8 ms·

Electronic Lottery Tickets as Micropayments (‎1997)

87 points by severine 9y ago

debt 9y ago
It's possible to send a micropayment on Venmo. Send $0.01 to someone and it'll go through.
- function_seven 9y ago
  Would it still be possible if penny-per-article schemes became as wide-spread as ad-supported articles are? I doubt Venmo could keep up with that level of transactions at 1¢ apiece.
kbaker 9y ago
This is a pretty cool idea. Reminds me of the fapiao system in China for preventing tax evasion - convert the tax receipts into lottery tickets. https://www.beijing-kids.com/blog/2012/01/09/scratch-that-fapiao-how-you-could-win-rmb-500/ https://www.beijing-kids.com/blog/2012/01/09/scratch-that-fa...
awakeasleep 9y ago
This is so brilliant. I've thought about micropayments so much and never found a practical way to do them. And this is so simple it seems like anyone should have thought of it!
- wolfram74 9y ago
  How hard do you think this would be to implement on top of the Venmo or stripe API?
  - DennisP 9y ago
    I don't know but I'm working on an Ethereum implementation right now, and it's pretty easy.
    - tgb 9y ago
      I don't know anything about this, but how do you make randomness in Ethereum? I assume it has to replicable across any computer and therefore would be pseudo-random and predictable. Do you use something like the NIST randomness beacon at a specified future time?
      - zaroth 9y ago
        Google "provably fair bitcoin lottery". They typically are based on a future block's hash value combined with a published random seed. Here's an example: https://github.com/hmel/bitcoin-raffle https://github.com/hmel/bitcoin-raffle
        themadryaner 9y ago
        In theory, a miner could try to manipulate the hash of the future block to change the outcome. It is much more difficult with Bitcoin, where valid blocks are more rare and produce a high income, but with Ethereum blocks are so frequent that it might be possible to collude with the mining pools is done on a large scale. Additionally, how does this deal with Proof-of-Stake algorithms? Ethereum is heading there, and as far as I am aware the blocks would no longer publish hashes.
        rrobukef 9y ago
        A sybill attack would greatly increase the probability. And has cheatingly other gains.
        kobeya 9y ago
        No need for a future block. Recipient commits to the hash of a value. Payer signs a value. Hash the preimage (revealed in claim) and the signed value together. If less than a threshold, pass.
        infogulch 9y ago
        As long as neither party has any way to manipulate the hash. Should probably add a 0th step where the payer commits to use a specific signature.
- pfranz 9y ago
  The whole blocker to micro payments were banks and credit card companies (same reason ACH is so archaic even though other companies have much better systems--they decided it's not in their interest to improve it). Credit cards have a flat fee, plus a percentage. That's why small businesses have a minimum purchase price (even though it's against their merchant agreement). When it first started I figured PayPal would have enabled microtransactions, but I gave up on that years ago. Venmo could, but it doesn't seem like that's the market they're focused on. Bitcoin would fill that niche, but it has a few other barriers.
- kobeya 9y ago
  It is more recently called “probabilistic payments” and that search phrase will get you some results of such constructions in bitcoin among other things.
jws 9y ago
For the [unannotated/unexplained/keep your bling out of my eyeballs] version you can find the PDF at https://people.csail.mit.edu/rivest/pubs/Riv97b.pdf https://people.csail.mit.edu/rivest/pubs/Riv97b.pdf It's an interesting idea, and the paper is from 1997. That bodes well for it being patent free now. In section 7 I think they touch on the possible third rail, legality. In the US it would probably require opinions by 50 lawyers to even get started, then you would still have to watch out for any of 50 States Attorneys General to take a swipe at your business. I think back in 1997 the advertising model hadn't metastasized and people believed it could fund content. I'm probably not typical, but I run a gentle ad blocker. (It blocks the ad networks, but if a site has ads embedded in their actual content, with bytes served from their site, which they are responsible for, then I see the ad.) If a site asks me to turn it off that's ok, I leave and put them on my mental "don't visit" list. If the site asked for $0.001 instead, I would always pay. If they asked for $0.01, I think I would always pay, if we are talking about a quality journalistic article.
- michaelbuckbee 9y ago
  I'd wager that even at $0.01 per article that your time deciding whether or not to pay would "cost" significantly more than the actual payment.
  - jws 9y ago
    Yes, I'd much rather authorize automatic payment to sites… say give the Springfield Shopper the right to pull $0.01 each time I read one of their articles until they hit a $1 limit, or up to $0.25 per week, or something like that. There needs to be a throttle to keep someone from looting me, but as long as they stay in their budget I'm happy.
    - oh_sigh 9y ago
      The benefit of the lottery system from this post is that banks don't need to process every payment - only winning ones.
  - Nomentatus 9y ago
continuations 9y ago
This would be illegal (in US) right? Basically you'd be selling lottery tickets for 1 cent each.
rjromero 9y ago
Isn’t this just Proof of Stake?
- themadryaner 9y ago
  No. This is something entirely different entirely. Mining a cryptocurrency goes something like this: spend a ton of money investing in a state of the art server farm, hook server farm up to mining pool to earn Bitcoin, withdraw Bitcoin for money, spend money to upgrade your now obsolete server farm. In addition to being needlessly inefficient, server farms are causing significant harms to the environment in ways that traditional currency does not, and is causing increases in electronics and electricity prices due to their high demand. Proof-of-Stake is a way to solve this. Instead of computing power determining who creates the blocks (and earns the transaction fees/block rewards), and instead of miners spending Bitcoin to make Bitcoin, miners put their cyrptocurrency in a form of a lottery, with the winner writing the block without using any computing power. The result is the same, but much more efficient and without the environmental cons. It also may make the network more secure, since an attacker would need 51% of the