The Advent Of Tipping And Reddcoin – Part 2

In part 1 of this article several services that provide online tipping features were introduced; here we examine these services a little closer. Looked at one way, the potential market is almost totally untapped; but it is important not to overlook the possibility that the market itself may be quite small. The founder of tip-jar start-up Tipjoy (2008–2009), Ivan Kirigin, made the following observation:

“Roughly speaking, think of commerce as two orders of magnitude more common than transactions to non-profits. Similarly non-profits are an order of magnitude more common than P2P transactions.”

Others in the industry hold further scepticism towards online tipping. The founder of Twitter-centred payments service Twitpay, Michael Ivey said in an interview that “monetizing content that people don’t currently pay for may be the hardest thing for a company to pull off.”. Twitpay secured investment from Google Chairman Eric Schmidt and was then sold for $100,000 and transformed in to a non-profit fundraising tool.

According to Ivey the social pressure associated with tipping people in person – a waitress in a restaurant for example – is not present on the Internet. A person surfing the Internet does not feel embarrassed by not paying someone for content in the same way that a person passing a musician in the street might feel embarrassed not to tip them. And the actual content itself is free already so…

It seems clear that any successful online tipping or micropayment system is going to have to overcome a certain resistance to the new tipping paradigm, for the reasons stated above. Services will have to be feature-rich in order to attract users, so what exactly is on offer from the main players?

CHANGETIP

Nick Sullivan, the CEO of ChangeTip, launched the company in December 2013. Since that time the platform has been developed to support Reddit, YouTube, Pinterest, Twitter, Github and some other social networks. Recently ChangeTip released tip.me, a service whereby ChangeTip account holders receive a tip.me url which they can paste underneath content in order to solicit tips.

In a recent interview with Tina Hui of Followthecoin, Nick Sullivan emphasised his goal to change the way that online content is monetized, stating that up until now people have lazily accepted that the way to do this is via advertising. Although the founder of ChangeTip would like to cast the ChangeTip net wide to cover diverse content, in the same interview he admitted with some apparent frustration that to date the most highly-tipped person using the tip.me service was a girl doing a live peep show.

So how does using ChangeTip actually work from the user point of view? ChangeTip is command-line based. Firstly, to ensure that ChangeTip robots can recognise that a tip is being made on a supported social network, the user must specify the name “changetip” (along with a character or two to complete the syntax depending on the network) somewhere in the message in which they are announcing the tip.

The amount of the tip may be specified in several ways:

• a literal amount like 1 or 1 USD (or other supported currencies).
• a single selection from a range of words that stand for different amounts: “beer”, “coffee” or “donut”, for example.
• custom words made up by the user.

ChangeTip prefers to take certain precautions, for example automatically sending the smallest tip if multiple values are detected in a single-tip message. Users are also limited to sending tips of up to $25, although these limits can be altered by contacting ChangeTip directly.

As noted in part 1 of this article, sending tips via ChangeTip does not incur a charge from the company, although Bitcoin transfer fees do apply. ChangeTip is also set to begin taking a 1% fee for wallet withdrawals, from the beginning of 2015.

ChangeTip runs on a client-server model. ChangeTip manages client funds, meaning that it is a centralised service and is thus prone to the problems that have affected Bitcoin exchanges and payment services working on the same model, problems cased by human judgement (and in some cases, unrelated to ChangeTip, bad faith and outright fraud). It is important to note the irony here, as from its inception Bitcoin was designed as a means to resolve the centralised trust issue.

To conclude, ChangeTip is developing a specific niche service around Bitcoin. The “pros” of this service are its relative simplicity from the user perspective and its integration with a fair range of social networks. The “cons” of ChangeTip are the centralised model it is built around, the limitations imposed on users and in a more long-term sense, the limitations that will be imposed on the service by the fact that it is built around Bitcoin and will thus only be able to benefit from the implementation of new features in the digital currency at the time that these features are rolled out by the Bitcoin team, a process over which ChangeTip has zero influence.

FAN FUNDING

You know that online tipping is being taken seriously by the big players when Google rolls out tipping functionality for YouTube. The Fan Funding platform allows YouTube viewers to tip their favourite content with funds withdrawn from their Google Wallets.

