What does Micropayments mean?
Small payments transacted through decentralized blockchain networks.
The idea of micropayments has been heralded for years; it only required technology to catch up to it. Micropayments through automated decentralized blockchain technology opens the possibilities for entirely new markets for goods and services, including streaming content, machine-to-machine transactions, and an inclusive economy in which consumers may pay-as-they-go in small increments.
Clearinghouses for payments, such as credit card transactions and other traditional financial intermediaries are able to handle transactions at scale. However, they are accustomed to charging high transaction fees because they have high costs of service. For example, an issuing bank of a credit card is responsible for billing, collecting payments, and extending credit to customers. Merchants may be charged 2-3% plus a $0.25 fixed fee per transaction and customers pay interest, late fees, over-the-credit-limit fees, and sometimes annual membership fees.
The bottom line is that the infrastructure for centralized finance has costs that are prohibitively large for any transaction that is too small. What merchant would like to accept a credit card payment for a single purchase of a $0.20 item? That is why they often impose a minimum purchase. Even in cash, the smallest direct exchange is limited to $0.01.
What is the social burden for having to pay between 6-11% international wire transfer fees for remittances? Fees may be lower when the dollar value of the remittance is higher, but isn’t that self-defeating for the consumer? As the world’s connectivity expands, new solutions are desperately in demand.
Any decentralized blockchain network of networks that is able to transact micropayments economically and at scale can be a foundation for an entirely new set of markets. The ideal system, we think, has these qualities:
a) An efficient network where transaction costs can be brought down to much less than a penny to enable exchanges of fractions of a penny. We think this is a prerequisite to prepare for an economy that operates on machine-to-machine payments. For example, if IoT-mediated electric, water, and smart city functions are to emerge, the infrastructure to support frictionless markets between devices must exist.
b) Ease of use for all end users of blockchain-based services. Value to our end users is our primary objective, especially the ability for any non-technical person to protect themselves through Geeq’s Edge Security. Geeq’s protocol automatically pays for nodes’ services in micropayments as well, which means non-technical and technical users alike are able to outsource the logistics of the underlying blockchains’ validation.
c) The ability for consumers and producers (such as content creators) to write simple smart contracts for streaming payments, bypassing negotiations with other parties if desired, bring dreams of markets for independence on an open platform that much closer to reality.
Used in a Sentence:
The ability to introduce micropayments in a decentralized, sustainable, open economy is a revolutionary step in the evolution of markets.
Last Updated: February 25, 2023
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