There are many applications that monetize some form of digital data to users in the form of blog posts, games, videos, music, live data, and much more. One of the most common strategies for monetizing digital data is through the use of advertisements. The main benefit of this model is that it costs users nothing (nominally), and that it is a granular solution that allows users to pay (i.e. their attention) for only what they use.
Advertisements are not without downsides, though. On the web there’s a plethora of services that track your every move, so you can be offered more relevant ads. The average website also becomes way more bloated than it needs to be, caused by the need to download thousands of lines of code for said trackers, as well as hundreds of kilobytes (or even megabytes!) of ad data. This often forces users to install ad blockers, making it harder to monetize content.
A competing monetization model is the use of subscription services such as Netflix and most online newspapers. The main benefit of this model is that the data provider/content creator receives funds directly from users who want that data. This model also seems to be quite sustainable for those creating valuable data, but our current subscription model of paywalls has its own set of drawbacks. Here are a few:
- Our current subscription models don’t have much granularity, meaning that you can’t normally buy just a single news article. One reason for this is that transaction fees are too high to support transactions under one dollar in traditional online finance.
- Users must often share personal data with data providers including your online identity and payment information. This puts users at risk if the data provider has a breach, or if they actively sell user data under the table.
- Users can share their subscriptions with as many free riders as they wish. This has lead to massive sharing of accounts; some research shows that 15-20% of Netflix, Amazon Prime Video, and Hulu users don’t have their own accounts (Subscription Mooching).
- Many paywalls are simply very easy to get past! Opening an incognito/private window is sometimes all that is needed to stop a paywall script from being loaded. This is a fundamental problem because there is traditionally a UX trade-off between waiting for payment authentication before sending the paywalled data and pre-loading it and only revealing upon authentication. The former solution results in a worse UX since there is latency that many data providers have decided is not worth introducing. The latter results in our current situation of making it easy to get around paywalls by simply stopping the script that hides the loaded data from running, which is done easily using such tools as noscript or a simple option on the Brave Browser.
The Lightning Network provides a new way of creating paywalls for digital data that solve all three of these problems! Not only is it now possible to have tiny microtransactions on the scale of fractions of cents, but these transactions are near-instant and require no third parties. This means that not only can you pay-per-view in a future where YouTube adopts Lightning, but you can pay per couple seconds of viewing! Having these tiny payments has the additional benefit of changing otherwise expensive subscription costs to tiny price tags on individual data items (this technology of course does not inhibit the use of traditional subscription options). In short, Lightning allows for really deep granularity.
Lightning payments are very private and go as far as to allow for payments in which data vendors never learn the network identity of the buyer. Selling digital data over lightning requires no knowledge of any user information! It is important to note that lightning does not inhibit a digital vendor from requiring user information if they must do so to adhere to regulations.
Lightning also solves the subscription free rider problem by corresponding payments one-to-one with digital downloads. Simply put, users pay for what they download, rather than having shareable free passes.
Lastly, Lightning Paywalls are cryptographically unbreakable!
Every lightning invoice specifies a payment hash which is used by the buyer to route a payment to the seller. The seller knows the pre-image to this hash but no one else should. Hence, the buyer finds a route to the seller on the lightning network and sends a conditional payment to the first hop on that route which says that they can take the payment only if they reveal the pre-image to the payment hash, and the buyer also tells them the next hop in the route.
This continues until the payment reaches the seller who knows the pre-image. They can then reveal it and claim funds – as can every node along the route. The pre-image can be viewed as a cryptographic receipt of payment on the lightning network as the buyer will get it only if they pay. Essentially, every payment on the lightning network is a payment for a secret (where this secret is learned by everyone along a payment route).
So how do Lightning paywalls work? Upon request, a data vendor responds with a lightning invoice alongside the requested data encrypted with the pre-image of that invoice. They should also encrypt using the intended recipient’s public key so that no one else gets the data for free. This solves the problem of how to send the user all of the data they need up front in such a way that they can access the data if and only if payment is authenticated.
Lightning allows for content providers to both provide relevant and meaningful content without sacrificing their ability to monetize their service. It enables seamless user experiences by providing payment and encryption in a single technology. By implementing Lightning, services such as Netflix, YouTube, ESPN or any streaming digital data provider can offer more granular options while providing secure, instant and private payment options for their customers.
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Contact Nadav @Nadav_Kohen
All of our API services are built using Lightning technology and the Lightning Network. All API services are live on Bitcoin’s mainnet. Our fully customizable data service allows customers to stream as much or as little data as they wish and pay using bitcoin.
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If you are a company or cryptocurrency exchange interested in learning more about how Lightning can help grow your business, contact us at [email protected].