wealth in the network in order to compromise it. And even if someone gained 51%, they would not attack the network because they have the most value to lose. This article is also about using a lottery, but for a very different purpose. Microtransactions are difficult with current solutions, because vendors like PayPal, Visa, and Cryptocurrencies usually institute minimum fees. This system get around this system through the use of a lottery. As an example, instead of paying $1 to 10 different sites (say in a pay-per-view of newspaper articles), you pay with a reverse lottery ticket. This lottery ticket has a one in ten chance of winning, and if it does you have to pay $10. The resulting payment is the same, but all your payments are in large sums so that transaction fees are taken care of. If the newspaper receives 10 reverse lottery tickets, they will receive equivalent profits to charging each customer $1. Therefore, the customers pay the same and the sellers receive the same, but without transaction fees eating up nearly as large a percentage of the transaction that a micro transaction would. Both systems use a lottery powered by blockchain randomness, but the similarities end there. The purposes and the meaning of the lotteries are completely different. In the case of the latter, it is actually a lottery you don't want to win.
EGreg 9y ago
This is brilliant. The main question, however, is how to do the random draw without collusion with whoever is making the random draw?
- jws 9y ago
  The paper touches on this. You could use a number which will become known on a future date. They propose the last 3 digits of a state run lottery. Anything with enough randomness to cover your payout ratio would work. You could imagine taking a hash of your instance identifer concatenated with the NASDAQ final for the end date if you really don’t want to trust anyone.
  - EGreg 9y ago
    And how do we all agree on the NASDAQ final for some end date now and in the past? Maybe the oracle cheated. So in any case we need multiple machines who we hope don't collude. How would we prove the NASDAQ final price was not manipulated ever so slightly by a colluding party? And so on.
    - jws 9y ago
      Manipulating NASDAQ for a $10 contract seems like more work than it is worth.
CryptoPunk 9y ago
The Orchid protocol is using this method for its micropayments: https://medium.com/@gustav.simonsson/ethereum-probabilistic-micropayments-ae6e6cd85a06 https://medium.com/@gustav.simonsson/ethereum-probabilistic-... The project's white paper mentions this paper.
Nomentatus 9y ago
We also have the option of taxing ISPs and then handing that tax to creators (according to legit page views). That way that the ISPs collect the fee for creators seamlessly. A bit like gas taxes going for highway construction in the fifties. Wouldn't it be great if newspapers paying reporters made sense again?
- woah 9y ago
  Legit page views?
  - Nomentatus 9y ago
    See "gaming the system", above. Not easily defined, because gaming.
- tengbretson 9y ago
  There is no reason whatsoever that such a system would have to be implemented with taxation.
  - Nomentatus 9y ago
    Save the absence of better alternatives, perhaps. And you have to examine all the alternatives to the present disaster for content-creators in order to pick the best one.
- toast0 9y ago
  There's no reasonable way to apportion payment for content by metrics that ISPs can see that wouldn't be horribly gamed and bad for users. Pay per page view is obviously out because what is a page view? Pay per byte is inviting pages to get even bigger, no thanks. Pay per connection or DNS lookups or time of connections is all easy to game in JavaScript.
  - Nomentatus 9y ago
    Gaming is a real problem, no question. As it is for ads now. But I doubt it's insurmountable.
zaarn 9y ago
That's quite genius tbh, I wonder if there is something like this in the works for widespread deployment.
heyrhett 9y ago
This sounds like Peppercoin, which Rivest founded in 2001: https://en.wikipedia.org/wiki/Peppercoin https://en.wikipedia.org/wiki/Peppercoin
jakobnicolaus 9y ago
A couple of years ago I built an app (PayMeMaybe) which uses this idea to settle small debts between friends: https://play.google.com/store/apps/details?id=app.paymemaybe.paymemaybe https://play.google.com/store/apps/details?id=app.paymemaybe... Wasn't quite the break through success I suspected :)
IanCal 9y ago
Part of the question for me is this: There's a reasonable amount of tracking required to pass these tokens around (and I'm a little confused as to how you avoid 'double spending' of tokens). This is treated as cheaper than doing the transactions at the bank level. Why are the bank level transactions expensive? What is it that means that moving tickets around is near free but electronic references to money not?
- runeks 9y ago
  As far as I can see, there is zero difference between a) an electronic IOU each worth exactly 1 cent, which can only be redeemed in bundles of at least 1,000 IOUs, and b) a $10 IOU/lottery ticket with a 0.1% chance of winning. In both cases the average IOU is worth 1 cent, and in both cases the issuer avoids handling very small amounts by only allowing redemption of IOUs worth at least $10. The bottleneck here is the process of issuing these IOUs, which must be done by a trusted party in order to avoid the double spend problem.
- amelius 9y ago
  Even if the bank transactions are expensive, we should consider that most people don't mind paying a small amount for content every month, say $25. Losing that money would be no disaster. So why not pay that amount to a party that pays content creators, so they can distribute the money. They are not banks, but if they screw up, then it's not a disaster happening, it's only 25 bucks. But they will not screw up anyway, since they would lose all their customers. And after you've used up your $25, you could "refill" your account by depositing another $25. I actually don't see what the big problem is.
  - mnx 9y ago
    This exists. https://flattr.com/ https://flattr.com/ (they changed their model, so if you remember the "Flattr this" buttons, they are no longer needed)
- pjc50 9y ago
  I believe it's all in the fraud handling. On https://news.ycombinator.com/item?id=15592192 https://news.ycombinator.com/item?id=15592192 I came up with the phrase "the problem with micropayments is microscams". Whereever there is value there will be attempts at fraud, and on the internet you can automate them. Dealing with fraud inevitably requires a skilled human making decisions and dealing with complaints.

