Tipping May Be Bitcoin’s Next Killer Application

The next killer application in bitcoin may just turn out to be micropayment tipping through social media and online communities. In what is increasingly being seen as a ‘tipping revolution‘ internet users are now using bitcoin to send small payments to businesses directly online for their work. This viral growth of the emerging digital tipping industry could very well be the next application in bitcoin and blockchain payment technology.

Why is tipping with digital currency a big deal?

Tipping allows for the very first time content creators to be compensated directly for their work on a micro-transactional level, something which analog payments systems were too rigid and slow to perform previously. Digital currency systems such as bitcoin however, operate with no intermediary businesses and only need to be registered through a ‘tipping network’.

ChangeTip who has grown to become one of the market leaders in the early bitcoin tipping industry in a span of less than 6 months for example, uses off-chain, and possibly soon, sidechain transactions to clear their inventories. Because of this, not every small tip needs to be recorded fully into the main bitcoin blockchain, but only references to the main network need to be made to ensure integrity among funds.

Blockstream, a company backed by the likes of Reid Hoffman (Founder of LinkedIn) is currently in development of such mechanisms and describes:

Sidechains allow the blockchain to be enhanced with better performance and privacy protections. They also enable new extensions to support myriad asset classes, like stocks, bonds, derivatives, real and/or virtual world currencies, as well as add to the capabilities like smart contracts, secure handles and real-world property registries.

It remains to be seen how the infrastructure of the tipping industry is built around bitcoin. As it now stands many of the current bitcoin tipping businesses operate from centralized systems, mitigating some advantages of purely using bitcoin. An argument could be made that users of bitcoin will demand a decentralized network to tip from, very much in the same way that bitcoin operates from the decentralized blockchain network. A so called ‘tipping network’ could come onto the scene and take market share from what these early tipping businesses have built up over the last few months.

In the future, look for bitcoin tipping to expand to email-to-email payments with the expansion to a BIP70 protocol, which would extend the functionality of sending payments via a cryptocurrency wallet.

As a repository among the core bitcoin developers describes:

BIP describes a protocol for communication between a merchant and their customer, enabling both a better customer experience and better security against man-in-the-middle attacks on the payment process.

We may also soon see payments being send to and from email aliases instead of wallet addresses which encompass sizes much larger than the conventional tipping amount.