The Advent of Tipping and Reddcoin

Over the past few years there has been an explosion in Internet crowdsourcing and crowdfunding. Gone are the days of raising money by carrying around a form for signatures and a bag for change. Events, communities, business ventures, charities and other causes can reach a wider audience and raise more money online.

As the use of the internet to raise money has become more and more popular services have sprung up that facilitate microdonations, and the transfer of other small amounts of money. The logic behind these services is much the same as the logic behind Facebooks “like” button; The effort that people put into enriching their online identities, and the wider web, with diverse content warrants the ability to show appreciation. If you were out in a pub with a friend you might buy them a drink, on the Internet you "tip" them.

Tipping online has crept up on us. While stories of crowdfunding campaigns going viral and raising ten times the target amount regularly make the front page news, the advent of online tipping has not attracted much media attention… until now. At the beginning of September, Google launched “Fan Funding”, a way to tip people on YouTube. As the launch came hot on the heels of the announcement of Amazon’s $970 million acquisition of Twitch Interactive, the popular Internet video channel for gaming enthusiasts, it would appear that Google has played a card in retaliation.
For those who have been following digital currencies, tipping is nothing new. Cryptocurrency enthusiasts will be aware that in August, Bitcoin tipping service ChangeTip announced their own implementation of tips for YouTube. Going back a bit further, one of the biggest success stories this year (for the first half at least) was Dogecoin, a light-hearted cryptocurrency project launched for the purpose of tipping people small amounts of money online.

Tipping has been around for longer than Dogecoin. Services such as Flattr, which allows users to tip “flattrs” (worth a fixed amount of fiat currency), have been available for several years.

Google, Flattr and other services are keen to monetize the continued growth of social media. YouTube reaches more 18-34 year olds in the U.S. than any cable network, 75% of American Internet users are on Facebook, Pinterest users are doubling nearly every year… the statistics speak for themselves. Furthermore there is still huge growth to happen in countries outside the U.S. and Western Europe, eMarketer reports that in 2016 Latin America will pass Western Europe in social network user penetration. The force of these trends is driven by direct adoption and by the strategies of social networks. The likes of Facebook and Twitter continue to build and acquire a range of diverse apps as they branch out into other areas of online interest.

BraveNewCoin Price Chart

So who is in the running when it comes to tipping platforms?

Flattr: The Swedish microdonation platform has been around since 2010. Users set a monthly budget to donate. Flattr takes a 10% cut from all donations.

Google: The tech giant recently launched Fan Funding which allows users to tip on YouTube. Users must have a Google Wallet. Works in the US, Japan, Mexico and Australia. Google takes 7% of each tip.

ChangeTip: Users of this Bitcoin tipping platform will soon pay a 1% fee to withdraw tips and are liable to pay Bitcoin transaction fees.

Reddcoin: The digital “social” currency was launched at the beginning of 2014. Reddcoin aims to provide seamless integration with social networks. Reddcoin tips are free to give and to receive.

The concept behind online tipping is certainly attractive. In practical terms sending people small amounts of money online is not necessarily easy. Much of the payment technology available today does not cater to the growing demand for microdonation functionality. As we can see there is widespread charging of minimum fees; tipping instantly loses its appeal if half the tip is swallowed up in a default minimum fee.

Reddcoin is a digital currency secured by a cryptographic algorithm (commonly known as a “cryptocurrency”). The goal of Reddcoin is clear:

"Reddcoin is the social currency that enriches people’s lives and makes digital currency easy for the general public. Reddcoin achieves this by integrating a digital currency platform seamlessly with all the major social networks to make the process of sending and receiving money fun and rewarding for everyone"
— www.reddcoin.com

At the heart of Reddcoin technology lies an algorithm, built by lead developer Laudney, called Proof of Stake Velocity (PoSV). As Bitcoin has gained mainstream exposure one of the recurring criticisms has been its mining algorithm, known as Proof of Work (PoW), this secures the network and incentivises participants. 

With the advent of mining pools – systems that group together the power of thousands of miners –  the PoW algorithms that secure Bitcoin and “altcoins” such as as Litecoin and Dogecoin, are open to the 51% attack. This mining-pool problem was not foreseen at the outset of Bitcoin; it is now clear that using PoW to secure a cryptocurrency network encourages the massive centralisation of mining power.

The explosion in Bitcoin mining difficulty has resulted in an exponential increase in electricity use, and the manufacture of dedicated equipment. The net outcome is millions of dollars spent on electricity, and tons of mining equipment becoming obsolete and being scrapped every day. The estimated carbon footprint of Bitcoin mining runs into tens of thousands of tons of CO2 per day.

Proof of Stake Velocity allows users of Reddcoin to easily participate in securing the network, and provides incentives to both purchase and use Reddcoin. There is no need for specialised hardware or the use of extra electricity to mint new Reddcoins (Minting increases the overall supply of Reddcoin by 5% per year). Owners of Reddcoins need only use their wallets, by opening them on a regular basis, this can be done while using their computers for any other task. Minting provides more security to the network than mining as it avoids the centralising effects and potential hazards (51% attack) inherent to mining. There is no question the minting is much more economical and environmentally-friendly than mining: there is no comparison between the two.

Proof of Stake Velocity (PoSV) is proposed as an alternative to Proof of Work (PoW) and Proof of Stake (PoS) to secure the peer-to-peer network and confirm transactions of Reddcoin, a cryptocurrency created specifically to facilitate social interactions in the digital age
— www.reddcoin.com

Reddcoin transactions are essentially free of charge. There is occasionally a tiny network fee for transactions, this has been set up to prevent spamming as a DoS attack on the blockchain. Any fees charged in this way are distributed to people who mint. There are no service fees for Reddcoin transactions and there will not be any in the upcoming next-generation tipping platform.

The social currency also boasts fast confirmation times, ten times faster than Bitcoin. The time it takes for a transfer to complete is crucial in the fast-moving environment of social networks and e-commerce; last year Flattr removed Bitcoin support for its platform, citing technical issues related to Bitcoin’s long confirmation times.

The current Reddcoin platform supports tipping on Twitch TV, Reddit and Twitter; the service is currently being developed to cover Facebook, YouTube and other social networks. To position itself deeper within social media, the Reddcoin developers released a social marketing campaign tool for community and business use, Reddcoin Broadcast. This tool is currently being upgraded to incentivise the participants of each campaign through the distribution of a campaign’s Reddcoin budget.

To explain the vision behind Reddcoin, the team worked to create an official video: https://www.youtube.com/watch?v=KlYJ0sNVVpg

Tipping people online has to be as easy as taking some coins out of your pocket and handing them to someone. The race is on to develop a truly seamless platform that will provide this functionality across the Internet. The second part of this feature article will explore the current environment in more depth…