Ars Technica: A penny for your bits: micropayments to make a comeback?

R. A. Hettinga rah at
Tue Nov 18 19:15:34 EST 2003

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Ars Technica Newsdesk

A penny for your bits: micropayments to make a comeback?

Posted 11/18/2003 @ 3:41 PM, by Elle Cayabyab

Remember DigiCash? Did you have Flooz gift certificates or earn Beenz by
shopping online? The e-payment startups of the dot-com boom are no longer
around, driven out of the Internet payments business by companies and
consumers that expected Web content to be free, and the costs associated
with processing micropayments. Times have changed, and with the success of
Apple's iTunes Music Store, micropayments are poised to return to
e-commerce in a big way. With companies likePeppercoin already in the beta
stages of providing these services to content providers as diverse as
comics, music, and art, micropayments are back, and its backers hope it's
here to stay.

"The key is timing and technology," says payment clearinghouse overseer Ron
Rivest, who thinks Peppercoin has both right. The company's technical
credibility, at least, is not an issue. Rivest coinvented the RSA
public-key encryption system, used by Web browsers to make credit card
purchases secure. Micali holds more than 20 patents on data security
technologies and won the 1993 G? Prize, the highest award in theoretical
computer science. Their system uses statistics and encryption to overcome
profit-erasing transaction fees; the approach is unique and more efficient
than its predecessors.

The user interfaces are deceptively simple; in Peppercoin's instance, one
simply has to click an icon to charge an item to their account. Behind the
scenes, the action gets a little more complicated. Some services deduct
purchases from a prepaid account while others deliver content and charge
later, e.g., in batches. The difference between the dot-com darlings and
today's companies is in its currency; where Flooz and Beenz used a points
system to track charges, companies like Peppercoin and BitPass use dollars
and cents to state prices, easing the user experience.

Despite skepticism about the viability of micropayments, one has but to
look overseas to see how it has transformed e-commerce. In Japan, the bulk
of mobile content and services are sold by the download. Firstgate
Internet's partnership with clients such as British Telecommunications
brings in more than $1 million in revenue monthly. Proponents of the
technology see a clear path to adoption. Paypal's Max Levchin is quick to
note that companies only need to figure out how best to reach the critical
mass they will need to succeed past their rollout phases. Who knows - maybe
you'll see Ars selling PDFs by the article soon.

R. A. Hettinga <mailto: rah at>
The Internet Bearer Underwriting Corporation <>
44 Farquhar Street, Boston, MA 02131 USA
"... however it may deserve respect for its usefulness and antiquity,
[predicting the end of the world] has not been found agreeable to
experience." -- Edward Gibbon, 'Decline and Fall of the Roman Empire'

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