BTC Inc
by Giulio Prisco, Apr 07, 2016

Scalable Distributed Ledgers Will Enable Pervasive Internet Micropayments


p2p payments

Before the Web as-we-know-it, there was a conceptual precursor known as Project Xanadu. The brainchild of information technology pioneer, sociologist and maverick philosopher Ted Nelson, Project Xanadu was never fully implemented. However, according to many top computer scientists, the Xanadu conceptual architecture was much more open, scalable, sustainable, fair and ultimately better than today’s Web. While it’s too late to go back, distributed ledger technologies could gradually enable a Web more similar to Nelson’s vision.

Founded in 1960, Project Xanadu was first described in Nelson’s 1974 book titled Computer Lib - Dream Machines. The book - one of the very first computing books - become a cult title and was described by Howard Rheingold as "the best-selling underground manifesto of the microcomputer revolution." Nelson is credited with coining the term “hypertext,” but the hypertext implementation in HTML - which stands for “Hypertext Markup Language” - falls short of Nelson’s conceptual breakthroughs.

The Web, introduced by Tim Berners-Lee in 1991, can be considered as a simplified version of Nelson’s ideas. But the simplifications introduced made the Web actually implementable, and consequently the Web thrived, pushing Xanadu to the sidelines. A quarter of a century later, the Web has taken over much of the world’s economy and disrupted many industries, but important parts of Nelson’s original vision remain unimplemented.

In fact, Nelson was annoyed that the Web lacked key elements of Xanadu, reported Walter Isaacson in his 2014 book The Innovators: How a Group of Inventors, Hackers, Geniuses, and Geeks Created the Digital Revolution. In fact, while the Web has one-way links, Nelson’s hypertext concept had two-way links, which would require the approval of both the person creating the link and the person whose page was being linked to. Such a system would enable a scalable and sustainable micropayment economy for the Web, which would benefit all content producers from large publishers to amateur bloggers. “HTML is precisely what we were trying to prevent - ever-breaking links, links going outward only, quotes you can’t follow to their origins, no version management, no rights management,” said Nelson.

Isaacson notes that Jaron Lanier, another legendary cyberculture icon who pioneered Virtual Reality, agrees with Nelson and thinks the Internet economy has gone the wrong way. “The whole business of using advertising to fund communication on the Internet is inherently self-destructive. If you have universal backlinks, you have a basis for micropayments from somebody’s information that’s useful to somebody else,” said Lanier in a 2013 interview.

In his 2014 book Who Owns the Future? Lanier noted that the current Internet publishing model based on “free” information subsidized by advertisers favors a handful of powerful content aggregators over publishers - especially small publishers - and defended Ted Nelson’s original vision with two-way links and micropayments. 

“The real sophistication of Ted’s idea is how it would bring about a balance of rights and responsibility while at the same time reducing friction,” wrote Lanier. “If the system remembers where information originally came from, then the people who are the sources of information can be paid for it.” It’s important to note that two-way links would work across multiple mashups and permit the originators of information re-used in derived works to keep earning royalties for decades. “A new kind of middle class, and a more genuine, growing information economy, could come about if we could break out of the ‘free information’ idea and into a universal micropayment system,” noted Lanier.

“In the late 1990s Berners-Lee tried to develop a micropayments system for the Web through the World Wide Web Consortium (W3C),” noted Isaacson. “It was never implemented, partly because of the changing complexity of banking regulations.” Web pioneer and Netscape creator Marc Andreessen, who considers Bitcoin as a good model for standard Internet payment systems, noted that, if he had a time machine and could go back to when the Web was first designed, “one thing I’d do for sure would be to build in Bitcoin or some similar form of cryptocurrency.”

Recently the W3C restarted its work on an overall Web payments architecture and produced initial drafts. The W3C drafts make only incidental mentions of Bitcoin and distributed ledger technologies. However, it’s worth noting that digital currencies based on distributed ledgers are the only form of Internet-native payment system that exists, works and effectively implements one-click payments.

A good example is SatoshiPay, a recently announced platform that offers Web publishers a new way to monetize content through frictionless Bitcoin “nanopayments” as low as fractions of a cent, that are instantly settled and can be executed at high frequency. “This enables completely new ways of monetizing Web content and digital goods in general,” said SatoshiPay cofounder and CEO Meinhard Benn.

But high frequency Bitcoin micropayments can only be implemented for mass adoption if the Bitcoin network is able to operate at high frequency, which isn’t the case at the moment. In fact, a recent research paper shows that, in the current design of Bitcoin Core, there is a fundamental conflict between throughput and decentralization. Incremental improvements could achieve a throughput of about 27 transactions per second in the Bitcoin network, but the price to pay for further increases would be making the Bitcoin system more centralized. More aggressive scaling will in the longer term require fundamental protocol redesign,” note the researchers.

There are initiatives to develop non-Bitcoin distributed ledgers to exploit alternative protocols that could be scaled to much higher transaction rates, suitable for a pervasive micropayment economy. It’s also worth noting that the Lighting Network, where related Bitcoin transactions can take place instantly on “micropayment channels” off-chain, with only the final settlement processed by the Bitcoin blockchain, could enable high-frequency scaling, near-instant transactions and efficient micropayments. Promising Lighting Network development projects have been started by, among others, Blockstream and the “Thunder Network” project.

While the projects mentioned want to add micropayment layers to the Web, including micropayments in the core Internet protocols, as originally suggested by Nelson, they would require many years of standardization work by official bodies such as the W3C. An interesting intermediate approach would be integrating micropayments in the browser. A high-profile team headed by Brendan Eich, creator of the JavaScript programming language and former CEO of Mozilla, recently launched a new browser dubbed Brave, which offers faster browsing by replacing ads with clean and light ads, with an option to switch ads off via Bitcoin micropayments. A forthcoming version of the Brave browser, planned for April, will include micropayments and a built-in Bitcoin wallet.

It’s also interesting to note the similarity between Nelson’s two-way links and smart contracts, and speculate on whether two-way links could be implemented by next-generation distributed ledger technologies for smart contracts.