87 points by severine 9y ago

debt 9y ago

It's possible to send a micropayment on Venmo. Send $0.01 to someone and it'll go through.

function_seven 9y ago
Would it still be possible if penny-per-article schemes became as wide-spread as ad-supported articles are? I doubt Venmo could keep up with that level of transactions at 1¢ apiece.

kbaker 9y ago

This is a pretty cool idea. Reminds me of the fapiao system in China for preventing tax evasion - convert the tax receipts into lottery tickets. https://www.beijing-kids.com/blog/2012/01/09/scratch-that-fapiao-how-you-could-win-rmb-500/ https://www.beijing-kids.com/blog/2012/01/09/scratch-that-fa...

awakeasleep 9y ago

This is so brilliant. I've thought about micropayments so much and never found a practical way to do them. And this is so simple it seems like anyone should have thought of it!

wolfram74 9y ago
How hard do you think this would be to implement on top of the Venmo or stripe API?
- DennisP 9y ago
  I don't know but I'm working on an Ethereum implementation right now, and it's pretty easy.
  - tgb 9y ago
    I don't know anything about this, but how do you make randomness in Ethereum? I assume it has to replicable across any computer and therefore would be pseudo-random and predictable. Do you use something like the NIST randomness beacon at a specified future time?
    - zaroth 9y ago
      Google "provably fair bitcoin lottery". They typically are based on a future block's hash value combined with a published random seed. Here's an example: https://github.com/hmel/bitcoin-raffle https://github.com/hmel/bitcoin-raffle
      - themadryaner 9y ago
        In theory, a miner could try to manipulate the hash of the future block to change the outcome. It is much more difficult with Bitcoin, where valid blocks are more rare and produce a high income, but with Ethereum blocks are so frequent that it might be possible to collude with the mining pools is done on a large scale. Additionally, how does this deal with Proof-of-Stake algorithms? Ethereum is heading there, and as far as I am aware the blocks would no longer publish hashes.
        rrobukef 9y ago
        A sybill attack would greatly increase the probability. And has cheatingly other gains.
      - kobeya 9y ago
        No need for a future block. Recipient commits to the hash of a value. Payer signs a value. Hash the preimage (revealed in claim) and the signed value together. If less than a threshold, pass.
        infogulch 9y ago
        As long as neither party has any way to manipulate the hash. Should probably add a 0th step where the payer commits to use a specific signature.
pfranz 9y ago
The whole blocker to micro payments were banks and credit card companies (same reason ACH is so archaic even though other companies have much better systems--they decided it's not in their interest to improve it). Credit cards have a flat fee, plus a percentage. That's why small businesses have a minimum purchase price (even though it's against their merchant agreement). When it first started I figured PayPal would have enabled microtransactions, but I gave up on that years ago. Venmo could, but it doesn't seem like that's the market they're focused on. Bitcoin would fill that niche, but it has a few other barriers.
kobeya 9y ago
It is more recently called “probabilistic payments” and that search phrase will get you some results of such constructions in bitcoin among other things.

