Hbar Micropayments

by Apr 24, 2019Use Cases

The New Hashgraph Micropayment Economy

Discussion: The role of a currency, or a medium of exchange, is to allow transactions that are important to two parties or more in an economy of value trading. In the modern world, the US dollar has become the de facto global reserve currency, largely in part to the economic prowess and prominence of the US economy. However, in the role as the world’s money, the US dollar had been replaced from its original store of value with gold and silver backing, to a fiat currency that is solely defended by the might and military of the US government.

The lowest denomination of the US monetary system has always been the cent, followed by a five-fold multiple of the penny in the nickel, as well as the dime and the quarter. These metallic coins appear as arbitrary fractions of the US dollar, but still remain useable, fungible and divisible by most citizens with a basic use of mathematics. However, since the establishment of the US currency system, a multitude of changes has occurred in the national and global economy that have created a spectrum of forces on those base divisions of the US dollar.

At the current time, the cost to create even a single US penny is more than the actual value of the penny itself. Additionally, the coins that were originally issued as fungible assets of storable value, have been systematically debased, or replaced by less valuable metals, such as copper, nickel and zinc. What’s more is that the use of these fungible assets have decreased in popularity as well because of the much greater portability and divisibility of electronic cash. In the modern economy, many limitations are imposed on its value exchanges of goods and services because of these somewhat arbitrary divisions of currency. In fact, only approximately 8% of the world’s currency is circulated as solid, printed cash and the remainder as 1’s and 0’s in an electronic memory storage device in banking institutions.

REF: https://money.howstuffworks.com/currency6.htm

Internet Payments: Since the invention of the internet, a new and unforeseen global economy was spawned that opened up new avenues of commerce and wealth never imagined before. In the development of the world wide web, a series of payment systems had arisen that permitted online businesses with new customers and markets, but with an inconvenient cost to the end user. The friction involved with early internet payment systems involved the necessity to exchange personal information, such as one’s name, date of birth, residential and billing address as well as private credit card information. This was a less than ideal solution to the new global online economy, but had been tolerated for quite sometime due to its expanded market potential. The use of traditional payment methods on the internet also posed a significant consumer risk in the form of identity theft, credit card fraud and personal data exposure.

Eventually, in the 21st century an innovative internet-based payment system was created that valued personal privacy and payment efficiency, called PayPal. The innovators behind this novel value exchange technology, included investors Peter Thiel and Elon Musk. They hoped to design their payment system to be the native currency for the internet. However, as legal requirements constrained their corporate ideal, the age of frictionless internet currency would have to be postponed. This was largely due to the legal necessities of know-your-customer (KYC) issues and basic monetary transfer fees that plagued all payment systems at the time.

With every currency transaction in commerce, an insurance payment and heavily regulated transaction fee was incurred that made any payments less than $1 US dollar unfeasible. Although the founders of PayPal hoped to design the ideal internet financial transactional payment system, they were constrained by both the limitations of internet technology, financial institutions and banking regulations. The hope of a private, secure and frictionless monetary remittance technology for the internet would have to be postponed.hedera feesHowever, in the process of establishing the most private, secure and useable internet payment system, PayPal ending up charging a fair amount for each exchange. For a typical transaction, PayPal charges, at base, a $0.30 USD fee plus an interest fee. If one wished to transfer the lowest possible allowable in the PayPal system which is $0.05 in a transaction, PayPal would charge $0.05 for the service. Effectively, eliminating the economic incentive to send anything less than 5 cents without a total loss. This practice effectively excluded PayPal from ever becoming the native currency exchange platform of the internet for anything practically under $1 US dollar.

REF: http://pressbin.com/tools/paypal_micropayments/

Blockchain Revolution: After the US national banking default crisis in 2008, a small cadre of anonymous cryptographic software developers implemented a network that would spur a new revolution in financial technology (fintech). These bright-minded thinkers developed a clever system of financial transfers that required no intermediary to settle their transactions, thereby eliminating the middlemen in their payment network. Additionally, these financial revolutionaries also developed the first censorship-resistant payment system that settled faster than any other banking or institutional method and with only a nominal fee. Their end-product was the bitcoin network, and in its wake grew the largest fintech reconstructionist movement to this day.

Inherent in the design of the blockchain movement was the removal of the unnecessary banking institution and its third party ledger. In its place, was the novel creation of a universal, transparent distributed accounting system that allowed anyone to transact with another, peer-to-peer (p2p), without incurring burdensome fees and delayed settlement processes. The bitcoin network proved to the world that banks and fee-consuming middlemen were no longer necessary in the internet’s new financial economy.

