Buying versus donating

Currently (and probably it has always been the case) in the Bitcoin community there is some push towards donations as some sort of business model, or in general just a general love for the idea of donations, and I think that is very misguided.

Two examples of the push for the primacy of donations

For example, there is a general wantness of people to have some sort of “static QR code” or “static Lightning invoice” that people can put on their Twitter profiles to receive donations (sometimes they say “payments” instead of “donations” but to me there is no such a thing as a payment without a good or service being given in exchange, so I’m saying “donations”) and that is a hard problem to solve considering the fact that most Lightning wallets are running on phones.

Another example is the “Podcasting 2.0” initiative that tries to integrate podcast players with Lightning wallets so they can send donations to podcast hosts that are running Lightning nodes. Their proponents call it “value for value” (or “value4value”, “v4v”) and if you ask they will say value4value is a “model” in which the listener gives out in satoshis to the podcast host the same amount of “value” he is getting from listening to that content.

The value4value concept makes it almost explicit the problems I see with this big emphasis on donations the Bitcoin community is making in general. In essence, the idea that the listener is capable of measuring the value it gets from the podcast then converting it into a monetary amount and then donating that is completely wrong and even nonsensical.

Why value4value is not sound

Basic (Austrian) economics teaches us that all value is ordinal, not cardinal – i.e., it can’t be measured or assigned a number to. One can only know that at some instant they prefer x over y, they cannot say x has a value of 10 and y has a value of 9. Because of that, it’s a nonsense quest to try determine how much value one is getting from a podcast.

Basic (Austrian) economics also teaches us that exchanges happen when there are differences in the subjective valuations of goods, i.e., Alice can give x to Bob in exchange for y if Alice prefers y over x and Bob prefers x over y at that point. Because of that (and disregarding the previous paragraph), it’s futile to expect that the podcast listener will donate exactly the amount he is getting from the podcast in “value”.

Because of the two points above, it should also be clear that it is impossible to convert “value” in podcast content form into “value” in satoshis form, but I won’t try to explain why that is because this is not an economics textbook.

What actually happens is that whether it’s in the value4value context or not, donations are always a somewhat random and subjective amount, if they happen. If I like some content that someone is publishing for free, my decision on if and how much I will donate is never dictated by some nonsense calculation, but by calculation that is governed almost entirely by feeling and animal spirits (but one that also considers how much money I can spare, how much I like that person and how much I perceive they need).

When I go to a normal shop to buy a bottle of milk I look at the bottle of milk and I read its price, and there is one simple decision I have to make: is this bottle of milk worth more than the amount of money that’s specified in the price tag? It’s a single decision with only two answers: yes or no.

While when I see a free form on some free “creator” page asking me to type how much I will donate I have to decide if I will donate, when I will donate, how much I will donate, if I want this donation to be done every month or how will that work going forward? Will I keep consuming the content produced by this person? Will they keep producing? Maybe I’ll just listen for free now and do this later as I’m busy, but then will I forget? Maybe I have just donated a lot to someone else and do not have much more money to spare, but now I feel guilty that the other person got all my donation money and this one didn’t get anything but I can’t go back and ask the other to return the money I just donated – and so on and so forth.

Conclusions

Although the paragraphs above are confusing and do not follow a very logical presentation pattern, I hope you got from them why I think donations are much more complicated than purchases, and that repeating the “value for value” mantra doesn’t help at all.

Considering that, what I wanted to say is that bitcoiners should give more attention to the other model, in which people produce goods and services and sell them. And that model can be applied successfully to “content creators”, podcasters etc in many ways that are probably (I don’t have any data backing my claims) better than the donation model.

Other possible monetization possibilities

For example, I’ve noticed that many blogs and podcasts with interesting content start to release exclusive episodes as they get big enough. These exclusive episodes are available only for “supporters”. This is effectively selling access to the episodes. There is also the “crowdwall” model in which multiple people pay so that some content gets released for free.

We can count even the model in which a donation is not just a blank donation, but gives the donor the right to write something on the screen or something like that – these are actually not just donations, but purchases of these rights.

Professional videogame streamers have come up with some other interesting ideas. For example, they crowdfund the creation of special content (“if enough people pay I will dress like a rabbit”) or they sell the right to participate in the stream somehow (for example, by playing a game with the streamer in some special day).

In these models, the static QR code with which so many people dream doesn’t make much sense (if you’re selling a specific episode or if a payment is specific to one identifiable person, you need different QR codes or more metadata to be attached to each payment by the payer).

Addendum

I think people like the donation model very much because they only see the big and super famous people that receive donations. A very small set of people have so many followers that they can live with just donations, even though donations are very inefficient and they could earn more and even deliver better content if they were using some other model.

I imagine that a creator with a high number of followers will get a lot of people that do not donate anything, a lot that will donate a little – probably less than they would if they were paying – and eventually a little number of people that will donate way more than they would if they were buying. This last group is probably what makes it worthwhile to work on this donations model for these creators.

The takeaway is that the donations model is not a panacea and is not very good either.