One of the more commonly discussed theoretical uses of Bitcoin shortly after its inception was that of micropayments. Charging people very small amounts of money (or sending very small amounts of money) has been a problem for a long time due to the friction of payments.
If you want to mail a check, you need a check, postage, and an envelope. Those all together cost a bit more than $2.00 if you want tracking – so sending $20.00 by check is hilariously inefficient: a 10% transaction cost!
If you want to process a credit card or debit card payment, you might get charged something like 30 or 35 cents, or you might get charged 2-3% in fees. Better than that $20.00 check, but still not great.
So what if you want to send someone $20.00 in Bitcoin? You’ll get charged a bit less than $0.04 – if you want your transaction to process in a timely fashion. This is the standard transaction fee for the network, and it remains constant across it, regardless of how much you want to send. For our $20.00 example, this works out very well, amounting to a fee of 0.2%. But it doesn’t scale down as perfectly as we might hope.
The question, then: how do you charge someone $0.10? With Bitcoin, that’s a 40% fee; with other financial services, it would probably cost you more than $0.10. So Bitcoin has helped, but it’s still completely unworkable.
The answer? Before now… you don’t. You just don’t. Period, end of story, no more questions. Previously, you had to find a way to “bulk” together your payments. What would this mean? Either you sell someone 100 “credits” at a time, each worth $0.10, for a total sale of $10, or you sell some sort of subscription plan. In either case, in order to accept payment and only get charged a significant, rather than an insane, amount of fees, you have to convince your customers to spend $10, when really you’d be much happier convincing them to spend $0.10 100 times.
The issue compounds on itself when it comes to accepting donations – it’s easy for someone to just choose not to donate to you when it’s too much trouble, or the minimum is too high. Those who stream video games (on sites like twitch.tv) have definitely learned this.
And in recent days, they’ve been graced by an unassuming and humorous option that has taken twitch chat by storm.
Yes, everyone thought Dogecoin was a joke – is a joke – and they still won’t stop. But they’re very wrong, and here’s why: transaction costs.
Sending someone $0.10 with Dogecoin costs 1 DOGE in transaction fees. $0.10 worth of Dogecoin, at the moment, is about 400 DOGE. That’s a mere 0.25% fee. Very, very nice.
Such efficiency, very merchant pleasing, much humorous, so silly. Wow.
Twitch is a company that was relatively recently bought by Amazon, and Twitch very recently started to incorporate Dogecoin into their website after an onslaught of requests by excited shibes. Two big steps have been taken.
First, you can now subshibe to channels using Dogecoin. Twitch is a service built on individual user accounts getting followed by users. A user who wants to help support a channel can subscribe to it. In return for a recurring $4.99 monthly payment, the user receives a few nifty perks, but mostly this is done just to support the streamers. Twitch now allows users to subscribe with Dogecoin – but interestingly, NOT Bitcoin – as their payment option. We don’t yet know how widely used this option is or will be, but it’s still pretty cool, don’t you think?
Second, Dogetipbot went active on twitch.tv recently. This allows users to tip others via Twitch chat, instantly and with very low friction. More importantly to us, it means that thousands – tens of thousands – hundreds of thousands – of people who are PERFECT adopters of cryptocurrency are getting it shoved in their faces daily in Twitch chat. Who do you think watches people play video games online? The demographics trend young, trend white, and trend male – not to say we should be excited about reinforcing the Bitcoin stereotype of 20-something white men being the only users, but hey, we should still be excited about getting the word out. And Twitch is a great way to do so.