New Opportunities for Innovators
The lightning network enables instant, peer-to-peer and private transactions between any two parties located anywhere in the world. Never before have we had this capability. With this new technological development, comes more opportunities for innovators and users to interact on the internet. The lightning network enables new types of business models that have the potential to upend entrenched industries and businesses. It enables connections between parties that would’ve never been able to connect in the past, unlocking capital and getting it where it is needed most. The lightning network even makes possible the far-fetched idea of decentralized autonomous organizations a reality.
Pay Per Use Business Model
Most products and services that are free to use today are not really free. Most apps and social media platforms allow users to use their platform in exchange for the user’s data. These companies are then able to use this swath of data and create models that are extremely accurate in predicting user behaviours, wants, desires, and actions. This type of information is extremely useful for advertisers and they pay handsomely for access to it. Companies such as Google, Facebook, Snapchat, and Bytedance have become multi-billion dollar companies off the backs of their user’s data. This model has some benefits to users as they get highly targeted ads for things they might actually want. The downside to this model is that the user experienced is sullied with ads everywhere and these companies know too much about their user’s day to day lives. Privacy is non-existent.
There is an alternative to this type of business model that might work better. Advertisers pay pennies and fractions of pennies to these companies to get there ads in front of the users of the platforms. For example, in 2019 Facebook only made about $29 in ad revenue per user. Advertisers, not the actual users of the platform, paid this to Facebook. Why can’t users pay a small yearly fee to use Facebook? It doesn’t seem so far-fetched when you think about all the subscriptions and services people already pay for. Social media can just become another monthly expense for most users.
The lightning network makes the logistics of this possible. Users can pay satoshis or even fractions of satoshis for using these social media platforms. Each tweet, like, interaction, Instagram post, etc., would cost users pennies. Each user would have a channel open with the platform and funds would move as they use the service. Users could simply “top up” their balance as it depletes. The companies would benefit from seamless, frictionless payments from their users, not having to deal with advertisers, and having happier users. They would also enjoy additional ancillary benefits. Firstly, this new model would strongly discourage spam and trolling. Users would think twice before posting unnecessary things and bad actors would think twice before unleashing bots on these platforms. Secondly, these companies could create a closed off ecosystems where users “tip” each other for posts they like, pay each other for goods and services, and make donations to the causes they believe in. The possibilities are endless!
New Connections Never Before Possible
Another benefit of the lightning network is that it allows everyone, including the poor and unbanked people in far off places, to enter the international financial system. Today, in the legacy system, most people in the world do not have access to banking. This means they don’t have access to services such as financing, receiving digital payments, and making payments abroad. They are stuck in primitive economies solely reliant on the networks in their immediate vicinity. The lightning network will allow savers to allocate their capital to the borrowers that need it most. Borrowers will just need a smart device and internet connection in order to receive funding.
Another interesting use case involves content creators and their fans. Today, content creators with provocative or unpopular views and opinions easily get ‘deplatformed’ when social media companies claim they are violating their terms of service. A recent example is Alex Jones getting banned from multiple social media platforms at once. These content creators currently have nowhere to turn when this happens. There entire livelihood gets upended when something like this happens. With the lightning network they would be able to continue to accept payments, tips, and donations from their fan bases without anyone being able to shut them down.
Decentralized Autonomous Organizations
Decentralized Autonomous Organizations (DAO) are entities that are governed by computer code and not people. All the rules, business logic, and finances are embedded in the code so no human intervention is necessary. Because of its decentralized nature, a DAO cannot be shut down by governments. The only risk is a bug in the code that allows bad actors to steal funds or mess with the logic of the code. The lightning network allows a DAO to scale. It allows for hundreds and thousands of smaller payments that may not be possible on the base layer of Bitcoin.
One interesting example of a DAO is a vending machine company. Imagine if someone buys a “smart” vending machine and embeds it with the code of a DAO. Once this vending machine is released into the real world it can function autonomously. For example, it can receive payments from customers in exchange for the goods it carries. When running low, it can place orders with vendors pay them with profits and get replenished with new inventory all using the lightning network. The users would enjoy low fees and instant payments. No one wants to wait around for 1 confirmation on the network before receiving their snacks and drinks. The vendors can rest assured that payments from the vending machine to the vendor are backed by the security of the bitcoin network. To take this a step further, in theory, this machine can even buy other machines with its profits and have it placed in underserviced areas; a truly autonomous and decentralized organization. This exact same business model applies to ride sharing services provided by autonomous cars.
The Lightning Network will Enable New Businesses Models
As bitcoin gains mass adoption, network fees will make every day smaller transaction impractical on the base layer. At the same time, innovators and entrepreneurs will think of new ways to serve this growing user base of Bitcoiners. These forces will converge on the use of the lightning network to implement these new business models and many others we cannot yet imagine. It will allow for connections so random and serendipitous that capital usage will become the most efficient it has ever been. It will create untold wealth and prosperity for humanity as it helps fulfill the promise of DAOs.