The last 20 years have been a golden age for independent creators on the internet. Platforms like YouTube, Instagram, and others have empowered a new class of creators to turn their passions into sustainable businesses.
Despite this success, a fundamental problem still limits creators and their ability to do their best work. That is, no creator owns both their distribution and monetization.
Creators rent access to their audience and their income from tech companies like Amazon, Google, PayPal, and Facebook, without leverage to negotiate on their terms of service.
While it's true that creators can still distribute emails, blog posts, and podcasts beyond the reach of social media giants, creators have never had the tools to earn income on their work without censorship, fees, or processing delays.
Now, for the first time in internet history, they do.
The Lightning Network's architecture allows creators to earn directly from their biggest fans, in new ways that aren't even possible on a fiat payment system.
I suspect that there will be many new business models and applications for creators that are uniquely enabled the Lightning Network, but one I'm particularly excited about is podcasting.
To see why, and to appreciate the importance of building on open platforms, it's helpful to first understand the distinction between closed and open platforms.
A closed platform is one where the company or service provider building it has full control of its content and users. Apple's App Store, PayPal, Patreon, Facebook, Twitter, and YouTube are all examples.
Closed platforms are highly efficient, the companies running them generally operate with good intentions, but they aren't designed for their users. They're designed to generate cash flows for company shareholders.
At first, the distinction seems pedantic. Surely a better user experience leads to larger cash flows, right?
In the beginning, this is often true. But a tension between the best interests of shareholders and users develops once closed networks cross a certain tipping point of success.
Once crossed, the bonds formed by a critical mass of users and creators are too strong to be broken. This is the magical moment where an internet community becomes self-sustaining and its network effects take over.
But for users, the success of a closed platform is a double-edged sword.
As the network grows larger, the chances of another company successfully bootstrapping a direct competitor approaches zero.
The problem with so much success is that winning networks can relentlessly extract value from users for their own gain, without fear of anyone leaving.
Apple takes a 30% fee on in-app payments, YouTube takes a 45% fee on ad revenues, and Facebook keeps all their ad revenue without paying their creators a penny. Still, they all continue hitting record high user numbers quarter after quarter.
They also have record high revenues as their ads, notifications, and content policies become more intrusive over time. Annoying to users? Definitely. Annoying enough for them to change platforms? Not yet.
Despite the deteriorating experience, users stick around because the value of being connected to billions of other users is still greater than the inconvenience of annoying ads, high fees, censorship, and restrictive policies.
Furthermore, the coordination costs of bootstrapping a new network from scratch are too large to overcome, and all the tech giants know it.
This is the fundamental problem with closed platforms.
Open platforms on the other hand, are not built or controlled by a single company or gatekeeper. Their decentralized nature makes them much less efficient, but resistant to manipulation for the pursuit of corporate profits.
This gives creators and developers a stable foundation to build upon.
Email, websites, podcasts, and Bitcoin are all examples of open platforms:
On open platforms, no single company is in charge.
This means there is no company to build sleek onboarding experiences or run marketing campaigns to accelerate adoption, but it also means there is no company to limit, censor, or revoke access to the rest of the network.
Large tech companies can still use open platforms, but they must compete on the merits of their product offering - without the advantage of a closed platform to inhibit new competition.
Crucially, open platforms level the playing field for all, allowing anyone to plug into fully-formed networks of content and users with full interoperability between competing products.
This increases the pace of innovation, raises the quality bar of product offerings for users, but it has an even bigger impact on creators.
Open platforms let creators do their best work, maximize their earning potential, and build with a long-term focus.
Content creators face two fundamental challenges:
These two components form a vital feedback loop for creators, whereby distribution leads to monetization, allowing creators to invest time to make more content that generates more income.
For an illustration, imagine a bicycle with tires representing the two components of a creator's feedback loop - distribution and monetization.
Every cyclist wants reliable, air-tight tires that will propel them on their journey, just like every creator wants a stable platform to maximize their distribution and monetization.
However, when Facebook tweaks an algorithm to limit reach, when YouTube de-monetizes videos, or when PayPal censors transactions or charges punishing fees, creators lose some of their ability to distribute and monetize their work.
To the creator, it starts to feel as if their bicycle tires are slowly leaking air. While hard to notice at first, every pedal becomes a little more difficult than the last, slowing down creators and limiting their potential over time.
It sounds hard to believe, but creators have been riding bicycles with soft tires for the entire history of the internet.
Even creators using open distribution platforms like RSS, email, and blogs still rely on closed monetization platforms like PayPal, Amazon Affiliates, Patreon, or Google Adsense to earn income.
Of course it's still possible to ride a bike with one or two soft tires, and it's usually a better option than walking. However, you'll go much farther and much faster with proper tires.
For creators, that's the promise of building on open distribution and monetization platforms.
Over the last 12 years, Bitcoin has grown into a trillion dollar open monetary platform with hundreds of millions of people around the world using it to store their wealth.