jws 9y ago

For the [unannotated/unexplained/keep your bling out of my eyeballs] version you can find the PDF at https://people.csail.mit.edu/rivest/pubs/Riv97b.pdf https://people.csail.mit.edu/rivest/pubs/Riv97b.pdf It's an interesting idea, and the paper is from 1997. That bodes well for it being patent free now. In section 7 I think they touch on the possible third rail, legality. In the US it would probably require opinions by 50 lawyers to even get started, then you would still have to watch out for any of 50 States Attorneys General to take a swipe at your business. I think back in 1997 the advertising model hadn't metastasized and people believed it could fund content. I'm probably not typical, but I run a gentle ad blocker. (It blocks the ad networks, but if a site has ads embedded in their actual content, with bytes served from their site, which they are responsible for, then I see the ad.) If a site asks me to turn it off that's ok, I leave and put them on my mental "don't visit" list. If the site asked for $0.001 instead, I would always pay. If they asked for $0.01, I think I would always pay, if we are talking about a quality journalistic article.

michaelbuckbee 9y ago
I'd wager that even at $0.01 per article that your time deciding whether or not to pay would "cost" significantly more than the actual payment.
- jws 9y ago
  Yes, I'd much rather authorize automatic payment to sites… say give the Springfield Shopper the right to pull $0.01 each time I read one of their articles until they hit a $1 limit, or up to $0.25 per week, or something like that. There needs to be a throttle to keep someone from looting me, but as long as they stay in their budget I'm happy.
  - oh_sigh 9y ago
    The benefit of the lottery system from this post is that banks don't need to process every payment - only winning ones.
- Nomentatus 9y ago

continuations 9y ago

This would be illegal (in US) right? Basically you'd be selling lottery tickets for 1 cent each.

rjromero 9y ago

Isn’t this just Proof of Stake?

themadryaner 9y ago
No. This is something entirely different entirely. Mining a cryptocurrency goes something like this: spend a ton of money investing in a state of the art server farm, hook server farm up to mining pool to earn Bitcoin, withdraw Bitcoin for money, spend money to upgrade your now obsolete server farm. In addition to being needlessly inefficient, server farms are causing significant harms to the environment in ways that traditional currency does not, and is causing increases in electronics and electricity prices due to their high demand. Proof-of-Stake is a way to solve this. Instead of computing power determining who creates the blocks (and earns the transaction fees/block rewards), and instead of miners spending Bitcoin to make Bitcoin, miners put their cyrptocurrency in a form of a lottery, with the winner writing the block without using any computing power. The result is the same, but much more efficient and without the environmental cons. It also may make the network more secure, since an attacker would need 51% of the wealth in the network in order to compromise it. And even if someone gained 51%, they would not attack the network because they have the most value to lose. This article is also about using a lottery, but for a very different purpose. Microtransactions are difficult with current solutions, because vendors like PayPal, Visa, and Cryptocurrencies usually institute minimum fees. This system get around this system through the use of a lottery. As an example, instead of paying $1 to 10 different sites (say in a pay-per-view of newspaper articles), you pay with a reverse lottery ticket. This lottery ticket has a one in ten chance of winning, and if it does you have to pay $10. The resulting payment is the same, but all your payments are in large sums so that transaction fees are taken care of. If the newspaper receives 10 reverse lottery tickets, they will receive equivalent profits to charging each customer $1. Therefore, the customers pay the same and the sellers receive the same, but without transaction fees eating up nearly as large a percentage of the transaction that a micro transaction would. Both systems use a lottery powered by blockchain randomness, but the similarities end there. The purposes and the meaning of the lotteries are completely different. In the case of the latter, it is actually a lottery you don't want to win.

