Why Use A Cryptocurrency Rather Than Fiat Money or a Points Scheme?
Permission.io has created a cryptocurrency-based permission market that enables its users to earn money by watching video content. The proposition is simple. Currently, advertisers pay $millions to the likes of Google and Facebook to serve up their ads to consumers. The permission marketplace eliminates the middleman. It empowers advertisers and consumers to interact directly, providing advertisers with the opportunity to compensate consumers for their time and attention. The currency is the ASK token.
So why not do the same thing, but reward consumers in dollars? Or if not in dollars, then why not have some kind of points scheme similar to air miles or credit card points?
First, consider the option of using fiat currency as a reward for ad viewing.
The Challenges of Fiat Rewards
Perhaps, the most obvious problem with this is that fiat currencies are national, whereas the Permission.io business is global. Its members can be anywhere. Keeping separate accounts in multiple currencies and making payments in those currencies would be complicated compared to simply using a single cryptocurrency.
But that’s not the main problem with a fiat-based permission market. In most countries, the rewards would be treated as income and Permission.io would have to issue tax documents and might even have to collect taxes. And the regulations it would need to abide by would vary country to country.
In the US, for example, people earning from watching ads would be classified as contractors, if they earned more than $600 per year. In those cases, Permission.io would have to issue IRS 1099 forms for them each year, and those “contractors” would have to declare their rewards as taxable pay. Managing all of this globally would be a bureaucratic nightmare.
For that reason, when we conceived of Permission.io we never gave much consideration to our members being paid in fiat currency. However, we did give some thought to the idea of having a points scheme like air miles or credit card points.
The Difficulties of Point Schemes
Tokens and points are viewed as roughly equivalent by most government tax authorities. In the US, if you are gifted air miles that are estimated to be more than $600 in value, it is taxable income, but if you earn them by buying airplane tickets then no matter how many you accumulate, they are not taxable. The reasoning behind this is that you are not obliged to use the air miles you acquire, and in practice a fairly substantial percentage of air mile holders — about 30 percent — never do. It is thus viewed as unjust to tax something you might never use.
Cryptocurrency tokens acquired by watching content should be viewed in the same way. Permission.io’s intention is that the ASK token will have redeemable value within the permission marketplace.
So why not run Permission.io using a points scheme?
There are several important advantages that a cryptocurrency and its blockchain technology provide that a points scheme cannot deliver. They are as follows:
Low Operating Costs
The blockchain community provides a wealth of proven open source software, from which robust, low-cost cryptocurrency environments can be constructed. This saves considerably on development costs and, importantly, it enables the creation of an environment where operational costs and rewards can be distributed across a decentralized community of stakers. The stakers are regularly rewarded in tokens for providing the computer resources to run the environment.
There are a multitude of advantages to this in respect of security (the blockchain environment has proven to be extremely secure) and scalability (blockchain environments are now being built to enable high volumes of transactions.)
Also, the technology is not standing still. It is supported by a healthy and rapidly growing developer community that supports it and contributes to its evolution.
Microtransactions
For Permission.io, a particularly important capability that cryptocurrency software provides is an ability to process small value transactions — what are called “microtransactions.” Put simply, the payment for viewing an ad can be relatively small — perhaps just a few cents. In order to process many such interactions coherently and economically, it is necessary to have a currency that is highly divisible (ASK is divisible to 8 decimal places) and an environment where processing individual transactions is genuinely inexpensive. As we have already noted, blockchain transaction costs are low — and as the technology improves, the costs fall.
Transparency and Governance
A guiding principle of the blockchain community is transparency. Blockchain systems can be trusted in many circumstances because the way they work is visible, observable and auditable.
This means that users can see and audit their own transactions, and check the operation of any smart contracts that impact their activity. And because they can, some will. The governance of the blockchain itself can be equally transparent, and in Permission.io’s environment, it is. When the governance of the blockchain is exposed to view, the consensus by which new changes to software are approved can be observed to be fair.
In practice, a cryptocurrency system is not so different in concept to a points-based reward scheme. It is a large system with a large volume of users and it provides its own economic ecosystem. The fundamental difference is in the software. The cryptocurrency-based system uses less expensive technology, is better equipped to enable low-value transactions and provides a transparent environment that engenders trust among its users.
Robin Bloor Ph D. is the Technology Evangelist for Permission.io, author of The “Common Sense” of Crypto Currency, cofounder of The Bloor Group and webmaster of TheDataRightsofMan.com.