However, with greater adoption, the blockchain technology undergirding the new fintech revolution began to show some inherent flaws in its original design. As the proof-of-work (PoW) distributed ledger of bitcoin grew, a consuming amount of energy and inefficiency began to appear that had not been originally designed around. What’s more is that the bitcoin network also began to encumber larger and larger transaction fees with growth of the network to the point that small transfers of wealth were no longer feasible. This was because of expanding network congestion, transaction speed limits and arbitrary fee schedules by the miners.bitcoin fees

After nearly a decade of substantial growth, the bitcoin network, like PayPal, demonstrated that the hope of supporting the internet economy with less than $1 US dollar payments was not feasible. At its peak, the bitcoin network charged nearly $50 USD for a single transaction, and at the time of this writing, the cost of a single transaction was at minimum $0.50 USD. A micropayment, or subdollar internet value exchange was no longer possible in the blockchain economy. Many additional rivals to bitcoin had also emerged, but also experienced a similar design flaw of network congestion, lack of adequate throughput and economic design to not permit a payment less than a US dollar without significant cost.

REF: https://bitcoinfees.info/

Hashgraph Distributed Ledger Technology: After a prolonged period of blockchain ledger development, a few contrarian rivals to the bitcoin network began to appear in the form of alternate data structures. In the blockchain design, synchronized bundled transactions were assembled and built into a hashed chain of settlements that created a demandive memory and CPU requirement to sustain. However, the novel direct acyclic graph (DAG) design offered a novel way to allow parallel transactions at higher throughput levels, with greater energy efficiency and even greater security. The ultimate expression of this data architecture is the Hashgraph algorithm. In its design, none of the limitations of blockchain are present. It demonstrates performance characteristics of being fast, fair and secure without excessive use of energy in a PoW system, but uses an alternate proof-of-stake (PoS) model.

In the development of the Hashgraph algorithm, a public distributed ledger technology (DLT) is built on this data structure, called the Hedera network. This public DLT shows the greatest performance characteristics of any antecedent blockchain or DAG, allowing hundreds of thousands of transactions per second, global scalability and the highest security achievable to date (aBFT). In fact, the settlement time and properties of the Hashgraph algorithm even improves upon the legacy financial settlement systems of the SWIFT international payment system and the Visa network. Hashgraph is clearly the culmination of all previous fintech innovations and will set the gold standard for any future DLT innovation.

REF: https://www.hbarprice.com/how-fast-is-hashgraph/

Hashgraph Micropayments: One of the most remarkable achievements of the Hedera public DLT and Hashgraph algorithm, is the ability to send a cryptographic financial transaction for the cost of less than 1/1000th of a US cent. The fact that a monetary settlement could occur for a fee far below the mark of a single US dollar marks a significant inflection point in the internet economy. Finally, a payment system has been developed that can permit an entirely new set of microeconomic products and services through the world wide web without being precluded by exorbitant fees and regulatory measures. The micropayment system was finally born with the Hedera Hashgraph network, allowing even the tiniest payment of 1/1000th of a US penny.

The functionality of the micropayment cannot be underestimated. By facilitating the ability to pay for a service that is smaller than even the smallest denomination of US currency is a remarkable achievement. Even more so is the achievement to send that sub-penny payment for an even smaller amount of currency in the thousandths of a US cent. The use cases for this new internet financial system may not be obvious to the casual observer, but with enough understanding, it should help enlighten any investor to realize its potential.

The amazing global demand for a frictionless micropayment system that only the Hashgraph network permits should be enormous. In this micropayment economy, users will use an internet browser wallet to allow a certain payment threshold for services, such as watching videos, reading articles and other media that normally may require a monthly subscription to view. This means that the browser wallet could open up a whole new level of internet commerce currently held back by monthly subscription payment walls.

Hashgraph Micropayments

Use Case- Online Publishers: Imagine going to your favorite newsletter website, only to be confronted by the dreaded ‘paywall’ and not being able to read the short article they teased you into clicking on. A paywall is an obligatory graphic that insists on an internet user enlisting in a subscription of monthly payments, with credit card and personal information, when all you may wanted to do is read a brief topical article. This phenomenon has grown substantially in the past decade, largely because of the dwindling revenue potential of many media outlets from decreasing paid print readership and advertisers. Many of these legacy publishers would make a generous amount of revenue simply from advertisers that paid for space in their printed periodicals.

Publisher Paywalls: The use of a hard paywall, meaning that a publisher’s website will not share any free material without subscription is the most frustrating as a casual internet browser. This usually leads the user away from the website with no click-through conversion or ad impressions, effectively losing a customer opportunity. A soft paywall at least allows an internet reader to peruse a section of an article to let them judge if the content is actually worthy of a full commitment to a monthly membership and fee. This has a better conversion rate, but still far below the hopes and expectations of online publishing websites.

