Electronic Payment Systems 20-763 Lecture 10 Micropayments II

1. Electronic Payment Systems20-763 Lecture 10Micropayments II

2. Micropayments • Replacement of cash • Cheaper (cash very expensive to handle) • Electronic moves faster • Easier to count, audit, verify • Small transactions • Beverages • Phone calls • Tolls, transportation, parking • Copying • Internet content • Lotteries, gambling

3. Micropayments • Transactions have low value, e.g. less than $1.00 • Must process the transaction at low cost • Technological savings: • Don’t verify every transaction • Use symmetric encryption • Float-preserving methods • Prepayment • Grouping • Aggregate purchases (to amortize fixed costs) • Provide float to processor • Partial anonymity (individual purchases disguised)

4. Micropayments • Prepaid cards • Issued by non-banks • Represent call on future service • Not money since usable only with one seller • Electronic purse • Issued by bank • Holds representation of real money • In form of a card (for face-to-face or Internet use) • In virtual form (computer file for Internet use) • The two forms are converging, e.g. wireless

5. Electronic Purse Issues • Loading (charging) the purse with money • Making a payment (removing money from the card) • Clearance (getting money into the seller’s account)

6. Remote Micropayments • Remote micropayments • Buyer is not physically in seller’s presence • Can’t insert card into vendor’s machine • No physical goods, only information goods • if micropayment will work, goods must be cheap, e.g. $0.01 • Subscriptions, credit cards, checks, ACH (even PayPal) too expensive • Examples: web pages, stock quotes,news articles, weather report, directory lookup • Need instant service for large numbers of 1¢ transactions + reasonable profit to payment provider

7. User Vendor Web Browser Web Server Scrip Broker Server Broker Remote Micropayment Parties • Users (buyers) • Vendors (sellers) • Brokers (intermediaries) • issue “scrip” (virtual money)to users • redeem scrip from vendorsfor real money • Assumptions • User-Broker relationship is long-term • Vendor-Broker relationship is long-term • User-Vendor relationship is short-term

8. Micropayment Efficiency • Providers need to process a peak load of at least 2500 transactions/second • Public-key cryptography is expensive • 1 RSA signature verifications = 10 symmetric encryptions = 10,000 hashes • Need to minimize Internet traffic • Servers must be up • More servers required, longer queues, lost packet delay • Remove the provider from the process (user + vendor only) • For small payment amounts, perfection is not needed • Losing a micropayment • Keep micropayment fraud low

9. WN-1 WN W0 W1 WN-1 = H(WN ) WN-2 = H(WN-1 ) WN-2 W0 = H(W1 ) W1 = H(W2 ) Payword Concept • Hash functions are one-way and easy to compute • Use them to secure scrip • Suppose we need N “coins” • Start with a random number WN • Hash it N times to form W0 • • • • Vendor receives W0 to start • Each payword is worth one unit • When vendor receives W53 he verifies it by hashing

10. Payword • Based on “paywords,” strings that will be accepted by vendors for purchases • User authenticates himself to a broker with one signature verification, establishes means of paying “real” money for paywords • User sets up with broker a linked chain of paywords to be used with a specific vendor. (Linking is used to make authentication of the paywords very cheap.) • User pays vendor by revealing paywords to vendor • Marginal cost of a payment: one hash computation

11. Payword • User sets up Payword account with a broker (pays real money) • Broker issues user a “virtual card” (certificate) • broker name, user name, user IP address, user public key • Certificate authenticates user to vendor • User creates payword chains (typical length: 100 units) specific to a vendor

12. USER INFORMATION (CARD #, CREDIT LIMIT) BROKER PRIVATE KEY EXPIRATION DATE BROKER NAME Buying Paywords • User visits broker over secure channel (e.g. SSL), giving coordinates of bank account or credit card: U, AU, PKU, TU, $U • Broker issues a subscription card CU = { B, U, AU, PKU, E, IU } SKB • Vendor will deliver goods only toAU USER NAME USER ADDRESS COORDINATES OF BANKACCOUNT OR CC USER CERTIFICATE USER PUBLIC KEY

