The Micropayment Economy: What It Is, and Why It Matters
Crypto Basics

The Micropayment Economy: What It Is, and Why It Matters

Created 2yr ago, last updated 7mo ago

Micropayments seem like such a good way to tip your favorite content creators or access paid content — but why haven't they caught on?

The Micropayment Economy: What It Is, and Why It Matters

Table of Contents

Crypto micropayments are the [redacted L1 chain] of cryptocurrency use cases: promised to have a massive impact when they work...but unfortunately, they never do.
CoinMarketCap Alexandria first looked at crypto micropayments two years ago. Back then, we highlighted how the Bitcoin base layer is unsuitable for micropayments. But even with plenty of new and cheaper chains around, blockchain micropayments have not taken off. That is why today, we will look at:
  • What micropayments are.
  • The current state of micropayments.
  • How blockchain micropayments would work.
  • Potential use cases for crypto micropayments.
  • Challenges for blockchain micropayments.

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What Are Micropayments?

Micropayments are transfers of tiny sums, for example, fractions of a cent. You may have a few cents left over in an exchange account, commonly also referred to as dust. This sum is too small to be processed, but if that were a possibility, it would be an example of a micropayment.

A working example of a micropayment would be a crypto faucet. You receive a trivial sum for a trivial task and once you hit the withdrawal threshold, you can withdraw your balance.

The Current State of Micropayments

There are no reliable numbers on how much yearly volume micropayments generate across fiat and cryptocurrencies. However, according to a white paper on cryptocurrency payments, crypto payments amounted to only $6 billion of the $10 trillion global e-commerce market in 2020. puts the volume slightly higher, at around $16 billion, but that is still only a tiny sliver of the entire payment market (and micropayments are only a fraction of that!).
To understand why blockchain micropayments haven't taken off, we have to analyze why micropayments as a whole have done poorly.

At first glance, micropayments sound like a great idea and a market niche.

On the supply side, current payment rails like credit card providers or even fintech solutions take too large a percentage cut to make micropayments viable. One example of this is batching low-value transactions. For example, a company like Apple batches small transactions into big ones by applying a probabilistic model to balance credit risk and fee purchases. Small transactions like buying an app on the App Store are not processed immediately on Apple’s side. Instead, Apple enjoys the economies of scale to wait for an opportune moment to actually process your $0.99 app store purchase.
On the demand side, just think about how many times you clicked on an article with an intriguing title, only to be slapped with an annoying paywall. You’d like to read on, but you don’t want to get a full subscription. Or what about those creators that record amazing travel documentaries you'd like to support?

If only there was a way to pay for what you want to consume...

Some companies did try to solve this problem with a micropayment solution.


For example, Satoshipay ran a pilot project with German publishing giant Axel Springer in 2018. However, despite being "pleased with the results," the cooperation did not continue. The Defiant quotes Satoshipay as having generated over one million euros in payments for publisher clients over the last two years. Even though one million is nothing to sniff at, it is comparably little money for a seemingly massive market. Clients praise Satoshipay, which provides a widget for per-article sales, but say customers did not really adopt the new feature.

Brave Browser

The Brave browser, though often touted as the poster child of micropayments, still has a long way to go. Its share of monthly active users (MAU) at the end of 2022 reached 55 million. Still, Firefox has over 200 million MAU, not to mention market-leading Google Chrome. When it comes to micropayments, Brave is no game-changer yet either. .The Defiant talked to technology news site The Register and found out that the site had generated $800 in revenue from Satoshipay. At the time, though, The Register didn't even know about being on Brave's list.
Fiat-operating micropayment providers have not fared much better though. Axate, a browser extension similar to Satoshipay, also uses a top-up wallet that readers charge when hitting a paywall. A pop culture newsletter that uses Axate’s service said its readers "love" the system's simplicity, but only a comparably low 10-20% of them sign up for a wallet.
Particularly publishers are averse to offering micropayments. According to tech and media journalist Simon Owens, they would rather pitch a subscription. Why? Publishers fear that micropayments could cannibalize subscription revenue. Moreover, while subscriptions offer a lot of perceived value ("$99 for hundreds of articles!"), single articles do not. And they do not scale well either — better to sell 100 subscriptions at $99 each than 10,000 articles at $0.50 each.

Can cryptocurrencies correct these shortcomings?

A Micropayment Blockchain Future?

On paper, crypto looks like the solution for micropayments: cheap, fast and with less friction than traditional, fiat-based payment solutions.

