A survey of micropayment technologies, and the MilliCent system

Mark S. Manasse
Compaq Systems Research Center


MilliCent is an investigation into the possibility of small-scale commercial transactions over electronic networks. Several other system designs will be analyzed, to compare and contrast in terms of computational, disk, and network requirements.

Typical schemes for performing commercial transactions require various amounts of traceability, verifiability, and security--enough so that they require at minimum a digital signature per transaction. Reasonably unforgeable digital signatures are slow: contemporary machines can sign one to four dozen messages per second, depending on key length, while decryption runs about an order of magnitude faster. An on-line transaction with a financial agent would naively be limited to a few dozen per second per host, which means that even running flat out at one cent per transaction, the maximum revenue stream for a given host is under a half-million dollars per year. Using off-line techniques and significant amortization (but with signature verification), one can raise the revenue stream by a factor of ten, at increased risk of financial fraud.

In microcommerce, we seek to reduce the costs, increase the transaction rate, and provide on-line levels of certainty to vendors. In MilliCent, we do this by the use of *scrip*: currencies local to the vendor accepting them. Scrip enables local verification that funds are previously unspent; a vendor can easily keep track of serial numbers associated with scrip. Since scrip is of value only to its issuer, scrip and scrip usage can be validated by lower-security cryptography; in the case of MilliCent, we sign scrip using HMAC-MD5 and a secret.

This suffices to make scrip secure, but is inadequate to solve the systems performance and transaction cost issues: how do we purchase scrip in the first place? To solve this, we introduce *brokers*, scrip trading-houses, in whom consumers invest limited amounts of financial trust, and who, using scrip to keep track of customer accounts, sell consumers the scrip they desire. These brokers amortize the cost of actual financial transactions across consumers, serving to make a typical purchase achievable in 1+\epsilon round-trips: in the normal case, the consumer has scrip for the vendor in question. In the less-common case, the consumer makes a round-trip to the broker to buy vendor scrip, and then a trip to the vendor. In the still less-common case, the broker needs to make a trip to the vendor to procure scrip, or, more commonly, to procure a license to produce scrip.


Dr. Mark Manasse is widely recognized as one of the leading financial cryptographers in the world and inventor of the MilliCent Microcommerce System. He currently works at Compaq Computer Corporation's System Research Center in Palo Alto, California. His particular area of expertise is in solving systems problems where mathematical and theoretical techniques might be applied judiciously. Hailed by Wired Magazine as the nanobuck guru, Mark has used this expertise to direct the technical evolution of the MilliCent system over the last four years. Previous areas of success have included:
-multiprocessor memory architectures, which led to work on competitive algorithms,
-window systems, which led to work on methodologies for concurrent programming, and to the studies behind low-bandwidth X
-distributed computing, which afforded the opportunity to work on integer factorization
-the Web, which has led to investigations into cryptographic protocols for conducting casual commerce on the Internet, and techniques for probabilistically determining clusters of similar web pages.

Dr. Manasse has an A.B. cum laude in Mathematics from Harvard; an M.A. in Mathematics, an M.S. in Computer Science, and a Ph.D. in Mathematical Logic from the University of Wisconsin. He has been honored with the title Senior Consulting Software Engineer, one of the highest engineering achievements bestowed by Compaq, and holds U.S. Patents 5,345,578, (Competitive snoopy caching for large-scale multiprocessors), and 5,802,497 (A mechanism for low-priced electronic commerce). He has also published a number of abstracts, technical reports and proceedings in electronic commerce, competitive algorithms and distributed computing and related fields.

Dr. Manasse has been with the Compaq's Systems Research Center since 1985. Before that, he was a Visiting Assistant Professor for the Department of Computer Science at the University of Chicago. He has also worked for the Computing Science Research Center at Bell Laboratories as a member of its technical staff. In his spare time, Mark plays bass for Severe Tire Damage, the first band to appear live on the Internet, and a band which subsequently opened for the Rolling Stones when they played on the 'Net in November 1994.