The third kind of browsing obstacle is the metered paywall, which allows a less frequent internet customer to read a certain amount of material per month for a smaller subscription fee. This has better success than the hard paywall, but still does not have the conversion rate that most media outlet organizations expect to manage payroll.hedera hashgraph micropayments

Online Ad Tech Giants: The largest competition to online publishers in the days of the internet, are the savvy monetizers Google and Facebook, who have sequestered a lion’s share of the online ad revenue market. The duopoly of these tech giants captures the majority of digital ad revenue and nearly all of the digital ad year-over-year growth. This effectively excludes any online legacy publisher from generating a substantial amount of ad revenue in the near future.

In order to properly monetize their individual endeavors, modern internet media content creators have to find an alternate payment solution. Many have resorted to paywalls or outright donations to their industry. These are not long term effective solutions and will certainly lead to regression of traditional publishing companies. Additionally, the present effectiveness and ease of using an ad blocker has also taken a large amount away from online media services. A counter technology is certainly necessary to help with online content monetization.



Hashgraph Micropayment Community Test: In Phase 1 of the community testing of the Hedera Hashgraph network, users were able to download a Google Chrome Extension Wallet that allowed a micropayment app to interface with a website. Although the internet site was artificially created as part of the test net, many interesting articles were hosted on the testnet page, that discussed issues pertinent to Hashgraph cryptocurrency and the digital asset ecosystem. As a user read an article, their Chrome Extension Wallet created a payment link that ‘paid’ for the articles that users clicked on with intention of reading. In the community test, these users actually generated an earnings of 5 hbars per article clicked on. This was the opposite action of the intended market, where users will click on articles they wish to read and pay in hbars per article or service.

The testnet demonstrated with amazing success the ability of Hashgraph to support a real time micropayment system of internet browsing of secured content for a nominal price. Although the prices in the test experience were artificially inflated to incentivize the Hashgraph community testers, the proof-of-concept was clearly verified. Many users in the program received immediate micropayments of 5 hbars, straight to their Hedera online wallet and earned exchangeable cryptocurrency. The limit in the program was also generous, allowing users up to ~$120.00 USD in the form of 1000 hbars. The speed of hbar transfer, the ease of using the Hedera wallet and the enjoyment of perusing a micropayment website of published content showed quite clearly how the new microeconomy of Hashgraph could function successfully.

One of the most important features about the Hashgraph micropayment test case, was the fact that no personal information or payment structure, other than hbars in the wallet, had to be exchanged in the process. That means, that the typical friction incurred in the current internet payment methods, such as Visa credit cards or PayPal, was completely eliminated. In its place, was a simple to use, graphically pleasing wallet browser working in parallel with the Google Chrome internet browser. This proof-of-concept has fully demonstrated the use of a distributed ledger technology with an online service of published content that improves user experience, limits personal info exposure and allows a simple pay-per-click economy based on micropayments.hbar community testing

Conclusion: The modern internet advertising model, dominated by giants such as Google and Facebook has effectively reduced online publishers to a minimal market of ad sharing revenue. Many publishers face extinction in this brutal technological economy and have to rely on largely ineffective paywall structures, donations and decreasing market share. However, developments in the form of distributed ledger technology, such as the Hashgraph network, have created a new sense of hope with its micropayment function.

Instead of installing user-deterring paywalls, modern internet publishers and media content creators can now use a simple form of monetization that incurs fees as low as 1/1000th of a US penny. What’s more is that these payments do not require an expensive third party such as the Visa network or PayPal, who often take a substantial cut of small internet related payments. This remarkable breakthrough technology is only available in the Hedera Hashgraph cryptocurrency and payment coin, the hbar. It is the only decentralized network with the requisite speed, scale, security and governance to generate a global adoption by large enterprises that desperately need to monetize their content.

Hashgraph offers something that no other blockchain or distributed ledger network can currently do. The use case of online publisher micropayments through a simple browser wallet could open up amazing new avenues of online commerce. The ability to pay the tiniest amount in products and services can be applied to numerous industries. Other use cases of micropayments could include user earnings by watching advertisements, creating social media content and other online activities. In actuality, the Hashgraph micropayment system can finally allow the one-way digital online economy to flow both ways, for the media companies as well as  the user. This two-way microeconomy, where users earn and spend is an exciting new field application of distributed ledger technology.

Ultimately, the dream of the micropayment desired by many legacy payment providers and current blockchain networks, is fulfilled in the Hashgraph hbar wallet browser. The future will tell how far reaching of an idea this is, but according to its founder, Dr. Leemon Baird, it is considered the ‘killer dapp’ that could kickstart a whole new microeconomy for both corporations as well as the user.

Ħello Future.