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Micropayments. Presented by Anthony Wood To CRAB, March 2, 2004. Some Quotes. “Micropayment technology in and of itself is about as interesting as new and improved dish soap.” Mike Gaynor, founder of RedPaper

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micropayments

Micropayments

Presented by Anthony Wood

To CRAB, March 2, 2004

some quotes
Some Quotes
  • “Micropayment technology in and of itself is about as interesting as new and improved dish soap.” Mike Gaynor, founder of RedPaper
  • “Users should be willing to pay, say, one cent per Web page in return for getting quality content and an optimal user experience with less intrusive ads.” Jakob Nielsen
  • “[I]n many ways, theft is the unspoken inspiration for micropayment systems.” Clay Shirky
outline
Outline
  • Micropayments
  • A Littered Landscape
  • Current Schemes
  • Coin-flipping
  • Rhetoric
micropayments4
Micropayments
  • Means of making money (or at least recovering costs) from online content
  • Low prices (< $1), high volume (hopefully)
  • Alternative to subscriptions, aggregations
  • Allows customer to quickly purchase only what she is interested in
  • Moves content creators closer to consumers
motivation
Motivation
  • Even free online content costs something
  • Currently funded by:
    • Advertisements (banners, popups, sponsorships)
    • Subsidies
    • Good-will of content creators
  • Using CCs invokes high transaction costs
  • Prevent Spam? DoS attack?
history
History
  • Digital Silk Road (Hardy, Tribble, 1993)
    • Include “coins” in packets
  • Millicent, NetBill, NetCard,PayWord,MicroMint,DigiCash, E-Money,E-Coin …
  • Biggest losers to date: venture capitalists
  • Continuum from tiny, per-packet schemes to “normal” online banking (EFT, credit-cards, etc)
  • Current focus is on small—not tiny—bank-mediated access control for WWW
design considerations
Design Considerations
  • Double-spending or forgery of “coin”
  • Mediated online transactions, or offline cash alternative
  • Availability of online principals
  • Converting “coin” to real money
  • Overhead of each purchase
  • Necessity of custom software
  • “Try before you buy”
  • Handling fraud, chargebacks
  • Does user buy content, or only viewing rights?
current schemes
Current Schemes
  • Peppercoin
    • Bills customer’s CC periodically
  • Paystone
    • Like bank account
  • BitPass
    • Like debit card
    • Anonymous
peppercoin
Peppercoin
  • Founded by Rivest and Micali
  • Merchant fees: 5-10%
  • Merchant uses PepperMill (Java app) to encrypt/enclose content in PepperBoxes
  • Customers install PepperPanel
  • Purchaser downloads PepperBox, pays using PepperPanel, decrypts contents
  • Peppercoin pays merchant probabilistically on some transactions
  • Peppercoin charges customer’s CC monthly
paystone
Paystone
  • Merchant fees:
    • 10 cents + 5% under $5 (25 cents minimum)
    • 30 cents + 3% over $5
  • Customers load account with money
    • Can walk into Bank of America branch
  • Merchants create “paylinks” to PayStone, including encrypted return URL
  • Purchaser follows paylink, enters email/password, redirected back to content
  • No software installed
bitpass
BitPass
  • Founded by 2 Stanford grad students
  • Merchant Fees:
    • 15% under $5 (1 cent minimum)
    • 50 cents + 5% over $5
  • Customer loads account by PayPal, CC
  • Follow link to BitPass, authorize payment, redirected back to seller
  • Seller installs “gateway” to control access
    • PHP, Perl CGI, mod_perl, ASP.net
coin flipping
Coin-flipping
  • Probabilistic payment scheme
    • E.g., with probability 1/200, user pays larger amount; otherwise, access is free
    • Expected payment is therefore small negotiated amount
  • Principals: User, Vendor, Bank
  • Goals: efficiency, fairness, authentication
  • Process:
    • Pre-processing
    • Coin-flip rounds
pre processing stage
Pre-processing Stage
  • Vendor creates one-way chain
    • y = f(f(f( … (x))))
  • Vendor sends y and proof of x to User
  • User verifies proof of x
  • User creates its own one-way chain
    • y’ = f(f(f( … (x’))))
  • User sends (y, y’) and signature to Vendor
  • User sends proof of x’ to Vendor
  • Vendor verifies proof of x’ and signature
pre processing stage14
Pre-processing Stage
  • User has:
    • Own chain: y, …, x2, x1, x
    • Vendor pre-image: y’
  • Vendor has:
    • Own chain: y’, …, x’2, x’1, x’
    • User pre-image: y
    • User signature of (y, y’)
coin flip round
Coin-Flip Round
  • User reveals next pre-image in y’ chain
  • Vendor reveals next pre-image in y chain
  • XOR of pre-image bits defines coin-flip
  • If User refuses to pay, Vendor takes (y, y’), signature, and transaction record to third-party
coin flip round16
Coin-Flip Round
  • U -> V: x4
    • Vendor now knows flip-result
    • If User knew, she could abort protocol and not pay (if bad flip)
  • V-> U: x’4
  • Both can verify that xi+1 = f(xi)
  • Flip = x4 XOR x’4 (suitably biased)
arguments for
Arguments For
  • Those who pay, control content
    • Micropayments align content providers interests with consumers
  • Electricity and long-distance both meter usage and are successful
    • For small amounts, users don’t stress about cost
  • Subscriptions force all/nothing decisions in advance of viewing
arguments for18
Arguments For
  • Subscriptions wall-off from linking, browsing, and spidering
  • Art is not a commodity than can be replaced by free alternatives
    • (Buy McCloud’s comic strip)
  • iTunes and PayPal are not far from micropayments
arguments against
Arguments Against

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arguments against20
Arguments Against
  • Littered landscape of failed companies
  • Flat-fee schemes are more successful
    • Metered charging is successful only for monopolies
  • Very small transactions can be very hard to value
    • How much is half of one Wired article worth?
  • Existing payment infrastructure is becoming more flexible
arguments against21
Arguments Against
  • Aggregation smooths variability in content, and is more efficient
  • Mental transaction costs make deciding to buy more expensive than item being purchased
  • Viewers can always find something else for free
questions
Questions
  • How much is this presentation worth? The entire seminar? A UVA education?
  • Have you purchased an item for less than $1 online?
  • If user does not have to explicitly decide when to purchase, how does he prevent fraud?
  • Are micropayments a solution to a non-existent problem?