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Micropayment Wars Are Over... PayPal Wins?
Snocone writes "Cringely's latest column asserts that PayPal is now sufficiently dominant that it is pretty well certain to achieve de facto standard for micropayments over the net. Goes into the history of PayPal and why their model works where no one else's has. Even if you don't agree with him, there's some good insights into digital currency infrastructure to be found here." I now use paypal to pay my girlfriend back when she picks up dinner and my roommate pays his share of the rent using PayPal. Its great... although with the $5 they pay in referrals, plus the $5 they pay to new users, ya gotta wonder ... (if anyone wants to use me as their referral, thats cool *grin*). its actually making the Tipping Jar concept practically feasible. I mean, can I tip artists a few bucks when I enjoy their MP3? Can I tip a few bucks when I enjoy reading someone's website? The potential to change a lot of things is within reach.
PayPal has essentially none of the cool features considered desirable for a cryptographic cash protocol, so there's still plenty of room for competition based on better technology. Check out the Lucre home page for details of a (seemingly) patent-free system for providing untraceable electronic cash.
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Xenu loves you!
The way to deal with Tip Inflation is to opt out of it. I tip 10%-20% at restaurants depending on service, and for service that was actively bad, I leave an insulting trifle.
I tip for every personal service that I receive. Cab rides, pizza deliveries, restaurant service, lap dances, and full-service fueling. Failure to do so would feel rude - unless my server was incompetent.
-- Jeff Paulsen
You mean I can't use pay pal to pay you $.01?
Gold in this context is a currency, like any other, except that its value relative to other currencies isn't easily under the control of any one government - rather, it's manipulable by _many_ entities (note what happens when, for example, a large central bank announces it's going to be selling part of its gold reserves).
:-) - finding a comparable chart for USD inflation is left as an exercise for the reader - but note that USD inflation peaked during the periods between points 3 and 5 on the graph - coincident with a spectacular decline in the gold price. Gold was US$296 in 6/1982 (in 1982 dollars). It's slightly under that now I think. That's in 2000 dollars. What was that about inflation again?
It's not subject to inflation per se - but in a world of multiple, competing currencies, in which few things people are interested in buying are priced in gold, it's hardly a rock solid store of real-world value. Look at, say, this chart, best I could come up with in 10 seconds on Google
In an environment where gold (or some other designated commodity) were the standard currency that everyone used, e-gold might make sense. But as things stand now, where everything you want to buy is priced in dollars (or Euro or pounds or yen etc.), the friction of buying and selling e-gold and the metal storage costs make e-gold impractical.. and the stuff about gold being a valid inflation hedge and it not being subject to government manipulation is IMO hooey (see above).
I was talking about this with people at a conference I was at earlier this year... as I recall, I think what I said was e-gold would make more sense if the e-gold marketplace itself were open - so that the buying, selling, and storage or metal was handled by multiple competing companies, rather than the one gold firm that was behind e-gold. I can't check the site to see if the market has been opened up - I doubt it given the absurd spreads they were charging. With real competition spreads (the difference between buy and sell) might go down and using e-gold as an exchange medium behind real-world transactions would start to make sense. I still wouldn't use it unless there was a way to, say, earn interest on my idle cash, er, gold, and do other things I can normally and easily do with dollars. 'Till then, I think it's just for the gold bugs.
There is, or used to be, a great, and active, discussion section on e-gold over at Free-Market Net.
http://www.privatebuy.com/ from ecount.
This looked great right up until I got to the part where you can only load your account using an existing credit card.
Somebody else in this thread mentioned that one thing that holds back anonymous payment methods is that they could be used for money laundering, and I have to begrudgingly admit that that's a valid point. Even with limits such as those established by privatebuy ($500 worth of transactions per day, no more than $1000 in your account at one time), somebody could still hack a system where money was chanelled through a large number of accounts under different names. After all, the crime syndicates of the U.S. Government and credit card companies do need to protect their interests against the machinations of lesser crime syndicates.
