Aug 25, 2022 - Economy

Exclusive: The Block launches tokenized paywall

Illustration: Annelise Capossela/Axios

The Block, a crypto media company, is moving parts of its consumer paywall exclusively to a crypto token model.

Why it matters: It becomes the first newsroom to launch a tokenized paywall within a new industry framework called the Access Protocol, which allows consumers to buy multiple media or creator subscriptions via a uniform set of tokens.

  • “This is all done in the vein of increasing distribution of our content to more people,” CEO Mike McCaffrey said.
  • The Block currently has thousands of consumer subscriptions and hundreds of enterprise subscription clients, per McCaffrey. Last year, the company bought out all of its investors.

How it works: The Access Protocol works by issuing custom “Access Tokens” to various crypto marketplaces for people to buy and use to access their subscriptions.

  • When a user hits a paywall on The Block's website — and in the future, other media paywalls — they can “stake,” or temporarily commit, a certain amount of tokens to gain access to the website’s content.
  • Each participating subscription media company or creator can dictate the minimum threshold for the amount of coins a user must stake, based on the cost of their subscription.
  • The Block, for example, could start with a minimum threshold of 1000 tokens, which could theoretically equal roughly the same amount in U.S. dollars as its annual consumer paywall of $250.
  • For subscribers who don’t want to convert their payments to the token system, they can still use credit card subscription payments via The Block’s old domain. They'll also be given access to The Block’s premium content on the company’s enterprise subscription site for the duration of their subscription period.
  • To start, the Block will initially apply the tokenized paywall to around 20% of articles published on its website. Eventually, it hopes to extend the paywall to all content, but it may take 5-10 years to get there, McCaffrey said.

Be smart: The advantage of a tokenized paywall is that it allows The Block to make money, especially by joining the Access Protocol early, while also incentivizing subscribers to invest in more subscriptions broadly.

  • Access Foundation, a small, third-party crypto group that created and governs the Access Protocol, set an initial inflation rate of 5% against the minimum threshold of tokens each year.
  • That rate, which in the future will be dictated by the market based on the amount of total tokens purchased and in circulation, allows users to grow their token holdings, and allows publishers to get paid.
  • For example, 5% inflation on The Block's minimum threshold of 1000 tokens, that means that after the first year of token subscription access, the amount of tokens staked would increase to 1050.
  • Of the additional 50 tokens, half are split with the user to incentivize them to continue buying new subscriptions within The Access Protocol and the other half is split with the subscription publisher or creator who can monetize them.

Yes, but: Various media companies have introduced crypto-based subscription alternatives to varying degrees of success.

  • Crypto media company Decrypt, for example, has created its own cryptocurrency for hyper-engaged readers.
  • Civil, a blockchain journalism startup that looked to decentralize media funding with tokens, shut down after just a few years.
  • "What makes this paywall different is that it’s meant to be compatible and interoperable with multiple media companies and multiple smaller creators," said Larry Cermak, VP of research at The Block.
  • "There's also no recurring payments," Cermak said. Users stake their tokens once and can remove their stake at any time.
  • "This way it's a bit stickier," he noted, referring to less consumer turnover.

What's next: The Access Foundation, which is backed by grants from blockchain platforms Solana Foundation and StarkWare, hopes to launch the tokens in the fourth quarter, and The Block's tokenized paywall will launch at that time.

  • In the interim, it's looking to onboard more publishers and creators to the Access Protocol, said project lead Mika Honkasalo, who was formerly a researcher with The Block.

Bottom line: "Imagine a world where you have one wallet in which you access all of these various publishers ... The idea is that it's a very seamless experience compared to today, where the only place where you can see all of your subscriptions is your credit card statement," McCaffrey said.

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