Bill M
The adult industry’s biggest foe doesn’t lurk in the halls of government. You won’t find it delivering thunderous sermons from the pulpit, or picketing the annual conventions. No, it’s something entirely different: the financial services industry, which has long stymied adult entrepreneurs from monetising their content.
Performers and corporate organizations alike frequently struggle to obtain credit card payment processing services, in addition to business and personal bank accounts.
This aversion comes down to two main factors: first, while the adult industry carries a stigma, the financial services industry will refuse their business out of a desire to preserve a “family friendly” image. Secondly, servicing the adult industry carries an inevitable element of risk, with stolen credit cards frequently used to purchase subscriptions and services.
And then Blockchain came along. This technology, paired with the advent of decentralised cryptocurrencies, promised to allow the adult industry to finally shake off the shackles imposed upon them by the establishment.
Except, it didn’t. In April 2018, Pornhub announced it would start accepting cryptocurrencies, including VERGE, Tron, and ZenCash (which since rebranded to Horizon). Five months after its announcement, which was widely covered by the tech media, only one percent of the site’s subscriptions were made via digital currencies.
That same year, Playboy declared it would integrate blockchain technology across its entire online media portfolio. Not only would it accept cryptocurrencies payments, but it would also offer users a wallet to store and spend their digital coins through the companies gaming, video, and content businesses. A few months later, it sued its outsourced blockchain developer over breach of contract after it failed to deliver.
“Not all that glitters is gold”
So, where did it go wrong? It’s an important question, not least because, at face value, cryptocurrencies promise to solve many of the current payment woes faced by the adult industry.
Take chargeback fraud, for example. Not only does this cause adult sites to lose money for services legitimately rendered, most payment processors will close the merchant accounts of customers with an excessively high chargeback ratio. Because cryptocurrency payments are generally irrevocable, adult sites don’t have to worry about this.
Because adult sites have a higher perceived level of risk, payment processors tend to take larger percentages of transactions to cover their costs. Stripe takes just 1.75 percent from each transaction, plus a $0.30 fee. Meanwhile, some payment processors targeting the adult market charge as much as nine percent per payment. That’s a significant slice of each transaction.
Cryptocurrencies, however, frequently have lower costs. VERGE, the cryptocurrency favoured by Pornhub, takes 0.1 XVG per transaction, which works out to just $0.0003.
But perhaps the biggest advantage of digital currencies is the autonomy they offer. In theory, there’s nothing stopping an adult site or performer from creating a wallet for their preferred cryptocurency, allowing them to immediately take payment.
Independent performers, like “camgirls,” have long been paid for their services via tokens. These were typically issued by a centralised platform, like LiveJasmin, with performers facing steep fees to cash out. For this sector of the adult economy, cryptocurrencies hold a tremendous appeal, allowing performers to earn a crust without having to deal with a middleman.
For larger sites, things are a bit more technically complicated, with any digital currency payment system requiring a significant degree of technical legwork. While sites can opt to write these integrations themselves, there are no shortage of startups offering plug-and-play crypto payment processing systems for the adult industry, including Sexcoin, VERGE, and Spankchain.
But despite that promise, blockchain is yet to radically transform how the adult industry work. There are glimmers of promise, but for the most part, sites remain chained to their existing payment providers and banking networks.
All roads lead to Wall Street
While the glacial pace of adoption within the adult industry is attributable to several factors, one of the biggest is likely crypto’s slow uptake in the wider world. Most people have a MasterCard, but few have the technical knowledge, let alone the motivation, to use digital currencies.
This apathy is likely tied to the boom-and-bust cycle of the cryptocurrency world. This is laid bare on Google Trends. You can see interest in the keyword “bitcoin” spike in late 2017, when the value of Bitcoin neared $20,000. By the end of 2018, a single Bitcoin was worth just $3,500. This price implosion caused people’s interest to waver, as is evident by the plateauing search volume. The last 48 hours has seen similar crashes in value, albeit not from as high a starting point.
Digital currencies simply aren’t as sexy as they were three years ago, in the same way nobody gushes over Enron stocks anymore (notwithstanding the fact that Enron went bust over fifteen years ago). And this disinterest makes it harder for adult sites to convince users switch from traditional fiat payment systems, which they understand.
I’d argue the second most pressing issue is that of trust. From Mt. Gox to BitConnect and OneCoin, the blockchain world isn’t short of bad actors. Separately, in 2018, a study from Statis Group estimated that 80 percent of all initial coin offerings (ICOs) conducted in the previous year were scams. The lack of oversight from a centralised authority is a double-edged sword, and has allowed scammers to take advantage of gullibility and enthusiasm within the wider public.
Naturally, this has left the wider public feeling wary. And until the blockchain and cryptocurrency industries get their respective houses in order, individuals and businesses alike will regard them with suspicion. And, for the adult industry, it’ll temper enthusiasm for more promising projects, like Gaze Coin’s crypto-powered virtual reality red light experience.
That would be a shame, but until the fundamental problems with blockchain are addressed, legacy financial platforms will continue to dominate the adult services industry. And that means higher fees, and less choice for struggling sites.
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