[HN Gopher] Electronic lottery tickets as micropayments (1997)
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       Electronic lottery tickets as micropayments (1997)
        
       Author : mrleinad
       Score  : 54 points
       Date   : 2021-06-29 18:45 UTC (4 hours ago)
        
 (HTM) web link (fermatslibrary.com)
 (TXT) w3m dump (fermatslibrary.com)
        
       | thinkloop wrote:
       | Why would transacting lottery tickets be cheaper than transacting
       | money?
       | 
       | EDIT: Who pays for the lottery ticket transactions that the bank
       | is saving?
        
         | jaywalk wrote:
         | Because the bank only has to process/pay out the winning
         | tickets instead of every single micropayment.
        
           | thinkloop wrote:
           | Yes, I understand that, but that is only for the bank,
           | society still has to pay for the 999 of 1000 transactions
           | that the bank saved. Who pays for those, why would they be
           | cheaper given that they are essentially money again.
        
             | londons_explore wrote:
             | The whole aim of this scheme is to try to allow
             | micropayments in a world where banks want to take a $0.20
             | fee on each transaction.
             | 
             | If you could persuade all banks to make all fees be
             | percentage based or nill, such a scheme would be
             | unnecessary.
        
             | saurik wrote:
             | Everyone pays them, but only probabilistically: the cost of
             | a single commit gets spread out over the cost of all 1000
             | of those transactions (in the same way that costs of doing
             | business that you can't track to a single customer still
             | get paid by all customers simply inflating your price just
             | a bit). As an example, if the cost of your product is $0.01
             | and the cost of a bank transfer is $0.25, and you receive
             | tickets at 1/2500 probability, then you tack on to
             | everyone's receipt "their share" of that fee, charging them
             | $0.0101 instead of $0.01, for a claim value per ticket of
             | $25.25 (as $25.25*1/2500==$0.0101), which you can see
             | includes the $25 for the 2500 products people bought and
             | the extra $0.25 to pay the banking fee. So: the recipient
             | paid that fee, but passed it on to the sender, who
             | ultimately paid that fee... but a much much lower fee
             | ($0.0001 instead of $0.25).
        
               | thinkloop wrote:
               | I understand the bit about doing less payments is cheaper
               | than doing more payments. The part that everyone is
               | glossing over is:
               | 
               | "and you receive tickets at 1/2500 probability"
               | 
               | How do you receive these tickets? How can they be
               | trusted? How can you guarantee they are honored? If we
               | can receive lottery tickets in a cheap, trusted, secure
               | manner why don't we just use the same system for the
               | money itself?
        
