Micropayments typically refer to transfers below a specific value threshold. Think of a micropayment as a really small transaction or payment — like the $1.20 you pay for a cup of coffee.

Billy won’t accept transactions below $5 because the payments provider often charges a base fee in addition to a percentage of the full cost for processing payments. For Billy to break even, the value of the transaction must be higher than the processing cost. Paying a fee on your meager purchase would simply be economic suicide. The transaction breaks down, with both sides losing out on benefits. You can’t get your caffeine fix and Billy loses potential income.

Historical experiments with micropayments have followed the same principle: aggregate tiny fees into a considerable amount before releasing them to merchants. In most cases, the user would have a digital wallet where they could deposit a fixed sum and authorize withdrawals for certain payments.

Moreover, users had to hand their personal information to companies, giving companies the freedom to sell their data.

APPLICATIONS OF BITCOIN MICROPAYMENTS

• CONTENT MONETIZATION
• ONLINE TIPPING
• PAY-AS-YOU-GO SUBSCRIPTIONS
• MARKETING AND ENGAGEMENT
• GAMING
• SELF-GENERATED DATA

MICROPAYMENTS CAN SCALE BITCOIN ADOPTION

Micropayments could be Bitcoin’s killer application. Bitcoin-enabled micropayments can be applied to many business models, triggering global adoption and increasing network effects.