Unfortunately, crypto micropayments have more friction than credit cards because they run into the familiar chicken-and-egg problem:

Producers will only integrate crypto payments when there is an overwhelming demand.

But consumers will only demand crypto payments when they're significantly more convenient.

A much-touted solution in the blockchain space is the Lightning Network. Bitcoin bulls, of all ages and backgrounds, love to hypothesize how much money publishers could have made if they offered the Lightning Network as a solution. However, we just heard that micropayments aren't that popular anyway, crypto or not. So, what gives?

Leaving aside Lightning's specific problems like liquidity, maybe content is just not the best use case for micropayments. But what about other use cases?

Use Cases For Crypto Micropayments

It seems that the biggest point of friction is getting crypto onto the wallet in the first place. You can't pay for an article if you don't have money in your Lightning wallet. But let’s flip this argument on its head. What if, instead of paying, you earned crypto as a micropayment?

Self-generated Data

One hypothetical use case of micropayments is data you generate without even knowing it. A popular example is electric cars (or smart cars) selling data collected from their sensors, such as traffic information or info about parking spots to public utilities. This data would be a true example of earning a micropayment, possibly cents or even less.
Another example of self-generated data, although sensitive data, would be health data generated from smartwatches. In theory, insurance companies would love to have access to that. In practice, there would probably be a heap of regulatory and privacy issues to sort out first.

Selling Surplus Electricity

A much-discussed topic among the Bitcoin community (and not only there) is surplus energy generated from renewable sources. We covered this topic in this article about Bitcoin energy production. Surplus energy generated from solar panels could, in theory, be another source generating micropayments. Leaving aside practical problems like that you (or an algorithm) would have to manage the process actively to keep the grid stable, this is a possible avenue to be explored in the future.

Machine-to-machine Payments

On the payment side, there are plenty of examples as well. For instance, micropayments for machine-to-machine services like charging electric cars and downloading bandwidth could spread the burden of paying for the consumed energy more fairly. Unlike with B2C payments, companies would reduce friction if profitable payment rails were available. In other words, you wouldn't have to sign up for a wallet to charge your car, that part would have already been taken care of.

Gaming and Socials

Another often-quoted potential use case is paying for streaming services, tipping and earning from online gaming. The idea is similar to other examples: you pay as much as you consume (in the case of streaming for the video or music streamed) and earn as much as you deserve (if you're a gamer for unlocking a new level). Twitter launched tipping via the Lightning Network in 2021, but the hype died off as fast as it came.

Challenges for Crypto Micropayments

Crypto micropayments could take off — but they also might not. That will depend on whether they can overcome the following challenges.

Earning Is Easier Than Spending

Take the Lightning Network, which has been tipped to rival Dogecoin as a possible crypto integration after Elon Musk's takeover of Twitter. For Crypto Twitter, this would work well since those guys already have sats. But how do the non-crypto users get them? Another fiat-crypto bridge is needed, which adds friction and makes non-crypto users think: "why does it have to be cryptocurrency?"

However, earning is easier because crypto comes to the users, not the other way around. Much will depend on whether blockchain micropayment solutions will find ways to do just that.

Can Blockchains Even Do That Technically?

Many use cases sound great in theory. But in practice, they all come with their own set of problems. For instance, selling surplus energy from your solar panels sounds great. But when the sun shines, your neighbors' panels will also be selling. More surplus energy supplied to the market depresses the price, so this process needs an intricate system of load management and storage. The same is true for machine-to-machine payments, which require such massive amounts of transactions that even fractions of a cent in costs make a big difference. So far, no distributed ledger technology has actually shown to be able to solve these problems at scale.

Micropayments Add Mental Friction

Imagine a world with no subscriptions and only micropayments. Every time you want to read a paywalled article, you have to authorize and pay. Even worse, every time you want to see an ad-free version of a website, you pay a fraction of a cent to do so.

Sounds annoying. And it would be. (Sounds also a lot like Metamask confirmations on the blockchain.)

Even though the financial cost may be lower, there would be a mental cost of navigating this space. Clearly, there would be mass authorizations and top-up wallets to reduce this. Still, you would be constantly reminded of having to pay. How many people would welcome being reminded of yet another aspect of their life being financialized is questionable.


Micropayments suffer from a demand and a supply-side problem.

Not as many people want to make micropayments as you would think. And no significant use cases have shown to be interesting enough. To earn a useful sum from single-cent payments, you have to receive a lot of single-cent payments.

However, the integration of crypto payments with a big social network like Twitter could be the impulse needed, so the jury is still out on crypto micropayments.
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