               | saurik wrote:
               | FWIW, this is not skimmed over in any of the papers ;P.
               | 
               | The only real mechanism you need is a shared random
               | number generator? Here is the simple one most people use:
               | you make a random number, hash it, and send me the hash.
               | I make a second random number, and then sign the number
               | and the hash. You then determine if you won by hashing
               | your number with mine, and if the hash type cast to a
               | number is less than 1/2500 times the maximum such number,
               | then you won, and can reveal your original number to the
               | bank--which has to be willing to honor the weird
               | instructions I scrawled on my check involving "only
               | accept this check if the following math holds based on
               | the public key of my bank account" to verify these hashes
               | and signatures... here is where turing complete
               | blockchains come in :D--as proof. Neither of us can now
               | control whether the ticket wins.
               | 
               | The thing you seem to be missing though honestly isn't
               | that? You are conflating the ability to create a
               | "trusted" mechanism with a "cheap" one: in a world where
               | it costs $0.25 to move the money, the issue is how to
               | mitigate that cost without losing trust in the process.
               | This is a transform on an existing trusted system that is
               | "too expensive" to make it cheaper. If you had a cheap
               | way of doing it, you wouldn't need this transform... but
               | you don't have a cheap way of doing it: you only have an
               | expensive way... so we agree to share the cost of using
               | that expensive way across numerous parties.
               | 
               | Really, I think the right question here is "but this
               | can't come for free: what is the cost?" and the key
               | tradeoff is that now all transfers are some horribly
               | confusing probabilistic space of variance over possible
               | payouts... you go to buy a stick of gum and end up
               | "losing" four days in a row and have now spent over $100
               | on four sticks of gum, which _in the limit_ should
               | eventually work out, but even then there will be some
               | binomial distribution where different people got lucky
               | throughout their lives and others didn 't; and, I think
               | worse, users can run into "cash flow" problems during
               | losing streaks as they have a budget based on their non-
               | probabilistic income that is now being used on
               | probabilistic expenditures... the whole thing is a mess
               | if you apply it indiscriminately :(.
               | 
               | This scheme is thereby simply "different": it results in
               | a primitive that only makes sense for very large numbers
               | of very tiny transactions, which the original trusted
               | system likely wasn't capable of, as it wanted to make it
               | not only cost effective but "reasonable" to spend $5...
               | by which I mean that, after I give you the money, I know
               | what I gave you and you know what you got and the amount
               | of money left in my account is in a knowable state and so
               | no one is "gambling" hoping to get lucky enough to make
               | it through this month without "actually" spending money
               | on their gum habit--or, alternatively, getting _massively
               | overpaid_ for gum ;P--so they can pay their respective
               | rents), something this system is (maybe almost
               | "hilariously") incapable of.
               | 
               | Put elsewise: I do not know of any current way to
               | _deterministically_ accept very small quantities of
               | money, at scale; but, given a way to deterministically
               | accept large quantities of money (at high cost) with some
               | attached instructions (such as you theoretically could do
               | with a simple check if the bank tellers were still people
               | and had advanced math degrees ;P), I am able to convert
               | that into a way to accept small quantities of money (at
               | low cost)... except now it is stochastic (probabilistic)
               | instead of deterministic :(. If, thereby, you had a way
               | to _deterministically_ accept small quantities of money,
               | then I have a way to (now stochastically : /...) accept
               | _even smaller_ quantities of money (which deceases your
               | variance and increases your efficiency); and, in fact, I
               | am always excited by the release of higher-efficiency
               | blockchains (such as Avalanche) for this reason.
        
               | thinkloop wrote:
               | Thank you for that response, I didn't realize the lottery
               | was happening at the moment of payment. I thought tickets
               | were given out then the draw happens at a later date and
               | the tickets are redeemed then. This makes sense! Thanks
               | for clarifying.
        
       | petermcneeley wrote:
       | How is double spend avoided? EDIT: My bad I thought this was a
       | currency.
        
         | nightpool wrote:
         | I don't understand the question. Each lottery ticket is made
         | out to a single "recipient"--in what situation do you imagine a
         | double spend?
        
         | alisonkisk wrote:
         | it's not (self-protecting) transferable / decentralized
         | currency.
         | 
         | It's same as a paper lottery ticket.
        
         | saurik wrote:
         | Your question is not without merit, as these lottery tickets
         | end up feeling a bit like "checks" (the paper kind you give
         | someone as an IOU against your bank account), which makes it
         | subject to the same general "kiting" attack of writing multiple
         | checks that would all have to pay off at the same time in order
         | to not overdraw your account.
         | 
         | In case this isn't obvious how it applies to this case--as the
         | probabilities might be obfuscating things somewhat, and I have
         | now seen multiple replies to you make it sound like your
         | question is invalid, despite being the key question for how to
         | use this technology (as someone who works with it daily and has
         | for years)--imagine if you send four people 50% tickets for
         | your entire balance.
         | 
         | In this scenario, you would expect two of them would win; let's
         | just assume this is the actual concrete result. Even if you
         | decide that people who receive a winning ticket will commit
         | their ticket before accepting it, two of these people got
         | losing tickets and a third will succeed in claiming their
         | winner... you just managed to get 1.5x the value of your
         | account, by handing out more (probabilistic) checks than you
         | can (probabilistically) pay.
         | 
         | The only protection from it not being a true 2x overdraft was
         | that two of the participants had a naive way to verify they got
         | paid... but really, participants in this system _usually_
         | accept money from low-probability _losing_ tickets; this then
         | becomes a form of off-chain settlement that is subject to
         | scenarios where people can  "double-spend" some of their money
         | if you aren't paying attention, in a way that is actually very
         | analogous to blockchains (such as Bitcoin and Ethereum) that
         | experience routine chain reorganization: you need to have some
         | kind of scheme in place to not only decide a single valid
         | result but also a scheme to feel comfortable with the
         | "finality" of that result (the whole "wait for six
         | confirmations" jazz).
         | 
         | The usual solution to this is to have the spender put money
         | down into an on-chain contractual "escrow" that gets "burned"
         | (destroyed) as part of any overdraft, to make it so you
         | hopefully lose more money than you are capable of overspending
         | in any reasonable period of time (which I would argue has at
         | least some parallels to mechanisms in proof of stake
         | blockchains, with the understanding that every single lottery
         | payment account is effectively its own blockchain at this
         | point).
         | 
         | Honestly, I find much more inspiration in this much later
         | paper, which extends this scheme to zero-knowledge coins and
         | does some of the math required to understand the bounds on the
         | escrow required to manage this risk.
         | 
         | https://eprint.iacr.org/2016/1033.pdf
        
