A Set of Protocols for Micropayments in Distributed Systems

Micropayments refer to low-value financial transactions ranging from several pennies to a few dollars. A big portion of electronic commerce occurring in the Internet belong to the category of micropayments. The cost of micropayments should be kept as low as possible in order for the service provider (the merchant) to profit from the low-value transactions.

We propose several protocols for micropayments in distributed systems. Our main goal is to reduce the charging cost by choosing a suitable security model, a charging model, and cryptographic algorithms; and by employing the properties unique to the information goods. Our protocols satisfy the requirements of a payment system and are ``cheap'' in terms of computation costs, communication costs, and key management costs.

We select the debit model for designing our protocols and base our protocols on the private key cryptosystems. We show that the existing authentication protocols and systems can be extended to handle micropayments in distributed systems. We also present possible extensions to our protocols.