For anyone who hasn't seen it, Neal Stephenson's short story The Great Simoleon Caper is an entertaining, thought-provoking look at the topic of anonymous e-cash.
So far, all of the online payment systems I've seen, including Paypal and Yahoo's payment service, are lacking in at least two areas:
What I would really like to see is a payment system where, as a user, I could set up an anonymous account and send the company a money order along with a note to "please deposit in account XYZ123". I would then have that much money to spend online. The payment company would collect a 1% service charge on everything I purchased, and all transactions are guaranteed to be as anonymous as practically possible (i.e. they would only collect enough data to prevent fraud and abuses, and never to share the data or use it commercially). People who wanted to receive payments through the service would have to identify themselves, of course.
Does anyone know if there is anything like this already in existance? Would you use it if it were available?
"Soon" has been quite a few months now..
Adam
Inexchange costs: somewhat painful. As for outexchange, the SOP is to calculate payments as the amount that could be outexchanged, so it makes more sense to look at all the exchange costs as inexchange costs. But re. storage: 1% per year? That's nothing. Your money shouldn't be sitting there that long anyway.
:) ).
All in all, if you're careful and willing to wait a while for your deposit to get in, you'll lose maybe 5-7% between putting money in and getting money out. The nice thing is that 5-7% holds no matter whether you're transferring pennies or thousands. Of course, that's assuming the precious metal market doesn't go nuts (of course it could go either way, but in the long term... well, asteroid mining can't help the price of gold much). Also, if you're in a rush, or you're lazy about shopping around, you can expect to lose closer to 15% through the transfer. Ironically, the best combination of price and convenience comes from funding your e-gold account with PayPal!
I think it's a pretty good deal if you want to send nickels and dimes all over the place, and you never keep more money in it than you are willing to lose. I think a fair assumption of risk is that your account will zero once every 2 years (yes, I pulled that number out of my hat; more below), at least unless they make some major changes to their security model. No big deal for a micropayment account, as long as you keep it in mind.
Obviously, I don't think much of the security. You have to remember that these people don't know you. With a bank, you go and create an account face-to-face, they have all sorts of nice meatspace backups and redundancies to make sure you are you when you go in to do something with your money. With something like e-gold, if you have the password, you must be the right person, and your account can be emptied, laundered through an anonymous e-cash system like digigold, and safely in the account of the thief in an eyeblink. You might be able to get your money back, but only if you could prove you didn't transfer it.
I also don't like the way they've eroded the legal foundation of e-gold. They keep talking about replacing the user contract, and they've got a clause which allows them to make any changes if you don't object within a week of them posting it on their website... whether you read it or not within that time. They made a big deal about the "unconditional right of redemption", which was your only last-ditch guarantee: if everything goes wrong, you can always have the metal in your account (having the cash value sent to you is not a guaranteed service; they have no contractual obligation to provide any service but that of returning your gold). In the proposed changes to the contract, they changed it to "conditional right of redemption", and they only have to give you your gold in neat bar-sized increments. Since a gold bar is worth something in the region of a year's pay, obviously this isn't a lot of help to the typical user. In the past, they dealt in coins, right down to silver coins worth under $20, so you could redeem practically any account. If the system ever becomes so insecure that everyone wants out, and nobody wants any e-gold, there's no guarantee that you'll get your money out. Basically, under the new plan, the emergency escape clause only works as long as there isn't any emergency.
It isn't secure, it isn't terribly convenient, and it isn't really cheap, but it works, it works all over the world, and it works now (that is, at least when the servers are up
Here's an e-gold discussion forum that goes way back. It covers the good, the bad, and the ugly of e-gold, with tasty sprinklings of marketroidese and paranoid ranting.
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Comment removed based on user account deletion
~d
Micropayments involve incredibly small amounts of value. How much does a single HTTP request for 20K of data cost? We're talking about thousandths to millionths of a cent here. The smallest transaction you can make with PayPal is one cent.
As others have mentioned, you can't use PayPal outside of the US...
