The concept of bitcoin circular economies has gained significant traction in recent years. A Bitcoin Circular Economy (BCE) is a self-sustaining economic model that operates independently of traditional financial systems.
Typically driven by non-profit initiatives, BCEs use Bitcoin to promote sound money habits, financial inclusion, and contribute to economic autonomy and sustainability.
While often equipped with the latest bitcoin POS technology, a key element that’s been missing is the ability to charge recurring payments. Thanks to the latest innovation, subscription payments on bitcoin have become a reality now – could this be a breakthrough for circular economies?
What are Bitcoin Circular Economies?
Bitcoin Circular Economies are usually small communities where multiple merchants accept bitcoin as a form of payment. 
Through the Lightning Network, a “second layer” payment protocol, which enables faster and more cost-effective transactions, Bitcoin becomes a practical currency for daily use.
This is crucial for the viability of BCEs, as it allows for efficient microtransactions, such as buying coffee or paying for services, without the high fees and long processing times associated with on-chain transactions.
The Role of the Lightning Network
The Lightning Network is designed to facilitate small and large through the creation of payment channels and routing of transactions through multiple channels. This system significantly reduces transaction fees and processing times, making it ideal for everyday transactions.
Using the Lightning Network through a wallet like Blink, users can save hundreds of dollars of on-chain fees.
Subscriptions on Lightning Network
Subscriptions are a powerful tool in any economy, as they provide a predictable revenue stream for businesses and convenience for consumers. The (fiat) subscription management and billing industry is projected to grow significantly, reaching $7.4 billion by 2027. Most software-as-a-service businesses utilize recurring payments to automate billing.
However, the bitcoin technology doesn’t provide the option for so-called “pull payments”. Its secure wallet design requires signing each transaction using the private key. The good thing is that on the Lightning Network, subscriptions can be implemented through various mechanisms.
Recurring Payments with Flash and Coinos
If a shop or service in a Bitcoin Circular Economy seeks to implement subscription payments, they can utilize Flash and Coinos. Flash is a company specializing in lightning payment solutions and Coinos is a bitcoin and lightning web wallet which supports recurring payments on lightning.
With Flash, it only takes a few minutes to create a payment plan. Then a business is ready to sign up customers. With the Coinos wallet anyone can “connect” their wallet to Flash to allow automated charges.
This allows the business to implement regular billing cycles in bitcoin without paying huge fees to credit card companies. Customers will also enjoy the option as it saves them time and hassle.
Nostr Wallet Connect and Direct Debit
Nostr Wallet Connect (NWC), available at nwc.dev, takes the concept of subscriptions a step further by enabling direct debit on the Lightning Network. Nostr is a decentralized social network protocol that can be integrated with wallets to facilitate more complex payment scenarios. By allowing users to authorize direct debits, businesses can set up subscription models where payments are automatically deducted at regular intervals. This eliminates the need for users to manually initiate payments each time, streamlining the process and reducing the likelihood of missed payments.
An Austrian Economics Perspective
From an Austrian economics perspective, the concept of subscriptions and recurring purchases can be seen as a way to align consumer time preferences with entrepreneurial risk and production planning.
In Austrian economics, time preference refers to the extent to which people value current consumption over future consumption. Subscriptions allow consumers to commit to future consumption in a predictable manner, which can help businesses make more accurate judgments about future demand. This alignment reduces the risk of resource waste, as businesses are better informed about the sustainability of their production processes.
Consumers help the business to plan ahead by providing a certain guarantee of payment and demand. In turn, businesses often offer discounts for long-term purchase plans.
Efficiency and Convenience
Subscriptions on the Lightning Network enhance efficiency and convenience for both businesses and consumers. For businesses, subscriptions provide a stable revenue stream, allowing for better financial planning and resource allocation. For consumers, subscriptions eliminate the need for frequent manual payments, saving time and reducing the hassle associated with recurring transactions.
Reducing Transaction Costs
The Lightning Network’s ability to facilitate low-cost transactions is a critical factor in making subscriptions viable. High transaction fees can make recurring payments impractical, especially for small amounts. However, with the Lightning Network, these fees are significantly reduced, making it economically feasible to set up and maintain subscription services.
Real-World Examples
Real-world examples of BCEs, such as Bitcoin Beach in El Salvador and the Plan ₿ in Lugano, Switzerland, illustrate the potential of these economies. In these communities, the use of Bitcoin and the Lightning Network has created self-sustaining economic models where local businesses and residents can transact efficiently and cost-effectively. The integration of subscriptions would further enhance these models by providing a stable and predictable revenue stream for businesses, fostering greater economic stability and growth.
Subscriptions on the Lightning Network have the potential to significantly boost Bitcoin Circular Economies by providing a predictable revenue stream for businesses and convenience for consumers.
Through platforms like Blink wallet, Nostr Wallet Connect, and Paywithflash, businesses can set up efficient and cost-effective subscription models that align consumer time preferences with entrepreneurial judgments.
This alignment reduces the risk of resource waste and enhances the overall efficiency of the circular economy. As these technologies continue to evolve, they will further transform local economies and contribute to a more sustainable and efficient global financial landscape.
