In a post I wrote recently about decentralised liquidity pools, I talked about the coming future and ways to make money through passive means. The interesting thing about liquidity pools which I didn’t really focus on, is that they allow someone access to 100% of their funds 100% of the time. This is different than investing where someone has to give their capital to someone else and then wait for that person to pay them back in full plus interest to see any real returns. Liquidity pools also have a much higher interest than any sort of lending. the 0.25% interest on NuPool is per day. If someone has a high interest savings account, they are probably at most getting around 1% per year. 0.25% interest on a per year basis is 91.25%. The thing that excites me about this type of model is that there is potential to ‘invest‘ in projects that return a yield without having to sacrifice any access to capital, also the risks are very low.
There is one draw back to the high interest, quick payout model. In order to make substantial capital, you need to already posses enough capital to move the needle. This is the whole ‘you gotta have money to make money’ concept. So while I think liquidity pools are an awesome idea, I think there are other things we can do to set up automated incomes for people. Micro transactions are going to play a very important role in this.
Currently, it is very expensive to pay out rewards to people because of the fees of processing digital currencies. These fees are very small but add up quickly if you are making lots of small transactions. Jeremie Miller, of XMPP fame, is working on a project called pennybank that allows for a micro payment channel to be opened up and money to be sent without getting hit with lots of transaction fees. I talked to him about it awhile ago and it sounds like he is trying to get it connected to devices that will monitor information about his media consumption and send it to the media companies which will pay per minute for the data stream.
This model can be applied to just about anything. Let’s say that there exists some bitcoin based advertising company that will let me pay by the second for people who view my ads. Let’s also say that I have a monthly budget of $500 and I want to pay someone $.0001 every second that my ad is displayed on someone’s website. I deposit the $500 into an escrow controlled by the software and then set up a contract to pay out per second based on some proof that the ad is being displayed. Once the amount of the individual ads is equal to $500 the software creates a single transaction on the blockchain and pays out the whole $500 dollars. This way I only have to pay the fees for 1 transaction, not thousands. Another benefit is that if the advertising company tries to stop displaying my ads before the $500 dollar limit is reached, they can not access any of the money. This eliminates counter party risk.
Photo Credit: Tax Credits