Mojo Nation is trying to create a mircopayment "barter system" backed in disk space, CPU, and bandwidth. It's bootstrapping the process with a distributed filesystem. You exchange your system resources for "Mojo" which you can exchange with other people consuming their resources (i.e. for downloading data from them). A single Mojo represents an incredibly small amount of value. In the long term we hope that Mojo will float on it's own and people will buy and sell it (possibly by using PayPal for settlement). We also hope people will build other services and charge Mojo.
Check it out, it's really cool, Mojo Nation.
Burris
(from PayPal's website):
/dev/null ?
The recipient gets an email that says "You've Got Cash!"
Do they really expect people not to dump such an Email directly to
The net has over 100 million users, the big three credit card companies have nearly a combined billion cardholders, yet according to Cringely the 3.3 million customers of PayPal makes them "unassailable".
In fact, I'd say that 3.3 million users is a very small set of net users, and that the real challenge is to reach those who are not geeks nor addicted to online auctions.
This may be changing as their culture becomes increasingly Westernized, but I wonder how many other parts of the world have never really included tipping as a part of their heritage.
It sounds like a great service -- except where do I use it? I don't give money to friends that often.
I mean, I want micropayments for online web sites. It doesn't look like this has made any penetration into that market. According to the PayPal web site, eBay is accepting PayPal, but I haven't seen it anywhere else.
Apparently there are 3.3 million customers -- that have signed up to get a free $5. The float is $40M. That's only $12/person. That doesn't sound like it's getting a lot of "real" use to me.
On another subject, I remember that there was a guy in the early digital cash space that was trying to create anonymous digital cash. He considered it important from a privacy standpoint that digital cash should be untraceable, just like regular cash. I would imagine PayPal is not that, but does anyone know what happened to that guy or what happened with his technology?
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Sometimes it's best to just let stupid people be stupid.
Before PayPal goes global, it has to figure out a good way of transferring funds to and from the users. This is a key problem that needs to be solved. Checks are totally out of the question globally, as well as credit cards to some extent. Virtually everyone in the States has a credit card, and they are easy to get. However, this is not the case worldwide, especially among teenagers and young adults, which I suppose are a key group for PayPal.
Online banking and money transferring in general varies a lot between different countries. Being a Finn, the primitive system of the States sometimes amuses me.
Here in Finland online banking has been available for over 15 years. Today, over 50 percent of the country's internet users use online banking. Nobody uses checks. I doubt they even exist in this country.
As far as domestic e-commerce is concerned, nobody uses credit cards. We have several payment options, one of which is an advanced money-transfer system. It basically is a normal online money transfer from one account to another, but allows the retailer to verify the transfer automatically, instantly.
What I'm trying to say is that PayPal has a long way to go to make it globally.
Give me a payment system, preferably anonymous, which doesn't claim the right to change the terms I've "agreed" to (using that term loosely) whenever they wish to, and I'm interested. Alternatively, how about I make the agreement subject to modifications documented on my web site and e-gold gets 10 days to dispute them.
My intent isn't to pick on e-gold, but on this practice in general. "I agree to $foo, $bar, and $baz, but you can change them any time you want." Why do you accept this?
Just to let everyone know. The reason PayPal is giving away $5 to each new user is because they make more than $5 on the balance left in your PayPal account.
It very similar to the way American Express makes a fortune on their travelers checks. All those unused travlers checks out there = $$$ in AMEX's pocket which it can invest to make more $$$.
Not that travelers checks/paypal are bad. They both make it more secure to make transactions in unfamilar environments.
My advice is to transfer your $$$ out of your account ASAP and for you to make the $$$ not them.
Cash in those unused travlers checks also!
That is all -click!-
-"The early bird catches the worm, but the late bird sleeps the most"
e-gold is still alive and kicking. (There's a refer(r)er-id in that link, if you don't want it chop it off. You have been warned.
But on the subject: e-gold is managing fine, and at least they don't have problems with people not from the US.
