The Millicent Protocols for Electronic Commerce

Many protocols have been proposed in the last year which address the problem of securely transferring money over a public network. Most of these schemes have similar goals: to enable transactions with properties similar to those achievable today using credit cards, to provide consumers and vendors with guarantees similar to those afforded by credit cards, or to translate existing payment mechanisms into electronic equivalents. The schemes vary widely in details; some schemes create electronic cash, some schemes work hard to provide anonymity for purchasers, some schemes protect consumers from exposing their underlying accounts to merchants, and some schemes ignore privacy issues altogether.

This is all interesting and necessary, but it fails to address the problems of a market segment that I expect to grow rapidly, once it becomes at all possible: extremely low-priced walk-up transactions. The proposed payment schemes all come with fee schedules that limit transactions to be fairly valuable. In practical terms, for today's systems, and today's mechanisms for transactions, the fees come to a minimum of approximately twenty-five cents for credit-card-like transactions, and at least a penny for services that provide a level of aggregation before charging a credit card. Over time these fees are almost certain to drop, but the current performance of disks, processors, and networks suggest that these fees aren't going to come down due to economic pressures alone: a system that can only handle a dozen transactions per second per computer needs to charge fees in this range in order to be profitable--and that's the kind of transaction rate implied by systems that require non-repudiatable digital signatures. Increased performance over time will increase the transaction rate; I contend that it's interesting to look at the results of applying that to decreasing the price of transactions.