-"Have you seen any solutions
for using crypto to pay for membership payments,
recurring payments, subscriptions, and the like?
Is there a philosophical issue that needs to be discussed,
or are we just waiting for technology to catch up?"
What a great question asked by patron Yes2Crypto!
And it's one that really is at the heart of my business.
As you probably know, my work and that of my team
is funded entirely from voluntary donations
and subscriptions, through platforms like Patreon.
And a lot of people question why
I wouldn't use crypto instead.
Now, I also accept crypto donations,
but that's beside the point.
It has to do with this.
It has to do with the fact that it's not easy
to do membership and subscription services with crypto,
and the fundamental issue is a philosophical issue
or rather a design issue that comes
to the core of the philosophy of crypto systems.
And that is that all crypto systems
are push systems, meaning that if you want
to make a payment, you have to push that payment.
Now this seems like an obvious thing,
but if you think about it, bank accounts,
credit cards, debit cards and things like that
are all pull systems; meaning that somebody else
reaches into your bank account and pulls out some money.
And most of the time they pull out
the amount of money that you authorized,
but sometimes they pull out whatever amount
of money they want because it's not your money.
It's the bank's money that they're holding
on your behalf, and might eventually give back to you.
So one of the problems with pull systems
is that you do not control who has access
to your accounts.
If anyone can pull money and then pull it again
and then pull it again, hey,
have you ever tried to cancel a gym membership?
Mm-hmm, yeah?
Three years later you've never been
and they're still billing you $29.99 a month
or $99.99 a month, and you can't cancel that thing?
Well that's the problem with pull systems.
And the myriad other problems with pull systems.
Crypto is more like cash or a check.
If I write someone a check, that does not authorize them
to then dip into my account and take money
again and again and again.
If I give someone cash, that does not give them
a way to reach into my wallet and take some more
whenever they please.
And crypto uses that mechanism, it's a push mechanism.
So in a push mechanism, if you wanted to set up
a monthly subscription, you would have to have
a wallet that basically every month
sends, automatically, to a destination.
And now we run into other problems
because in order to do that,
that wallet would have to be one,
either a custodial wallet, which means
you do not control your keys, or two,
it would have to be a hot wallet,
which means that the keys are online
so that the server, or desktop or laptop application,
can execute a transaction once a month.
And of course that's problematic
because we don't keep crypto online,
at least we only keep small amounts of crypto online
because we don't want it easily stolen.
However, if you do keep a small amount of crypto online
and you do want a system that can do
these kinds of automated payments,
here's an interesting thing, the Lightning Network
and layer two networks like that
which involve smaller payments,
and they involve hot wallets that are online
so you can do interactive payments,
you can do micro-transactions,
you can do very fast payments,
are actually ideal for these kinds of subscription services
and for the kind of pay-for-a-service instantaneously
thing that you might have when
you're reading an article or trying
to do some kind of micro-payment.
So I anticipate that we are going to see
subscription based services built on top
of the Lightning Network where your Lightning wallet
will be hot, and you can have it loaded
on your desktop or browser all the time,
and then you can have it automatically
push a payment to a subscription service every month.
Thank you!
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