Within Norway, you can wire money to anybody with a bank account, regardless of which bank I, or they, use. To pay bills, I go online to my bank's Internet service, enter the account number of the person to transfer to, the amount, and the date at which the transaction should execute. Setting up recurring payments is also possible. Transferring between countries is also quite simple using the SWIFT system.
Now, I can appreciate why PayPal appeals to Americans, if only as a temporary stopgap until all your banks allow sending money to each other. In the meantime, my American friends keep "writing checks". Sheesh. Welcome to the future, guys :)
(I once cashed an American check in my home country. It took one month to clear, and the intermediates took a huge bite out of the total amount. Next time I used SWIFT and it took three days and the money were more or less intact.)
As an aside, PayPal only works with American credit cards. I am currently in the US, and in a recent eBay payment my Norwegian credit card was rejected because they could not verify the billing address (and there was no country field available for the billing address). I have also totally failed to buy stuff from MassMerchandise, where they consider my Norwegian email address to be "high risk" (duh!) and their billing-address verification system has problems even verifying American cards.
That's what paypal's for. Not the huge stuff where you NEED a non-performance garauntee. There are other safeguards in place to make sure your eBay product works (eg, the eBay feedback system). For the big stuff, I'll still use plastic, ThankYouVeryMuch.
And about paypal stealing your money once you give it to them: if too many people complained about this (in other words, if they did it often enough to make it worth their while), there would be an uproar and they wouldn't stay the "de facto standard" for very long. There are still alternatives...
The interesting thing about PayPal is that it allows you to get cash from a credit card, but the transaction isn't treated as a cash advance. Generally, credit card merchant agreements don't allow the merchant to sell cash charged to a credit card; the potential for fraud is too great. I'm not sure how PayPal got around this.
Micropayments are a non-starter. All the enthusiasm for micropayments comes from people who want to collect them, not from people who want to pay them. Micropayments are the past; flat-rate is the present. Remember when AOL and Prodigy charged by the hour?
Have you ever worked as a waiter? Well, neither have I, but "lots of my friends" have and do. And let me tell you, they get paid shit for a shit job which very few people appreciate. Like a Systems Administrator, people only notice you when something is wrong (Or when you have a nice ass, granted.) It's a lousy job. Give 'em a buck or two.
You try working for minimum wage, and see how you like it. Especially for a job as thankless as that one. Service charges, BTW, are generally only added when you have a large party. I personally disagree with them, and if I'm with a large party and get bad service, I'll do the math to remove it from the bill. You don't tip someone if they do a bad job. That's totally reasonable.
You are such a troll. BK employees aren't even allowed to receive tips. Tipping is a way to show someone who is doing a lousy job that you appreciate their efforts to make your dining experience pleasant and trouble-free.
Apparently, so is correct grammar. In any case, there's no law that says you must tip fifteen percent. Tip what you can afford. If you truly cannot afford to tip, then I hereby postulate that you cannot afford to eat out. Stay home and cook something.
"You're right," Fisheye says. "I should have set it on 'whip' or 'chop.'"
Palmpal was very good. They even used to offer a means of paying other people or transferrinf money to others right through your PalmOS PDA. That was excellent until they cancelled it. This was an excellent system. I'm not saying it's not great right now, but the ability to use a PDA for paying was amazing. Can you imagine being at the store, taking out your PDA, aiming at an IR port, and then paying? I for one, would love that.
It's too bad PayPal got rid of this, because with this they could have continued being at the front of innovative payment technology.
At least, that's where I was putting my money.
Paypal is a great system, of course, this is in theory, since it is currently not possible to use it in Canada. So, basically, I can't use it. For that matter neither can a European, Asian, or anyone else. I think it's a little presumptuous to assume that the success of Paypal in the US is any indicator of whether this is actually useful in the real world. By that, I mean, the entire world.
----------------- "I have a bone to pick, and a few to break." - Refused -------------------
I threw up a 50 cent donation link on the AOLiza site a few days ago and I've already gotten a good response. A few people decided to 'buy' multiple donations, upping the donation.
It makes me feel a lot better than throwing up a stupid banner on every page just to get some money. Apparently it makes my visitors feel better too.
