Guest Post

The Road Not Taken: Browser-Based Micropayments and the History of Error 402

Author: Coinpedia

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Crypto Journalist and Editor of guest articles in CoinPedia. I am also handling Outreach & Partnerships Manager. Contact me: [email protected]


    We all know HTTP Error 404 – the standard browser response when a file cannot be found. But have you heard of Error 402 – Payment Required? Built into every Mozilla-based browser, it is an archaeological artefact of the internet we might have had: browser-based micropayments.

    Many of the early networking and internet pioneers, from HTTP creator Tim Berners-Lee to Netscape founder Marc Andreessen, assumed micropayments would be woven into the fabric of the web. In fact the term “micropayments” goes back before the birth of the World Wide Web, to network pioneer Ted Nelson, who saw micropayments as intrinsic to hypertext and associated copyright issues. In 1989, three decades after Nelson coined the term, Berners-Lee wrote the 402 “payment required” code into HTTP.

    Despite the powerful intuition that millions, if not billions, of consumers would value interactions with the web in small bites, the vision of paying for content à la carte still has not materialized. What happened? The failure lies not in lack of demand, nor lack of creator supply, but in the limitations of the payments industry. 

    Banking was not built for the web

    Working with the existing financial infrastructure made the task “impossible”, Netscape’s Andreessen has said. “We tried. We talked to credit card companies, banks, we weren’t able to [take payments]. Microsoft wasn’t able to do it.”

    The fundamental problem is that transaction fees – typically structured as a flat fee plus a percentage – don’t scale down. Trying to sell something for $0.50 might mean marking it up to $0.80, when going through a credit card company – and that is only if there is no minimum payment required. These costs have introduced enough friction to discourage an untold number of small trades (for a single article, video, or music stream, for example), funneling content creators toward platforms that take a deeper cut but at least provide other services.

    Around 2000, companies ranging from established players Compaq and IBM to eager start-ups Beenz and DigiCash were still chasing the market opportunity of micropayments. Start-ups are chasing them to this day. None, however, have provided a true micropayments layer that can be integrated throughout the web.

    Bad idea or bad timing?

    This sweeping failure has led some to judge micropayments as fundamentally flawed. Tech commentator Clay Shirky was particularly harsh, writing in 2000: “Micropayment systems have not failed because of poor implementation; they have failed because they are a bad idea. Furthermore, since their weakness is systemic, they will continue to fail in the future.”

    Shirky’s argument was essentially psychological: he believed users rejected micropayments because making multiple small spending decisions created more mental stress than one larger purchase. Twenty years on, this seems less convincing. Whether buying a song or app for $0.99, or spending $2.99 on loot in a mobile game, consumers have well and truly embraced small purchases. Beyond that, it seems rash to write off an entire financial model without having ever truly tested it; and at this point, we have had plenty of time to see the negative effects of a web that has developed without the option of micropayments.

    Without the ability to charge users seamlessly, in small increments, the media industry’s evolution has reverted to the mean. Scale is critical to success: outlets need an audience loyal enough to subscribe, or large enough to be worth top dollar to advertisers. Clickbait is the driver of traffic, with headlines noisy rather than substantive. And, although the emergence of “content creation” as an industry has seen individuals build their audiences directly, without editorial intervention, they are still dependent upon large tech platforms to reach those audiences and monetize their creations with various compromises that all stem from lack of financial power: agreeing to revenue-sharing or playing ads, encouraging their fans to manipulate the algorithms or promoting the platform itself. Yet none of these platforms succeeds in directing payment fully towards the creators. Content providers and their audiences still suffer from an inflexible market structure. 

    It is impossible to know whether early implementation of micropayments would have brought us to a different media landscape. Newspaper business models have not transitioned comfortably to the immensely competitive market for digital content. However, as consumers have come to understand that “free” content really means collecting your data in order to sell you further services, or repackaging your data as the product, they are eager for alternatives.

