The Crypto Subscription Economy

What it means for crypto entrepreneurs and how to get started

Subscriptions are Web 2.0's hottest business model right now. Blockbusters like Netflix or Spotify are so successful that incumbents like Apple and Amazon are now starting to copy them. And it seems that no one is safe from being subscriptionized. Patreon kicked Kickstarter off the crowdfunding throne, and after music and film, the gaming industry is on the verge of being disrupted as well.

Subscriptions Are Blazing

For the customer, the decision for a subscription service is an easy one. For a steady and usually reasonable price you receive a service with a much higher value than any one-time purchase. The subscriber also has the freedom to evaluate the service and cancel it at anytime.

For the service provider, a subscription business model means a reliable and predictable revenue stream and more direct customer feedback. This is why subscription businesses have grown revenues 8x faster than S&P 500 companies – 17.6% vs. 2.2% (Zuora) – since 2012. By 2020, they will have an estimated market volume of $100 billion.

Unfortunately, it ain’t all sunshine & rainbows. The public’s trust in platforms like Patreon or YouTube and payment providers like Visa or PayPal has diminished because of their de-platforming and de-financing practices. Additionally, the sheer number of middlemen involved in a seemingly simple process (sending money from fan to creator) led to unnecessary high fees, ranging from 10–30%.

Why Now?

Why is this a good time to start talking about crypto subscriptions? There are two main reasons crypto subscriptions are bursting on the scene now:

1. The Blockchain Gun Show: The questionable practices mentioned above pose a perfect opportunity for blockchain & cryptocurrency to show off their strengths. As Josh Stark acknowledged; Web 3.0 isn’t about speed, performance, or convenience. It’s about power. P2P payments powered by the blockchain easily bypass third party related fees and inefficiencies (i.e. censorship, high transaction costs, illegitimate chargebacks).
2. Technical Viability: Until recently, recurring payments seemed to be impossible to do with cryptocurrencies. Users either had to send their funds to a hosted wallet, pay for months upfront or pay manually every month. Thanks to innovations in smart contracts using meta-transactions, true crypto-subscriptions are now becoming a reality.

Benefits for the Ecosystem

Crypto-related businesses are still perceived as questionable in the eyes of the broader public. This is largely due to the ICO craze and the FOMO-driven business practices. Besides crowdfunding, crypto is still searching for the right use cases where its borderless capital allocation capabilities will add significant value.

Today, crypto enthusiasts put all their faith in subscriptions with the expectation that they will foster a more sustainable ecosystem. This hope is not unsubstantiated. It’s not only a very attractive model from an investor POV, it’s also very difficult to scam customers with questionable products and services. Instead of convincing customers to do one-time purchases by catering to their fear of missing out on the next “great thing”, subscription businesses actually have to serve a customer need on a continuous basis. This in turn attracts more genuine entrepreneurs, creators, and developers.

So, besides new business opportunities, subscriptions also evoke a new mindset for crypto entrepreneurs & dApp developers.

Benefits for Users

• Immediate access to goods & services.
• Test a dApp’s value for a lower cost and cancel anytime.
• Better UX due to the customer centric business model.

Benefits for Entrepreneurs

• Consistent & predictable revenue stream.
• Only need to focus on customers as opposed to speculators & users (i.e. token sale).
• More customer data & direct feedback.

Subscription Use Cases

• Crowdfunding: sustainable recurring funds for projects (independent dApps, games or open source projects) and creators (GoFundMe-like campaigns for independent developers, artists and creators).
• Content: offer exclusive content. Creators like Pewdiepie are leading the way for mainstream adoption.
• Memberships: access to closed groups and voting rights.
• SaaS: steady revenue stream for online services.
• Games: keep players hooked with monthly rewards.

How Can I Get Started?

True recurring crypto payments are enabled by the ERC-1337 standard. It allows intuitive subscriptions and any ERC-20 token as payment, including wrapped Ether, Bitcoin, or DAI stablecoin. There are different ways for creators and devs to put the ERC-1337 to use today:

1. Fundabit.co: With just a few clicks you can configure your own subscription smart contract (audited, owned by you, connected to your personal wallet), today.
2. Groundhog Pay: With just a few lines of code added to their website, businesses can start accepting recurring payments (from anyone with a Groundhog Wallet). Sign up for early access here.
3. Gitcoin: Open source projects can go to gitcoin.co/grants and apply for a grant to start accepting recurring donations for their projects.