More recently, the Lightning Network has become a thriving second layer on top of Bitcoin, allowing anyone with an internet connection to make instant, permissionless, and nearly-free payments.
Not only can creators now plug into an open monetization platform with hundreds of millions of users, they can even access a new type of monetization that was never before possible.
On the Lightning Network, payments can be made in any denomination without meaningful fees, even those worth small fractions of a penny. This opens the door for real-time payment streaming, micro-tipping, and other monetization strategies that simply aren't possible on fiat payment rails, where processors charge $0.30 or more per transaction and take days to settle them.
With instant, global settlement and the ability to send money at any scale without fees, the Lightning Network is the first viable solution for creators looking to opt out of closed monetization platforms and maximize their earning potential.
Since the Lightning Network is enabling entirely new payment models, it's still unclear how large total payment volume could become over time. However, the Lightning Network shouldn't be under-estimated just because payment amounts are small.
Payment volume depends on both payment value and payment frequency. Without delays or fees on Lightning, I expect average payment frequency will be far higher than on fiat payment rails.
The Lightning Network is still quite new, but in the last few months, a handful of companies have launched interesting businesses to help creators earn directly from their content:
Each company is taking a different approach to helping creators earn on the Lightning Network, but there is one application in particular I want to cover today.
As a media format, podcasts have a few unique attributes. Generally speaking, podcasts:
All together, these attributes are creating a perfect storm for podcasters to catalyze the next big wave of Lightning Network adoption.
For many podcasters, advertising is the most effective way to sustain their business. PwC's latest US Podcasting Report estimates that US podcasts will earn over $1 billion in ad revenue this year, and over $2 billion by 2023. Still, advertising is nowhere near perfect.
Advertisers are centralized entities, payments typically arrive on a monthly basis, and advertising is directly at odds with other monetization strategies like paid subscriptions.
If only a small fraction of your listeners are willing to pay subscriptions for your content, any gains made from subscription revenues will cannibalize your ad revenue, as your total listeners fall by 95% or more.
Wouldn't it be nice if podcasters could earn extra revenue directly from a diverse collection of their biggest fans, without detracting from their ad revenue or audience reach?
With the Lightning Network, they can.
Podcasting 2.0 apps let listeners send tips to any creator that has linked their Lightning address to their show, a process that only takes a couple minutes on Fountain.
There are 4,434,920 RSS podcast feeds on the internet today, but only 2,947 of them are on Lightning today. Put another way, only 0.07% of all podcasts on the internet can earn Lightning tips right now.
Still, Lightning podcasts are growing at over 15% per month, and growth should accelerate as better interfaces and smoother onboarding processes are built.
After all, there is zero downside to enabling Lightning tips, and the upside can be a meaningful contribution to total revenue. It's only a matter of time before the other 99.93% of podcasters figure this out.
Podcasters have no way of getting direct feedback from their listeners during a show. This forces listeners to make comments on YouTube, Twitter, Instagram, or other platforms creators might notice them on.
Podcasting 2.0 apps also let listeners send messages and tips to creators while listening to a show, providing direct feedback with timestamps attached to every comment. This innovation represents a shift to a more social podcasting experience for the entire industry, and is uniquely enabled by the Lightning Network.
Since RSS and the Lightning Network are both open platforms, comments are also interoperable across Podcasting 2.0 apps, so any creator can receive feedback from any listener using any app.
Open RSS Feeds
As mentioned earlier, creators can only maximize their earning potential when they have open platforms to share and earn from their work. Now, podcasters can build on two open platforms (each with hundreds of millions of users), taking full control of their distribution and monetization.
Since RSS and Bitcoin are complementary open standards, podcasters don't have to risk alienating their existing listeners or worry about migrating their content to a new platform.
All podcasters need to do is flip the switch and their Lightning tips and messages will seamlessly integrate with their existing RSS feed.
While the idea of voluntary tipping may sound like an underwhelming monetization strategy to some, consider the following.
When Uber flipped the switch and enabled tips back in 2017, drivers in the US and Canada earned an extra $600 million that year, and over $1 billion of tips the following year.
It's not hard to imagine podcasters earning a similar amount for the value they provide their listeners with.
As Podcasting 2.0 apps continue to build easy interfaces for listeners to tip their favorite podcasters, Lightning tips could even become a primary revenue source, without cannibalizing or interfering with a creator's existing ad revenue.
For the first time in internet history, creators can build their businesses entirely on open distribution and open monetization platforms.
Without closed platforms extracting value from their work, creators now have full freedom to express themselves, launch ambitious projects, and build without fear of censorship, algorithm changes, or restrictive platform policies.
Among all varieties of content creators, I think podcasters will be the first to adopt the Lightning Network, and that they will represent the Lightning Network's next big use case.
Lightning already integrates seamlessly with the RSS technology every podcaster relies on, it provides creators with a complementary source of revenue that doesn't interfere with ads or audience numbers, and Lightning payments settle instantly.
Acting on this conviction, I decided to make an investment in Fountain this summer, and have just launched my own Lightning podcast.