thinking about what happens if we transform the people who are reading our content from the victims of ads to the actual customer to the person who is actually paying not just with their attention, but with an easy to use easy to transport micropayment. – Seth Godin
This was the time for me to contribute. I felt, I simply had to add some technological information about Bitcoin, that Seth might have missed. This is what I have said, you can find it here starting at 43:43 min:
1 Bitcoin is too volatile
I see where you are going here. But: imagine you bought that content for an equivalent of 6 USD and you kept the other 4 USD change. Might be good deal. Or on the other hand, if you are the content creator and managed to save a little bit of these 6 USD, you were paid very well. Bitcoin is volatile, true. But if you spend it and immediately buy new bitcoin afterwards, you have lost nothing to volatility.
2 Bitcoin is not optimized for fast tiny transactions
That is true for Bitcoin blockchain base layer transactions. But have you heard about the Lightning Network and other layer 2 solutions? They enable microtransactions even in sub-satoshi amounts. Lightning payments are immediately settled, no need to wait for one block or 10 minutes minimum. With layer 2 solutions there is no limit to the number of payments that can be settled in seconds. Also lightning payments give you privacy protection, they are as private and anonymous as cash transactions. There are already solutions that let you pay for content inside messaging apps on top of the Lightning Network. For instance with a messenger called Sphinx.
3 With multiple formats and different blockchains it is difficult to exchange money between those walled gardens
Open blockchains like Bitcoin are not walled gardens. Quite the opposite. There is already a solution for that, it is called Atomic Swaps. They allow the immediate exchange of funds on different blockchains without the need for an intermediary. I argue: the technology is already in place to do fast, uncensorable microtransactions with Bitcoin, it is only not equally distributed yet.
Seth, thank you for your work, I am looking forward to new episodes and insights.