When the provider of video content on YouTube accepts Fan Funding donations, videos are displayed with an icon in the top left hand corner. Clicking on this icon reveals either a banner inviting the viewer to support the content provider or a pop up window with the same functionality. The next stage of the process involves a user deciding how much to tip via their Google Wallet.

Although using Fan Funding is designed to be quite easy, it certainly lacks the charm of tipping people “coffee” and a “hug”. Yet beyond this drawback there is a more fundamental obstacle that Fan Funding will certainly have to overcome if it is going to become a popular service: the long list of eligibility guidelines. To be able to use Fan Funding, a user must:

• own a YouTube account in perfect order (zero previous copyright or ToS issues).
• meet the criteria for YouTube partnership (with its own set of guidelines).
• verify by telephone their YouTube account.
• link an AdSense account to their YouTube account, with approval.
• be a resident in the United States, Australia, Mexico or Japan.

The rules laid down by Google imply that the only supported content providers will be those with established advertising revenue streams. And then there are the fees.

YouTube takes 5% transaction fees plus a set amount that varies by country. In the US, for example, the fee is fixed at 21 cents, meaning that if you tip someone $1, over 25% of that tip is taken by Google. Tipping is traditionally about rewarding a person directly for their efforts, without a cut going to anyone else; Google’s fee structure is extremely unappealing, and proves once again how hard it is for traditional payment providers to cater for micropayments in a satisfactory way.

FLATTR

One of the best known tip platforms on the Internet today is Flattr. To use this service a user must create an account and decide the monthly budget they will allocate to tips. The account is topped up with credit or debit cards, and the allocated budget is taken from the account each month.

When users see content that they would like to support, they “flattr” it (by clicking “favourite” on a YouTube video, by example). At the end of each month the budget is divided equally between the number of flattrs that the user made during that month. So for example if a user has $10 in their account and has made 20 flattrs in a month, each flattr is worth 50 cents.

The tip process is complete when, on the 10th day of every month, money is sent to the content providers who have been flattred. This means that there can be a delay of up to one month before a tip is actually delivered to the intended recipient.

There is one more point about the Flattr system that it is very important to note: each separate unit of content can only currently be flattred once, meaning that if you flattr three pieces of content the three recipients receive the same amount as a tip. It is unclear if Flattr will ever address this issue to allow users to flattr a piece of content several times in order to increase the value of the tip in relation to other tips sent in the same month.

Several months ago, Flattr partnered with MangoPay in a move which has far-reaching implications for its users, who must now add further information to their accounts and sign new terms and conditions that have been lengthened to include the MangoPay terms.

User who do not update their information or sign the new terms face having their accounts suspended and then removed after 3 months, losing all their money and flattrs as a result.

Paypal as a funds-withdrawal option is not longer available; nor is support for Skrill and Moneybookers. In the first part of this article readers discovered that Flattr recently removed support for Bitcoin, citing the long confirmation times as an insurmountable problem and also stating that hardly anyone was using Bitcoin to top up their accounts.

The reactions of Flattr users to the news surrounding the new deal with MangoPay have been quite negative. From the Flattr blog:

“I’m rather sceptical about kicking out PayPal, it will probably mean a lot less usage of the service from outside of Europe. It was always hard to convince the non-EU-users of my site to use Flattr because many of them thought it’s too complicated but without PayPal it’s extremely unlikely any of them will even bother to try.”

“No Skrill/Moneybookers? That’s a real real shame. 🙁 From my point of view this only makes Flattr less attractive.”

“I’m sort of concerned … that a complete removal of PayPal and Skrill may in turn cripple many creators who make their earnings via Flattr. And that only for the sole reason that so many users are dependant solely on Paypal, or simply will not dare use any other payment service, let alone a direct bank or credit card transfer (again without it being via Paypal or Skrill).”

“Started checking out the blog because noticed the widget no longer showing up on my website. Since PayPal option is being removed, I’ll probably stop using flattr altogether :- Time will tell…”

“I will not supply KYC data for micropayment. Full stop.”

It appears that the benefits of Flattr’s latest deal with MangoPay may not necessarily outweigh the problems.

REDDCOIN

In part 1 of this article an introduction to Reddcoin was made, including a presentation of core features such as PoSV (the algorithm that is used to maintain the security of the Reddcoin network), fast confirmation times and free transactions.