EGreg 9y ago

This is brilliant. The main question, however, is how to do the random draw without collusion with whoever is making the random draw?

jws 9y ago
The paper touches on this. You could use a number which will become known on a future date. They propose the last 3 digits of a state run lottery. Anything with enough randomness to cover your payout ratio would work. You could imagine taking a hash of your instance identifer concatenated with the NASDAQ final for the end date if you really don’t want to trust anyone.
- EGreg 9y ago
  And how do we all agree on the NASDAQ final for some end date now and in the past? Maybe the oracle cheated. So in any case we need multiple machines who we hope don't collude. How would we prove the NASDAQ final price was not manipulated ever so slightly by a colluding party? And so on.
  - jws 9y ago
    Manipulating NASDAQ for a $10 contract seems like more work than it is worth.

CryptoPunk 9y ago

The Orchid protocol is using this method for its micropayments: https://medium.com/@gustav.simonsson/ethereum-probabilistic-micropayments-ae6e6cd85a06 https://medium.com/@gustav.simonsson/ethereum-probabilistic-... The project's white paper mentions this paper.

Nomentatus 9y ago

We also have the option of taxing ISPs and then handing that tax to creators (according to legit page views). That way that the ISPs collect the fee for creators seamlessly. A bit like gas taxes going for highway construction in the fifties. Wouldn't it be great if newspapers paying reporters made sense again?

woah 9y ago
Legit page views?
- Nomentatus 9y ago
  See "gaming the system", above. Not easily defined, because gaming.
tengbretson 9y ago
There is no reason whatsoever that such a system would have to be implemented with taxation.
- Nomentatus 9y ago
  Save the absence of better alternatives, perhaps. And you have to examine all the alternatives to the present disaster for content-creators in order to pick the best one.
toast0 9y ago
There's no reasonable way to apportion payment for content by metrics that ISPs can see that wouldn't be horribly gamed and bad for users. Pay per page view is obviously out because what is a page view? Pay per byte is inviting pages to get even bigger, no thanks. Pay per connection or DNS lookups or time of connections is all easy to game in JavaScript.
- Nomentatus 9y ago
  Gaming is a real problem, no question. As it is for ads now. But I doubt it's insurmountable.

zaarn 9y ago

That's quite genius tbh, I wonder if there is something like this in the works for widespread deployment.

heyrhett 9y ago

This sounds like Peppercoin, which Rivest founded in 2001: https://en.wikipedia.org/wiki/Peppercoin https://en.wikipedia.org/wiki/Peppercoin

jakobnicolaus 9y ago

A couple of years ago I built an app (PayMeMaybe) which uses this idea to settle small debts between friends: https://play.google.com/store/apps/details?id=app.paymemaybe.paymemaybe https://play.google.com/store/apps/details?id=app.paymemaybe... Wasn't quite the break through success I suspected :)

IanCal 9y ago

Part of the question for me is this: There's a reasonable amount of tracking required to pass these tokens around (and I'm a little confused as to how you avoid 'double spending' of tokens). This is treated as cheaper than doing the transactions at the bank level. Why are the bank level transactions expensive? What is it that means that moving tickets around is near free but electronic references to money not?

runeks 9y ago
As far as I can see, there is zero difference between a) an electronic IOU each worth exactly 1 cent, which can only be redeemed in bundles of at least 1,000 IOUs, and b) a $10 IOU/lottery ticket with a 0.1% chance of winning. In both cases the average IOU is worth 1 cent, and in both cases the issuer avoids handling very small amounts by only allowing redemption of IOUs worth at least $10. The bottleneck here is the process of issuing these IOUs, which must be done by a trusted party in order to avoid the double spend problem.
amelius 9y ago
Even if the bank transactions are expensive, we should consider that most people don't mind paying a small amount for content every month, say $25. Losing that money would be no disaster. So why not pay that amount to a party that pays content creators, so they can distribute the money. They are not banks, but if they screw up, then it's not a disaster happening, it's only 25 bucks. But they will not screw up anyway, since they would lose all their customers. And after you've used up your $25, you could "refill" your account by depositing another $25. I actually don't see what the big problem is.
- mnx 9y ago
  This exists. https://flattr.com/ https://flattr.com/ (they changed their model, so if you remember the "Flattr this" buttons, they are no longer needed)
pjc50 9y ago
I believe it's all in the fraud handling. On https://news.ycombinator.com/item?id=15592192 https://news.ycombinator.com/item?id=15592192 I came up with the phrase "the problem with micropayments is microscams". Whereever there is value there will be attempts at fraud, and on the internet you can automate them. Dealing with fraud inevitably requires a skilled human making decisions and dealing with complaints.