       | Robotbeat wrote:
       | That's basically what cryptocurrency Mining is. You get paid for
       | mining with a digital lottery.
        
         | sidpatil wrote:
         | A similar interest payment structure exists for conventional
         | savings accounts as well:
         | https://en.m.wikipedia.org/wiki/Prize-linked_savings_account
        
       | saurik wrote:
       | Prior discussion of this same link can be found at this other
       | thread (which I had in my list of links below but it felt useful
       | to surface it).
       | 
       | https://news.ycombinator.com/item?id=15700718
       | 
       | So, something maybe-fascinating to people is that Rivest--who
       | designed this scheme--helped start a company to use it on the web
       | to pay for things like news articles and generally replace ads.
       | It was called Peppercoin, and was sufficiently before its time
       | that not only did it fail (well, in the usual YC-sense: it got
       | acquired by something boring and failed to change the world) but
       | a lot of the people working on this technology today have never
       | heard of it ;P.
       | 
       | Here are a million references I have in a note I was collecting
       | back in December on the rise and fall of Peppercoin (which I
       | intended to show to my team at Orchid--where we are trying to
       | apply this technology to a decentralized market for bandwidth and
       | other Internet services: see orchid.com--and then honestly never
       | have as I have been busy; and I considered that, maybe even "best
       | case", this was likely to be a distraction to them as much as it
       | was to me ;P).
       | 
       | background
       | 
       | https://news.ycombinator.com/item?id=989020
       | 
       | https://news.ycombinator.com/item?id=15272944
       | 
       | https://news.ycombinator.com/item?id=9837380
       | 
       | https://news.ycombinator.com/item?id=17533350
       | 
       | papers
       | 
       | https://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.44...
       | 
       | https://people.csail.mit.edu/rivest/pubs/Riv97b.pdf
       | 
       | http://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.5.1...
       | 
       | https://people.csail.mit.edu/rivest/pubs/Riv04c.slides.slide...
       | 
       | wikis
       | 
       | https://en.m.wikipedia.org/wiki/Peppercoin
       | 
       | https://en.bitcoinwiki.org/wiki/Peppercoin
       | 
       | https://ebrary.net/88179/business_finance/micropayments
       | 
       | funding
       | 
       | http://web.archive.org/web/20031002123349/http://www.paidcon...
       | 
       | https://www.buyoutsinsider.com/peppercoin-banks-on-4-3m-in-c...
       | 
       | http://www.econtentmag.com/Articles/News/News-Item/Peppercoi...
       | 
       | https://www.wsj.com/articles/SB112430543406915783
       | 
       | launch
       | 
       | https://bizwest.com/2003/10/31/peppercoin-solves-download-pa...
       | 
       | https://www.technologyreview.com/2003/12/01/233570/the-webs-...
       | 
       | https://www.nytimes.com/2004/01/07/technology/circuits/a-vir...
       | 
       | https://nextbillion.net/cashless-transactions-at-the-bop-pep...
       | 
       | "2.0"
       | 
       | https://www.finextra.com/pressarticle/1492/peppercoin-releas...
       | 
       | 2004-2005
       | 
       | https://www.digitaltransactions.net/peppercoin-scores-anothe...
       | 
       | https://www.digitaltransactions.net/moneris-signs-up-pepperc...
       | 
       | https://www.bizjournals.com/boston/blog/mass-high-tech/2005/...
       | 
       | https://thepaypers.com/payments-general/peppercoin-small-pay...
       | 
       | banking
       | 
       | https://www.businesswire.com/news/home/20050112005057/en/Pep...
       | 
       | https://thepaypers.com/payments-general/chase-merchant-servi...
       | 
       | mastercard
       | 
       | https://www.finextra.com/newsarticle/14621/peppercoin-and-ma...
       | 
       | https://www.cbronline.com/news/mastercard_and_peppercoin_to_...
       | 
       | https://www.insidearm.com/news/00025887-mastercard-supports-...
       | 
       | https://www.networkworld.com/article/2316448/mastercard-team...
       | 
       | https://www.pressreader.com/usa/san-francisco-chronicle/2005...
       | 
       | "3.0"
       | 
       | https://www.digitaltransactions.net/is-peppercoin-eyeing-opp...
       | 
       | https://www.digitaltransactions.net/peppercoin-3-0-debuts-wi...
       | 
       | operations
       | 
       | https://www.digitalcommerce360.com/2006/04/24/charles-casert...
       | 
       | https://www.securetechalliance.org/secure/events/20061003/T0...
       | 
       | 2006-2007
       | 
       | https://www.bizjournals.com/boston/stories/2006/07/24/story1...
       | 
       | https://www.insidearm.com/news/00015050-suntrust-merchant-se...
       | 
       | https://www.allwirelessnews.com/features/heartland-payment-s...
       | 
       | acquirement
       | 
       | https://www.americanbanker.com/news/peppercoin-sold-to-orego...
       | 
       | https://www.businesswire.com/news/home/20070416005392/en/Cho...
       | 
       | https://mashable.com/2007/04/17/peppercoin/
       | 
       | postmortem
       | 
       | https://www.techdirt.com/articles/20070417/012124.shtml
        
