Micropayments, redux

[David Wagner]

Ed Gerck  wrote:
>1. If there is no limit, then the well-known doubling
>strategy would allow the user to, eventually, make the
>bank lose -- the user getting a net profit.

I think you misunderstand the nature of the martingale strategy.
It's not a good way to win in Las Vegas, and it's not a good way to
win here, either.  Anyway, even if it were a problem, there would
be lots of ways to prevent this strategy in a digital cash system.

>2. If there is no prepaid amount, lucky users could quit
>"while ahead" -- which would hurt the bank since those
>users would be out of the pool to be charged, but they
>have used the service.

No problem.  This is expected to be roughly counterbalanced by the
number of unlucky users who quite "while behind".

>Another question, which answer I guess is more
>market-related than crypto-related, is whether banks
>will accept the liability of a losing streak ...for them.
>[...] The problem here
>is that, all things being fair, the system depends on
>unlimited time to average things out.

No, it doesn't.  It doesn't take unlimited time for lottery-based
payment schemes to average out; finite time suffices to get the
schemes to average out to within any desired error ratio.  The
expected risk-to-revenue ratio goes down like 1/sqrt(N), where N
is the number of transactions.  Consequently, it's easy for banks
to ensure that the system will adequately protect their interests.

And everything is eminently predictable.  Suppose the banks expect
to do a 10^8 transactions, each worth $0.01.  Then their expected
intake is $1 million, plus or minus maybe $1000 or so (the latter
depends slightly on the exact parameter choices).  Any rational
bank ought to be willing to absorb a few thousand in plus or minus,
at this level of business.

In short: I think your list of "problems" in the approach are not
actually problematic in practice.

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