Presentation on theme: "Micropayments Presented by Anthony Wood To CRAB, March 2, 2004."— Presentation transcript:
Micropayments Presented by Anthony Wood To CRAB, March 2, 2004
2 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
3 Outline Micropayments A Littered Landscape Current Schemes Coin-flipping Rhetoric
4 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
5 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?
6 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
7 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?
8 Current Schemes Peppercoin Bills customer’s CC periodically Paystone Like bank account BitPass Like debit card Anonymous
9 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
10 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 /password, redirected back to content No software installed
11 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
12 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
13 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
14 Pre-processing Stage User has: Own chain: y, …, x 2, x 1, x Vendor pre-image: y’ Vendor has: Own chain: y’, …, x’ 2, x’ 1, x’ User pre-image: y User signature of (y, y’)
15 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
16 Coin-Flip Round U -> V: x 4 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 x i+1 = f(x i ) Flip = x 4 XOR x’ 4 (suitably biased)
17 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
18 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
19 Arguments Against To continue, click here to contribute here $0.50 to the presenter
20 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
21 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
22 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?