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Micropayments are financial transactions involving very small sums of money. PayPal defines a micropayment as a transaction of less than 12 USD,^[1] and offers less expensive fees for micropayment transactions. A problem that has prevented the emergence of feasible micropayment systems that allow payments of less than a dollar is a need to keep costs for individual transactions low,^[2] which is impractical when transacting such small sums,^[3] even if the transaction fee is just a few cents.

[edit] History

Micropayments were initially devised as a way of allowing the sale of online content and were envisioned to involve small sums of only a few cents.^[3] These tiny transactions would enable people to sell stuff on the Net for small sums^[3] and would be an alternative to advertising revenue.^[4] During the late 1990s there was a movement to create microtransaction standards,^[3] and the World Wide Web Consortium (W3C) worked on incorporating micropayments into HTML, even going as far as suggesting the embedding of payment requests in HTTP error codes.^[2] The W3C has since stopped its efforts in this area ^[2] and micropayments never became a widely used method of selling content over the internet.

[edit] Early research and systems

In the late 1990s established companies like IBM and Compaq had microtransaction divisions,^[3] and research on micropayments and micropayment standards was performed at Carnegie Mellon and by the World Wide Web Consortium.

Compaq's^[3][5] Millicent was a micropayment system that supported transactions as small as 1/10th of a cent up to $5.00 in size.^[6] It grew out of The Millicent Protocol for Inexpensive Electronic Commerce, which was presented at the 1995 4th World Wide Web Conference in Boston.^[7] Millicent utilized symmetric cryptography.^[8]

IBM's Micro Payments was established circa 1999^[9] and would have "allowed vendors and merchants to sell content, information, and services over the Internet, for amounts as low as one cent."^[10]

The NetBill electronic commerce project at Carnegie Mellon university researched distributed transaction processing systems and developed protocols and software to support payment for goods and services over the Internet.^[11] It utilized a pre-paid account that micropayment charges would be drawn from.^[12] Started in 1997,^[13] it was an early foray into microtransaction research.

[edit] Online gaming

Micropayments are used in some massively multiplayer online role-playing games (MMORPGs). These are typically free to play games with no monthly fee, which offer players the possibility of purchasing in-game currency redeemable for items. These items are often more powerful than those that can be obtained by non-paying players or offer an advantage or feature otherwise unavailable.

[edit] See also

• Peppercoin
• CyberCash, Inc.

[edit] References

[edit] External links

[edit] Implementation

• W3C Micropayment Working Group

[edit] The micropayment debate

• The Case For Micropayments - Jakob Nielsen (1998)
• The Case Against Micropayments - Clay Shirky (2000)
• The Digital Imprimatur, How big brother and big media can put the Internet genie back in the bottle by John Walker.
• The Mental Accounting Barrier to Micropayments - Nick Szabo
• Fame vs Fortune - Clay Shirky (2003)
• Misunderstanding Micropayments - Scott McCloud (2003), answering to Clay Shirky
• Second generation micropayment systems: lessons learned (PDF), Robert Parhonyi
• A one year report on a micropayment funded website; importance of ease vs. amount - Reichler 2008
• Norman Hardy and Eric Dean Tribble: The Digital Silk Road September 1995