I guess it’s Payment Systems day here on Talk.org today. Just noticed the article on SlashDot about PepperCoin
PepperCoin has been around for a few months now (as a company that is), but it’s an interesting new approach to micropayments. Ron Rivest (The “R” in RSA) has always been good at thinking out of the box.
The basic idea from what I can remember is that lets say you want to buy something for one cent on a web site. Your 1 cent payment is grouped together with say 200 others to make a 2$ payment. The system chooses one of the payees in random an this person pays 2$. Thus lowering the transaction costs througout. If you use the system a lot you will end up on average paying the amount that you have purchased for. The key to PepperCoin is whatever clever way using probaility Rivest has thought up to make it fair for all users.
Transaction costs have always been the problem with Micro Payments. Rivest’s idea is definitely unique. It does sound familiar to something he might have presented at one point at a Financial Cryptography conference. (We are BTW trying to get the next one to come here to Panama)
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I was under the impression that the payee never had to pay past his $0.01. Peppercoin would send a token to the vendor with a value of 0 or $2. The probability of the vendor getting a $2 token would then be 1 in 200. This works great for vendors handling lots of transactions. It also prevents payees getting upset about having to pay $2 instead of $0.01 if they just use the system once. Please correct me if I'm wrong.
Cheers,
Antonio
That doesn't make sense to me because the transaction costs are when the consumer is billed. If you've got 200 people that have each paid a penny, then that's 200 separate transaction costs that peppercoin pays, before they ship the bundle of money off to the merchant. Right?