The new revenue stream gives distributed ledger technology (DLT) firms an alternative way to generate (crypto-denominated) cash flow instead of relying on initial coin offerings (ICOs), one-time sales or venture/private capital raising.
Some of the EIP-1337 standards were inspired by ERC-948: a token protocol developed by the New York-based company that aims to create a scalable subscription payment service on the Ethereum blockchain. ConsenSys stated in an Oct. 31 blog post that recurring payments (that reflect ongoing services) should benefit the ecosystem as well as help to mature the Web 3.0 blockchain economy.
Subscription payment behavior is well-known and widespread, meaning the user experience is a natural transition from Web2 to Web3 architecture. Because subscription payment behaviour is well known and the user can opt out anytime, they can make a purchase decision very quickly.
The model stands in contrast to utility tokens, which require knowledge of how the token can be used. The EIP-1337 standard mirrors what’s possible in the traditional economy, where consumers can easily pay for ongoing services and automate their payments each week, month or year. As such, the Ethereum standard contains an opt-out method that lets users cancel funding anytime.
The model conveys a few benefits. Subscriptions instill confidence in operators as they secure longer-term cash flow. Founders also benefit by focusing on the acquisition of subscribers, which requires a long-term view of the business. Recurring payments give ventures the ability to plan and grow. And subscriptions can reduce risk for investors as cash flow stabilizes.
Founders can focus on making users happy with service quality and user experience. With greater cash flow confidence comes the ability to better serve the customers themselves instead of constantly worrying over the bottom line. In contrast to utility token ICOs, where founders have to focus on the needs of speculators, and users, founders can simply focus on users.
ConsenSys stated that the goal is to have a common, security-audited implementation that can be applied wholesale into a new decentralized application (dApp). The ecosystem should be able to benefit from a dApp without users needing to fully understand a token’s whitepaper. In other words, users can subscribe to a service and cancel anytime, just like in traditional Web 2.0 services.
Another use case for EIP-1337 could be in the area of recurring income for developers which would allow them to work full-time on open-source projects. Or, perhaps, bounty programs where a stable source of funds can lead to dependable work for hunters.
The above approach “[allows] anyone to provide ongoing grants — in the form of recurring subscription payments — to any grant or project on the platform.”
As the blockchain economy matures, it will continue to acquire certain traits and dynamics that are found in the real world.
The author holds digital assets but none mentioned in this article.