       | satya71 wrote:
       | I'd take this over BAT.
        
       | saurik wrote:
       | We are using a scheme based on this premise as part of Orchid, a
       | decentralized market for Internet resources such as bandwidth.
       | 
       | https://github.com/OrchidTechnologies/orchid
       | 
       | In the current end-user client--which you can currently download
       | from the iOS/Android/Mac application stores--we use this to pay
       | for VPN service "as you go" in rather small units (the size of
       | these chunks in our case feels limited by bandwidth overhead of
       | sending signatures and CPU usage for signing tickets, as opposed
       | to by the reasonable size of a transfer).
       | 
       | https://www.orchid.com/download
        
         | thinkloop wrote:
         | Where do the savings come in? If you know how to securely send
         | lottery tickets why can't you use the same system to send the
         | money instead?
        
           | saurik wrote:
           | See my response to your other question here:
           | https://news.ycombinator.com/item?id=27681781 (but like, the
           | idea is that you can spread the cost of an underlying
           | transfer--which costs money to perform and potentially
           | _permanently_ store on the underlying blockchain--across all
           | of the people making probabilistic payments, which you can
           | make very small if the people involved are willing to
           | tolerate the variance on a resulting purchase and have a high
           | enough principal to still have a reasonably high efficiency
           | after paying for the amortized fees).
        
       | yboris wrote:
       | "In 1997, Ron Rivest (one of the inventors of Public-key
       | cryptography) proposed the use of digital lottery tickets for
       | online micropayments.
       | 
       | In this scheme, a lottery ticket for a $10 prize with a 1/1000
       | chance of winning could be used to pay for 1 cent"
       | 
       | https://twitter.com/fermatslibrary/status/140994550447414067...
        
       | ezconnect wrote:
       | PDF link https://people.csail.mit.edu/rivest/pubs/Riv97b.pdf
        
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