Industry

Cryptocurrency Finally Takes Off In The Porn Industry


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LONDON, ENGLAND – APRIL 25, 2018: Illustrations of a number of major cryptocurrancies, including Litecoin and Ethereum. (Photo by Jack Taylor/Getty Images)

According to recent market research conducted by the porn studio VogoV, as of 2018 about 470 adult video sites, 50 webcam platforms, and 35 sex shops worldwide accept cryptocurrencies (crypto for short) as a form of payment. That may seem like a lot, but relative to the overall size of the sprawling adult industry, it really isn’t. In fact, for an industry that prides itself on a history of early tech adoption and popularization, from VHS tapes to internet payment systems, porn has approached this new form of remuneration gingerly at best. Big and well known companies especially, like Pornhub and Wicked, flirted with accepting crypto for years before making any moves. And most sites long focused on accepting Bitcoin, arguably the best known and most dominant coin, rather than exploring new or numerous alternative cryptocurrencies. Early attempts to develop coins meant to serve the adult industry specifically, like 2014’s (a little on-the-nose) Titcoin, flopped miserably.

“Businesses didn’t need to use something hazy and new, like crypto,” says VogoV co-founder Aleksei Maetnyi, also known as Markus Dupree, his adult film performer and director pseudonym. “Traditional technologies worked, and still work, pretty well” for payments. Adult companies also recognized, he adds, that (until recently) few of their customers used, or were clamoring to pay with, crypto.

Since the middle of 2017, though, the adult industry has switched gears entirely. Last year, major sites like xHamster and Naughty America finally started accepting Bitcoin. Over the first half of this year, Pornhub and some of its sister sites announced partnerships with cryptocurrencies Horizon (formerly ZenCash), Tron, and Verge, and VRPorn.com started accepting Litecoin.

Simultaneously, and much more ambitiously, a number of entrepreneurs from the adult and crypto worlds have launched new coins and attendant payment infrastructures aimed at the adult industry. The creators of the OGO coin (VogoV), BOOTY token (SpankChain), Vice Industry Token, and WankCoin all seem to believe their systems can solve the economic woes bedeviling the industry—largely stemming from the fact few people pay for porn anymore—better than other crypto options. And they all seem to believe that, in short order, they will become the dominant crypto payment platform for adult websites and consumers worldwide, and perhaps other industries, too.

“This is an exciting time,” says Alex Hawkins, vice president of major adult tube site xHamster, “with really creative people exploring new systems.”

Cryptocurrency systems have a lot to offer the adult industry. Because credit card companies and banks consider porn a high-risk sector, rife with disputed transactions, adult sites pay considerably more in fees and workaround costs to process payments than most industries. VogoV’s materials claim these fees account for up to 13% of the cost of a digital porn purchase, but Maetnyi thinks it can go up to 19%. Crypto systems, argues Najva Sol, vice president of community at SpankChain, offer a clear record of definitive transactions that “mean that no one can consume a performer’s content and demand a fake refund or claim they’ve been frauded.” They also bypass the fees and infrastructure of banks, cards, and payment processors, radically reducing the cost of selling content digitally.

For consumers, cryptocurrencies promise a new type of anonymity. Although Hawkins argues that adult companies do a good job of trying to protect the privacy of their customers, porn buyers classically (and with some merit) fear that people in a bank or in their homes will be able to tell not just that they consume adult material, but what kinds, through their card statements. Cryptocurrencies, on the other hand, explains Sol, publicly record every transaction on a decentralized ledger, but use a pseudonym, potentially making it much more difficult for anyone to track a person’s porn habits. “Whether you’re a married religious conservative in the United States, a gay male in Indonesia, or a fetishist in the United Kingdom,” says Hawkins, “getting caught viewing or purchasing adult content can carry significant social and legal risks.” So a new degree of anonymity speaks to some.

“The benefits of cryptocurrency for adult businesses are so great,” says Lisa Moore, vice president of VRPorn.com, that “we would love to go 100% crypto in the future.”

Despite the fact that these benefits have been clear to many in the adult and crypto worlds since the early days of Bitcoin, it makes sense that crypto initiatives in this sector are only coming into the spotlight or taking off now. Crypto systems, points out Alec Helmy, founder and publisher of the adult industry news site XBIZ, come with a steep learning curve for any industry. A lack of consumer knowledge of, or engagement with, these systems for much of the past decade limited the appeal of pushing past early adoption barriers. But, Moore notes, 2017 especially witnessed a massive uptick in consumer knowledge and use of, and hype surrounding, cryptocurrencies. “With widespread mainstream adoption reaching a fever pitch,” explains Corey Price, vice president of adult streaming behemoth Pornhub, “we thought it an appropriate time to penetrate the market and start accepting cryptocurrencies.”

Despite increasing popular engagement with and enthusiasm about cryptocurrencies, though, initiatives in the adult industry probably won’t take off in earnest any time soon—especially those like Vice Industry, VogoV, and WankCoin that hope to build wholly new crypto systems.

Cryptocurrencies are still, Maetnyi admits, confusing for many consumers, conceptually and practically. This may be an especially big problem in porn world, Hawkins points out, because, “while fans of adult content come in all ages, actual purchasers of adult content tend to be slightly older, and are more conservative with their purchases and with the technology they use.”

The new coin systems burbling up in the adult industry are especially complex, as most currently seem to require that users buy one type of established cryptocurrency first, then exchange it for their novel token, and store and use it in a specific fashion—a far less intuitive process than paying with a card.

