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Micropayments Presented by Anthony Wood To CRAB, March 2, 2004.

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Presentation on theme: "Micropayments Presented by Anthony Wood To CRAB, March 2, 2004."— Presentation transcript:

1 Micropayments Presented by Anthony Wood To CRAB, March 2, 2004

2 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 3 Outline  Micropayments  A Littered Landscape  Current Schemes  Coin-flipping  Rhetoric

4 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 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 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 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 8 Current Schemes  Peppercoin  Bills customer’s CC periodically  Paystone  Like bank account  BitPass  Like debit card  Anonymous

9 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 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 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 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 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 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 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 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 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 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 19 Arguments Against To continue, click here to contribute here $0.50 to the presenter

20 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 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 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?


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