NYT could make more money with lightning – Bitcoin Magazine
This is an opinion editorial by Ram, a twenty-year-old student, soldier and storyteller.
Image credit: samchills on Flickr under a CC BY 2.0 license.
To understand why the New York Times could have made so much more money last year, it’s worth appreciating micropayments in the context of the Lightning Network.
We usually think of Lightning as a Bitcoin scalability solution, as it makes daily payments in bitcoin viable. Essentially, Lightning is a protocol built on top of the main Bitcoin network, and here transaction costs are significantly lower and payment speeds are much, much faster. In fact, Lightning is significantly more efficient than even Visa and Mastercard.
“The network (Lightning) can also process millions of transactions per second (TPS), which is far and above Visa’s capacity of approximately 25,000 TPS. Solana, another competitor in fast and cheap payments, can only do 60,000 TPS. So Lightning has a significant advantage here.” — Nat Eliason
And Lightning still has plenty of room to grow. While this technology is still maturing – for example in terms of security, privacy and adoption – it shows very strong network effects: the more people start using it, the cheaper and faster payments will become. And remember: they only cost a fraction of a kroner already!
One of the most exciting things this opens up is micropayments – There has not been enough talk about how exciting this prospect is, both economically and culturally.
It is impossible to send very small amounts of money in our traditional centralized payment systems. Depending on the service you use and where you send to, you won’t even be able to send 10 cents digitally. And this is for good reason: very small amounts do not make sense because the actual transaction cost may be greater than the amount you send.
Lyn, on the other hand, makes it possible to send these small amounts digitally. And since it’s a technology that exhibits network effects, costs will drop further as more people start using it. You can digitally send fractions of the penny today via Lightning, and you’ll likely be able to send even smaller amounts in the future.
Now let’s go to The New York Times. To understand why NYT could earn 50% more from Lightning maturation, let’s do some simple math.
Some simple facts:
- The publication earned $76 million in adjusted operating profit in the second quarter of 2022.
- Let’s estimate that the NYT made about $25 million in profit in one month in 2021.
- There were 125 million monthly global unique visitors to nytimes.com in 2021.
- It had around 9 million subscribers in the third quarter of 2022.
- Let’s therefore extrapolate that there were an average of 115 million monthly visitors to the NYT who were not subscribers in 2021.
- These non-subscribers can read a maximum of five articles each month.
(I’m going to be conservative with the math so as not to exaggerate how much NYT would have earned in a scenario where a mature Lightning Network exists.)
Of these 115 million visitors, some read two articles, and some read a maximum of five. On average, each of these visitors ends up enjoying one article each month, and since it’s so easy and seamless to send small amounts of money to the NYT thanks to Lightning, each visitor can end up sending 10 cents that month. So that month the NYT would have made $11.5 million more. That is 46% more in profit.
The math is elementary and imperfect, but it gets the point across: Micropayments open up a ton of potential. And their benefits don’t just stop at helping content creators. They can also sustain cultural changes and more, and I’ve provided some examples below:
- Ordinary people are charitable.
I believe that many more people, even if they are struggling themselves, would be happy to give $0.01 to the disabled kid playing the clarinet on the street – if such a gift were both practical and possible.
- Tipping bus drivers who are especially sweet.
- Teachers send small amounts of money to students in the classroom who raise their hands and try to answer questions.
Children who really try get one cent, even if the answer is wrong. If a child gets it right, congratulations! He/she gets five cents. (Remember when teachers gave chocolates to students who got their questions right? Well, they can’t show up with chocolate all the time, so micropayments can be viable substitutes!) You could end up seeing a lot more hands in the air!
Picture from Learn for America
So now, try to extrapolate how many industries and sectors such micropayments could benefit and the subsequent contributions to GDP. Imagine NYT employees seeing their wages go up. Imagine that they then spend this money on new things. And then imagine the wages of the people they bought from going up too. And the process repeats itself, and here we see the economists’ beloved multiplier effect, which is wonderful for the economy.
Micropayments lead to consumption in a whole new way, so for Bitcoiners: the next time you explain Lightning, don’t forget to talk about micropayments! That’s probably easier to digest than “scalability.”
And to economists skeptical of bitcoin: I would think you’d love something like this because it encourages spending. So, are you going soft on bitcoin yet?
Paul Krugman’s 2013 article; Picture from Decentralized today
This is a guest post by Ram. Opinions expressed are entirely their own and do not necessarily reflect the opinions of BTC Inc or Bitcoin Magazine.