“Any system that requires massive hurdles, validation, mysterious transactions and transaction fees, and the creation of new accounts,” argues Hawkins, “is dead on arrival” in most cases.

Coins in general, and especially new and small ones, are also notorious for their value volatility. Many fail quickly too, or vanish, sometimes after their inventors seemingly make off will all of early adopters’ hard assets. As Sol summarizes things: “There are a lot of shitcoins out there.”

“The average porn consumer,” she adds, “doesn’t want to read a whitepaper, and a forum, and some Medium articles just to judge the validity of a payment option.”

Promises of improved privacy alone probably can’t motivate consumers to overcome these barriers. As Hawkins notes, most “porn consumers are driven by impulse and immediacy,” rather than a careful consideration of their anonymity—beyond, say, entering a private web browsing mode. Some tech critics also argue that no coin truly offers the perfect anonymity some may seek.

The adult world’s new crypto platforms are experimenting with all manner of incentives for user adoption. VogoV and Vice Industry advertise discounts on content at some partner sites if users pay with tokens. (Some sites already offer discounts for users paying in established currencies like Bitcoin. Discounts, alongside privacy promises, ideally acts as incentives for people to move away from streaming free porn and towards actually buying high quality content.) SpankChain and VogoV stress the measures they are taking to control price fluctuations in their tokens. VogoV also claims that its coin users can contribute to the porn making process by regularly providing input on the kind of scenes they want to see and voting on which potential scripts they want the studio to produce. The company has a lottery active now too, which offers early adopters a chance to win an all-expenses-paid trip to Los Angeles to attend an adult industry party. Vice Industry even offers to pay users tokens for watching porn; WankCoin claims that it will do the same in the near future. (This may seem counterintuitive, but basically they think this will lead to deeper and longer user engagement with content, and allow them to generate robust data on viewer habits, creating real value that is worth paying for.)

Maetnyi also tells me VogoV is investing heavily in user interface and experience research to try to make onboarding intuitive for any consumer. SpankChain, Sol says, takes pains to create and promote educational content. Sex workers using their platform help educate users as well, she adds.

Still, these incentives may not be enough to draw users to new crypto platforms. “Until consumers are comfortable with a particular coin,” argues Hawkins, “there will be limited use.”

“In some ways, this mirrors the early days of internet payment processing,” he adds, “where consumers were very hesitant to enter credit card numbers. Where would they go? Who could track it? What would they get? It took a while for major payment processors to emerge,” and through their size and partnerships to earn legitimacy in the eyes of consumers.

Established porn companies may be hesitant to lend legitimacy to new adult crypto systems via adoption or partnerships as well, limiting their ability to become ubiquitous and trusted payment infrastructures.

Granted, all these new initiatives have already built partnerships with at least a few adult sites or networks, although some of them are not exactly prominent industry actors. SpankChain and VogoV work openly and prominently with major figures in the adult industry as well, who can not only market systems to fans, but help position coins to make their cases for partnerships. And Vice Industry’s “we’ll pay you to watch porn” pitch has generated gobs of mainstream press attention, much of it fairly positive.

New adult-focused crypto platforms also make some strong business arguments for partnerships. Vice Industry’s promise of rich new data and better consumer engagement may be especially enticing—although one has to wonder about the value of data or engagement generated via a reward system that seems so gameable. (Vice Industry did not respond to a request for comment.)

Competition won’t be a huge problem for these platforms, as (in theory) they can all co-exist within the same industry. Most seem to plan to eventually accept not just their own tokens, but a wide variety on their platforms, perhaps including each other’s. Eventually, they could all become ubiquitous. Helmy likens this to the many equally viable and accepted credit card payment companies in the world today.

But, Maetnyi acknowledges, “most existing adult industry token projects will die,” whether due to flaws in their underlying models or due to their failure to build a broad enough usage ecosystem early on.

The perks these new systems offer may not be enough to garner a critical mass of partnerships for functional growth, utility, and legitimization. Most of these systems have faced a few hitches in their early days as well: SpankChain reportedly recently dealt with a hacking incident. Sol tells me a firm just declined to do a security audit for them “because of ‘optics.’” And this summer, Playboy TV sued the party that was supposed to make Vice Industry Tokens work on their site, alleging the company had failed to deliver. Given the false starts of earlier attempts at building adult industry crypto systems, and widespread skepticism about fly-by-night operations in the crypto world, any early foibles, even entirely understandable and forgivable ones, could generate skepticism.

Although startups like VogoV aim to partner with hundreds of porn sites and become ubiquitous and trusted within the next year, VRPorn’s Moore argues that most emerging porn-focused coin systems “have almost no traction whatsoever.” She believes that established tokens, like Bitcoin, will probably become the dominant crypto forces in the adult industry. Even if they are still somewhat volatile and don’t speak as explicitly to the needs of the adult industry, they similarly offer more efficient payments and new levels of consumer privacy. They also have larger and more active user bases and established payment systems and are easier to acquire for crypto novices by far.

“I’m not sure why a payment system intended for porn would be chosen over a more mainstream coin,” she adds. “But maybe one of these projects will find a clever way to succeed.”

Regardless of which types of tokens die or gain traction in the adult industry, though, Moore and others are convinced that crypto will slowly proliferate in the adult world as payment systems overall gradually grow better known, more widely used, and more intuitive.

“Many of the technologies that we take for granted in adult today took years before they gained mainstream acceptance,” notes Hawkins. “When we think of the internet revolutionizing adult content, it actually took nearly a decade before it became the default point of consumption.”

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