    The vision of the 1990s is emerging

    The main barrier that prevented browser-based micropayments from becoming a reality was the cost of financial intermediaries. Micropayments can’t become a reality as long as transaction fees are too large to make the transaction itself worthwhile.

    When Bitcoin first gained prominence, industry insiders including Andreessen predicted its divisibility could make it ideally suited to small transactions. That was in 2014. He could not have predicted that by 2021, Bitcoin’s transaction fees would sometimes dwarf those of the major payment networks. Despite the recent crypto slump, Bitcoin’s current average transaction fee remains over $7, compared with a fixed fee of $0.10 and a transaction fee of 1.29–2.6% on credit card networks such as Visa and Mastercard. In addition, with the average confirmation time for a Bitcoin transaction currently over 10 minutes, it has not become the seamlessly reliable vehicle for payments that early proponents predicted.   

    In response, other blockchain-based approaches to micropayments are now emerging. Bitcoin’s high transaction fees are driven in part by the way the network achieves consensus. In order to secure the network, miners are required to solve cryptographic puzzles before proposing a new block of transactions, a computationally expensive process that is reflected in the fees. There are other projects building on the Bitcoin foundation, but those are unlikely to drive incentives toward processing transaction costs low enough to support micropayments, nor scale to the level that could occur in a completely connected world. 

    However, mining is not the only way to replace the security of a payment intermediary. Geeq, for example, has developed a low-cost, decentralized payment network where market participants can exchange micropayments directly. It is a new blockchain-based technology with no mining that has kept its eye on developing efficient, decentralized technology that scales. Unlike Ethereum and Bitcoin, Geeq has no main chain; this reduces overhead, eliminates congestion, and brings fees closer to their true resource costs, which could be as little as one hundredth of a cent.

    Ease of use

    For micropayments to be technically possible and a viable foundation for browser-based transactions, ease of use is essential. This is the benefit of Geeq‘s bearer tokens. These tokens do the job of physical cash, but are processed as purely digital payments. As a blockchain technology, they do not travel through a payment intermediary but through a decentralized network, being delivered from user account to user account. No minimum payments are required and transaction fees are tiny. With a cost of just $0.0001, you could send a penny knowing that 99% of that payment turns into revenue for the creator.

    Geeq’s bearer tokens are easily funded from the user’s digital wallet and may be generated in advance or on the spot. They can be denominated in any value of Geeq, whether that corresponds to a few dollars, ten cents, one cent, or fractions of a cent. This technology finally makes it possible to consume ad-free, privacy-enhancing content across the web, and offers relief from subscription fatigue.

    A fairer future?

    What do friction-free micropayments mean for the future of the web? They offer the chance to create or convert portions of the web that won’t funnel users back into the arms of those who would track your every move. Not only do micropayments enable the option to pay as you go, they free content creators or ecommerce merchants to experiment with business models such as offering ad-free or tracker-free browsing, made possible because they can get paid directly. Meanwhile, creators and businesses of all kinds would have access to many new sources of revenue. If these sound like brand new market opportunities, it‘s because they are. That‘s what happens when market frictions are reduced.

    Breaking free from the influence of tech monopolies and democratizing the online world may be a lot to expect of a simple payment mechanism, but the chance to nudge the web towards the way it was meant to be is around the corner. After all, Error 402 was there for a reason. The technology simply had to catch up.

    Author Details

    Stephanie So is an economist, policy analyst and co-founder of Geeq.

    Throughout her career, she has applied technology within her specialist disciplines. In 2001, she was the first to use machine learning on social science data at the National Center for Supercomputing Applications.

    More recently, she researched the use of distributed networking processes in healthcare and patient safety in her role as a Senior Lecturer at Vanderbilt University. Stephanie is a graduate of Princeton University (A.B.) and the University of Rochester (M.A., M.S., Ph.D).

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    Crypto Journalist and Editor of guest articles in CoinPedia. I am also handling Outreach & Partnerships Manager. Contact me: [email protected]

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