Cryptology ePrint Archive: Report 2016/332

Micropayments for Decentralized Currencies

Rafael Pass and abhi shelat

Abstract: Electronic financial transactions in the US, even those enabled by Bitcoin, have relatively high transaction costs. As a result, it becomes infeasible to make \emph{micropayments}, i.e. payments that are pennies or fractions of a penny.

To circumvent the cost of recording all transactions, Wheeler (1996) and Rivest (1997) suggested the notion of a \emph{probabilistic payment}, that is, one implements payments that have \emph{expected} value on the order of micro pennies by running an appropriately biased lottery for a larger payment. While there have been quite a few proposed solutions to such lottery-based micropayment schemes, all these solutions rely on a trusted third party to coordinate the transactions; furthermore, to implement these systems in today's economy would require a a global change to how either banks or electronic payment companies (e.g., Visa and Mastercard) handle transactions.

We put forth a new lottery-based micropayment scheme for any ledger-based transaction system, that can be used today without any change to the current infrastructure. We implement our scheme in a sample web application and show how a single server can handle thousands of micropayment requests per second. We analyze how the scheme can work at Internet scale.

Category / Keywords: cryptographic protocols / Micropayments

Original Publication (with major differences): CCS 2015

Date: received 24 Mar 2016

Contact author: abhi at virginia edu

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Version: 20160325:083122 (All versions of this report)

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