Over the weekend, Cuy Sheffield, who is the head of Visa’s Cryptocurrency division, wrote an extensive Twitter thread in which he made the case for the blockchain in making micropayments. Recently, Nick Szabo, who invented the name “smart contracts,” recently discussed the issue of micropayments in an article.
In the twitter thread, Sheffield addressed the problem in length. He argued that in the recent financial system, a fraction of a cent is not recognized. However, crypto does not have this problem. He gave the example of Bitcoin, which can be divided into one hundred millionths of a Bitcoin called a Satoshi.
He noted that even when the price is one cent, people still make mental transactions, which causes delays in purchasing certain services online. He argued that there were still transactions that were a fraction of a cent and this could cause people to avoid doing the mental transactions. Even the volatility of Bitcoin would not be a major concern for people since it would only cost them cents.
Some who responded to the thread noted that there were better ways to achieve this including the use of a digital dollar, XRP, or even USD stablecoins such as Dai. Sheffield responded by noting that there was no word to represent any transaction below one cent. He said there should be a name for this such as was the case with Bitcoin where there are Satoshis. He believes that there should be a name for these small transactions to create familiarity, which will help to remove the mental transaction costs. Sheffield also argued that using decimals was not effective.
Sheffield made the thread in response to a tweet by Brian Armstrong, the CEO of Coinbase. In his tweet, Armstrong noted how reducing the cost had an impact on consumer behavior. For instance, he noted that when an SMS used to cost $.20 a day, people used to send a few messages. However, when WhatsApp drove the price to zero, the number of texts being sent skyrocketed. He applied the same logic to micropayments and noted that they could skyrocket as well.