From: "Vladimir Z. Nuri" <vznuri@netcom.com>
Date: Fri, 7 Jun 1996 21:25:29 +0800
To: szabo@netcom.com (Nick Szabo)
Subject: Re: Micropayments: myth?
In-Reply-To: <199606060257.TAA16018@netcom.netcom.com>
Message-ID: <199606061924.MAA10732@netcom10.netcom.com>
MIME-Version: 1.0
Content-Type: text/plain



I believe that micropayments will revolutionize business
transactions, and that they are entirely feasible, and have
written on the subject on cpunks intermittently. NS starts
out with some opposite assumptions, which I don't really
think are entirely plausible.

>Consider a feature fairly independent of the particular payment system: 
>the statement of charges.  Here lies a tradeoff here between completeness 
>and complexity.   On the one hand, merely summarizing charges creates 
>the opportunity for salami frauds, allowing widely distributed false or 
>exaggerated microcharges to go undetected.  Furthermore, parties reading 
>only the summaries get no feedback by which they can adjust their behavior
>to minimize costs.

dunno what you are talking about here. with micropayments, why would
you necessarily have statements? you're using an old billing model
on a new paradigm. please establish a *context*. it would be ridiculous
if people submitted "microbills" to companies that responded with
"micropayments". that's the wrong model.

here's how people are talking about micropayments. imagine that
you see a link with a little 5c sign next to it. that means when
you click on it, you are automatically debited 5c. your own browser
can handle keeping your own records. the transaction occurs when
you hit the button. the idea of a bill being submitted, that you seem to
be suggesting with your idea, doesn't make sense. another example:
downloading an FTP file.  the whole idea of billing is thrown away
in favor of immediate processing.

  On the other hand, a statement too complex to
>be easily read also allows fraud, error, and inefficient usage to 
>go unrecognized, because one or both parties cannot understand the 
>rationale for the charges in relation to the presumed agreement on
>terms of service and payment. 

again, this doesn't make sense at all to me. "statements, bills, 
summaries"-- these are all things you require for larger size
transactions. if after a day of net surfing I have spent $3.16,
and my browser kept a record of every case where I paid it out,
what's the problem? the browser does not pay unless I click somewhere.
nobody submits bills to my browser.  all actions are initiated by
me.

>There seems to lie here a fundamental cognitive bottleneck, creating a
>limit to the granularity of billable transaction size whether electronic
>or physical.

"fundamental cognnitive bottleneck"?? not in my brain. perhaps you
should check your own equipment <g>

  One proposed solution to this has been "intelligent 
>agents".  But since these agents are programmed remotely, not by the 
>consumer, it is difficult for the consumer to determine whether the agent
>is acting the consumers' best interests, or in the best interests
>of the counterparty -- perhaps, necessarily, at least as difficult 
>as reading the corresponding full statement of charges. 

it doesn't make sense at all for one to give autonomous capability
to agents to spend money, at least until they have been refined.
I don't see where agents fit into this all in the beginning. you're
putting the cart before the horse. I've never seen micropayments
discussed in the context you are putting them in. (no wonder it
is causing you "cognitive dissonance"). the uses you cite may not
appear until long into the future. in the meantime the model I wrote
about above has no problems you cite that I can tell.

  By
>sleight of hand we may have merely transformed the language of 
>the transaction as it needs to be understood by the party, without
>reducing the complexity to be understood.  Furthermore, the user 
>interface to enable consumers to simply express their sophisticated 
>preferences to an agent is lacking, and may represent another fundamental 
>cognitive bottleneck.

you are tackling a different problem. "how can we get reliable agents
that can be trusted with buying decisions". this has nothing or little
to do with "the feasibility of micropayments". micropayments are not
necessarily tied to agents.

>Telephone companies have found billing to be a major bottleneck.
>By some estimates, up to 50% of the costs of a long distance call
>are for billing, and this is on the order of a $100 billion per year
>market worldwide.  Internet providers have been moving to a flat fee in 
>order to minimize these costs, even though this creates the incentive for 
>network resource overusage.  

imagine a user who controls his own wallet. he knows when he is paying
from that wallet. you seem to have this idea that outsiders could
make queries to that wallet that would be hard for the consumer to
keep track of. this makes no sense to me. the wallet action will always
be tied with some other action. the user picks up the phone to dial
somewhere, and it says, "that will be .3c-- will you pay"? he says
yes. 

>A micropayments system assumes a solution to the billing problem.

as I wrote, I don't imagine a billing system at all in terms of
micropayments. its the wrong model. in a billing system, the bill
and the action are not tied tightly together. person does [x] and
receives bill 3 days later or whatever. with micropayments, you
will have instantaneous transactions.

>If somebody could actually solve the this problem, rather 
>than merely claiming to have solved it via some mysterious
>means ("intelligent agents", et. al.), the savings would be 
>enormous even in existing businesses such as long distance and
>Internet service -- never mind all the new opportunities made
>possible by micropayments.  

wow, I think I've solved it. you can nominate me for some award
now <g>