Paypal rocks, though I'm really disappointed that they dropped support for the Palm...
Kevin Fox
Kevin Fox
It seems to me that the problem with previous micropayment schemes was not the scheme itself, but that there was never a situation in which the convenience of using the system outweighed the risks associated with trusting an outside party with your money and transactions.
eBay provided the fluid marketplace that created the situation where that convenience overrode the inherent mistrust of a newcomer like PayPal.
eBay brought the idea of the auction as a sales model to the forefront of the net, they also pioneered community based trust mechanisms that let their model survive even though they don't back transactions directly (something that would have quickly invalidated their business model).
What was supposed to be a concept that allowed high-brow concepts like online media micropayments seems to have come about largely because of the requirements of some people to sell $5 pens and beany babies.
Probably important not to forget that no matter how large the venture capital some firm gets to change the internet, most likely it won't succeed unless we decide it will.
I started out to register at PayPal, but because this was actual money we're talking about here, I took the time to read the agreement.
Bah! Feh!
If you use a credit card to pay for goods and services, you have the right to withhold payment for non-performance. The issuing bank charges back to the vendor in such cases.
You give that up with PayPal.
There's this long paragraph about reversing charges. In the event that you reverse a charge, you authorize them to turn around and re-charge your card. As many times as you reverse the charge, they'll put it back on.
Once you give money to PayPal you'll never see it again unless and until you sue them.
The reason why shareware thus far hasn't been wildly successful for generating revenue for the authors (clearly it provides other value, otherwise people wouldn't continue to make share ware or even open source software) is the barrier to payment. It is relatively easy to leave money for a waiter or toss some money in a street performers hat but it is much more difficult to write a check and put it in an envelope and mail it, or call a number and read off a credit card. When tipping becomes as simple as clicking a button on your MP3 player while it's playing a song that you like, tipping will become a viable revenue model for artists and other information publishers on the 'Net.
Burris
Sure, I own some CD's that I love so much I would have paid $50 for them. A tip system would be great to show my gratitude to the artist. And as the poster wrote, there are some personal websites that had me ROTFLMAO or greatly influenced me as a web developer and designer. I would love to send them $5 and say "Thanks! Have a beer on me."
That said, I wonder how long it will go on before things we used to do for pleasure and personal edification are motivated by the prospect of being micropaid for it. Art by the amateur has always been done for the love of producing art - it freaks me out a bit to think that amateur art may now be done for micropayments. Obviously, that's not the sole reason it's done but it could certainly be a motivator now. As an example, most /.ers participate because they enjoy participating but, be honest now, karma is definately a motivator, right? And what is karma? An abstract point system for quality posts - it doesn't really do anything but make you feel good. Now imagine if karma were micropayments - even more incentive right?
I guess I'm just wondering if micropayments will devalue the intrinsic good of things like art. I pull off and help someone change their flat tire or return a lost wallet to contribute good to the world, not b/c I'm hoping for compensation. A "Thanks a lot" is the only compensation I want. And while this may be extreme, it's possible these things could be motivated by the micropayment.
"Hey, nice shoes!"
"Thanks, here's a $1 micropayment!"
I realize that is a silly example but it helps to illustrate the possible trend towards money being the sole motivator and compensator for everything. I remember reading an article a while back about sites like Epinions and "expert" sites. They explored why people would devote large amounts of time to writing reviews and answering questions for complete strangers. The short answer was "egoboo" or ego boosts that came from being positively rated as a reviewer. But it made me proud that these sites went counter to the idea of the net being a commercial medium, like the corps view it. I was proud to be involved with a medium that is about free exchange of information and assistance with the motivation being the virtue of helping someone else out without compensation. I just wonder if micropayments for everything will threaten that notion.
Sorry to play devil's advocate but I have only read about how wonderful a micropayment system will be in light of the whole Napster fiasco. I've just been waiting for the other shoe to drop...
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We want some answers and all that we get
Some kind of shit about a terrorist threat
- Ministry