To use Reddcoin a variety of wallets are available, including the recently-released Reddcoin Electrum wallets. From the official Reddcoin website https://wallet.reddcoin.com/:

“Reddcoin Project officially provides two types of wallets: full-chain and SPV."

The Reddcoin Core full-chain wallet is a full-chain desktop wallet that traces its root back to the official Bitcoin Core wallet and continues to incorporate the latest features from the Bitcoin source code. The wallet provides both command line daemons and Qt-based GUI for Windows, Linux and Mac OS X. The full-chain wallet keeps a local copy of the entire blockchain whose size grows continuously.

The Reddcoin social wallet is another full-chain desktop wallet that adopts a fresh new design for user interface and integrates various social features such as real time price conversion, Reddit feeds, Twitter feeds and an IRC client.

SPV stands for Simplified Payment Verification, which was first introduced in section 8 of the original Bitcoin whitepaper. Reddcoin SPV wallets use the Electrum protocol and only need to keep track of block headers and addresses with non-zero outstanding balances. Reddcoin Electrum wallets are currently under active development and will come in three flavours:

• The Reddcoin Electrum desktop wallets for Windows, Linux and Mac OS X.
• The Reddcoin Electrum mobile wallets for iOS and Android devices.
• The Reddcoin Electrum browser wallets for Chrome, Safari and Firefox.”

To top up their wallet of choice a user can purchase Reddcoins at cryptocurrency exchanges such as Cryptsy, Bittrex, Poloniex, Crypthal, SwissCex and BleuTrade, or from a service such as WeSellRedd, which allows the purchase of Reddcoins using Paypal.

Tipping Reddcoin is done using the Reddcoin tip platform (Chrome / Firefox browser extension), and is implemented on several social networks including Twitter and Reddit, with support for many more networks included with the upcoming release of the next generation tip platform. Similar to ChangeTip, to make a tip users send a message including the name of the person whom they wish to tip, the name of the Reddcoin tip-bot in question and the amount of Reddcoin they wish to tip. The big difference between the Reddcoin tip platform and ChangeTip is in the way in which the Reddcoin user interface has been developed to a high level of seamlessness. Tipping with Reddcoin does not require the user to type commands: users select from a range of amounts; tipping can be done in a couple of clicks without any typing at all. Furthermore, as part of the Social X roadmap tipping Reddcoin is set to become completely decentralised, with no tip-bots involved.

And there are further major differences between ChangeTip and the Reddcoin project. ChangeTip is a service built around the digital currency Bitcoin; there is no link between the Bitcoin developers and the ChangeTip team. Reddcoin, on the other hand, has been conceived as a fully-fledged digital currency specifically designed for online tipping; the core services being built around Reddcoin are built by the Reddcoin team itself. This has very far-reaching implications.

Let us take, for the sake of example, the case already mentioned, where Flattr removed Bitcoin from its service due to slow confirmation times. Consider that ChangeTip encounters an insurmountable problem with a planned service due to Bitcoin confirmation times. There is nothing that the ChangeTip team could do to resolve the core issue. Furthermore, even if a concerted effort was made to submit a proposed change to the Bitcoin team, making changes to the Bitcoin protocol is notoriously slow and difficult, due to the generally conservative attitude of the core developers. In the case of Reddcoin, however, the developers of the tip platform are the developers of Reddcoin itself, and any change to the digital currency that would clearly facilitate its use as the online tipping currency – the social currency – could in theory be implemented at lightning speed.

The above is just one instance in which the fact that the Reddcoin team develops all aspects of the core Reddcoin project, including the Reddcoin protocol itself, will continue to give the project a major advantage over other online tipping projects that do not make use of their own custom-designed currency.

CONCLUSION

Several years have gone by since the first companies were launched with the specific aim of facilitating online tipping and micropayments. The world is still very much the oyster for these upcoming services; sustained efforts are being made by tech teams and bigger players to achieve mass adoption for their services. The scene is being set for one or several of these services soon to make significant breakthroughs into mainstream use, but judging the projects that will enjoy future success is not necessarily easy.

Investors and would-be early adopters must assess for themselves the features that will make or break a tipping service. But the fundamental questions are perhaps these: with the level of technology being developed today in the field of cryptocurrency, what important advantages may be gained from a custom-designed currency? What are the full implications of decentralisation on tip platforms?