Ron Rivest Suggests Probability-Based Micropayments

Karl J. Smith writes "Rivest has solved the micropayments problem with encryption and statistics. You throw away some transactions so that you don't have to pay bank fees, and process the rest. Hiawatha Bray has written an article and Rivest's new company is PepperCoin."

Comments

Re:Why randomize?

[JaredOfEuropa]

Not so, the customer is always charged the $0,50 (in this example). It is the shopowner who will get $10 or nothing. If he sells a lot of items, probability dictates that his average take will still be around $0,50 per item.

I suspect that on the customer's end they will solve the micropayment problem by forcing the customer to deposit a minimum amount (say $10) into his Peppercoin account, rather than charging every nickel and dime he spends separately. The customers will not mind if they expect to be able to spend these Peppercoins on many goods and services. Thst is where the chicken&egg problem comes in: if there are only a few sites accepting these coins initially, no one will want to depost the minimum $10 to activate his account.

Small sample statistics problem?

[Kaz Riprock]

What about the retailer that doesn't do a heavy volume of business through PepperCoin?

For example, if it's a 50/50 probability that a given coin is worth High or Low and you flip that coin 100,000 times, then within a minimal error, the coin will be 50,000 High/50,000 Low. But what about a retailer that only does 1000 or 500 or *less* per month.

Then, add on the fact that the PepperCoins being discussed aren't necessarily 50/50 but sound more like 5/95 or 1/99. If you closely examine any 500 of those 100,000 tosses earlier, you can probably find quite a few runs of 500 lows or more in a row. Suddenly, there are whole months that a retailer is going without payment to wait for that one time when they get compensated waaaay down the line. It seems a feast-or-famine proposal for the smaller retailer.