13. EXPENSIVE: REQUIRES DIGITAL SIGNATURE EXPIRATION DATE OF COMMITMENT VENDOR NAME USER PRIVATE KEY EXTRA INFORMATION (VALUE OF CHAIN) “FIRST” PAYWORD Making Payment • Commitment to a payword chain = promise by user to pay vendor for all paywords given out by user before E • N = value in jetons needed for purchases (1 payword = 1 jeton) • WN = last payword, a random value chose by user • User creates payword chain backwards by hashing WNWN-1 = H(WN);WN-2 = H(WN-1) = H(H(WN)) , etc., giving W = { W0, W1, . . . WN-1, WN } • User “commits” this chain to a vendor, sends M = { V, CU, W0, D, IM } SKU  CAN EASILY COMPUTE THIS WAY  DIFFICULT TO COMPUNTE THIS WAY M IS VENDOR SPECIFIC AND USER-SPECIFIC (NO USE TO ANYONE ELSE)

14. Making Payment, cont. • Vendor can use PKU and PKB to read the commitment to know that U is currently authorized to spend paywords. • User “spends” paywords with the vendor in orderW1 ,W2 ,. . . , WN . To spend payword Wi, user sends the vendor the unsigned token P = { Wi, i }. • To verify that P is legitimate, vendor hashes it i times to obtain W0 . If this matches W0 in the commitment, the payment is good. • If V stores the last payword value seen from U, only one hash is needed. (If last hash was Wi, when vendor receives Wi+1, can hash it once and compare with Wi .) • P does not have to be signed because hash is one-way.

15. Settlement with Payword • Even if vendor has no relationship with broker B, can still verify user paywords (only need broker’s public key) • For vendor to get money from B requires relationship • Vendor sends broker B a reimbursement request for each user that sent paywords with M, WL (last payword received by vendor) • Broker verifies each commitment using PKU and performs L hashes to go from WL to W0 • Broker pays V, aggregates commitments of U and bills U’s credit card or debits money from U’s bank account

16. Payword Payment Properties • Payment and verification by vendor are offline (no use of a trusted authority). • Payment token P does not reveal the goods • Fraud by user (issuing paywords without paying for them) will be detected by the broker; loss should be small • Vendor keeps record of unexpired paywords to guard against replay

17. MicroMint • Brokers produce “coins” having short lifetimes, sell coins to users • Users pay vendors with coins • Vendors exchange the coins with brokers for “real” money BROKER PURCHASE NEW COINSRETURN UNUSED COINS EXCHANGE COINS FOROTHER FORMS OF VALUE NEW COINS SPENDING OF COINS VENDOR CUSTOMER TRANSFER OF INFORMATION SOURCE: SHERIF

18. Minting Coins in MicroMint • Idea: make coins easy to verify, but difficult to create (so there is no advantage in counterfeiting) • In MicroMint, coins are represented by hash-function collisions, values x, y for which H(x) = H(y) • If H(•) results in an n-bit hash, we have to try about2n/2 values of x to find a first collision • Trying c•2n/2 values of x yields about c2 collisions • Collisions become cheaper to generate after the first one is found

19. Coins as k-way Collisions • A k-way collision is a set { x1, x2, . . ., xk } with H(x1) = H(x2) = . . . = H(xk) • It takes about 2n(k-1)/k values of x to find a k-way collision • Trying c• 2n(k-1)/k values of x yields about ck collisions • If k > 2, finding a first collision is slow, but subsequent collisions come fast • If a k-way collision { x1, x2, . . ., xk } represents a coin, easily verified by computing H(x1), H(x2), . . ., H(xk) • A broker can easily generate 10 billion coins per month using one machine

20. Selling MicroMint Coins • Broker generates 10 billion coins and stores (x, H(x)) for each coin, having a validity period of one month • The function H changes at the start of each month • Broker sells coins { x1, x2, . . ., xk } to users for “real” money, records who bought each coin • At end of month, users return unused coins for new ones

21. Spending MicroMint Coins • User sends vendor a coin { x1, x2, . . ., xk } • Vendor verifies validity by checking thatH(x1) = H(x2) = . . . = H(xk). (k hash computations) • Valid but double-spent coins (previously used with a different vendor) cannot be detected at this point • At end of day, vendor sends coins to broker • Broker verifies coins, checks validity, checks for double spending, pays vendor • (Need to deal with double spending at this point)

22. Detecting MicroMint Forgery • A forged coin is a k-way collision { x1, x2, . . ., xk }under H(•) that was not minted by broker • Vendor cannot determine this in real-time • Small-scale forgery is impractical • Forged coins become invalid after one month • New forgery can’t begin before new hash is announced • Broker can issue recall before the month ends • Broker can stay many months ahead of forgers

23. Millicent • Vendors produce vendor-specific “scrip”, sell to brokers for “real” money at discount • Brokers sell scrip from many vendors to many users • Scrip is prepaid: promise of future service from vendor • Users “spend” scrip with vendors, receive change BROKER USER EXCHANGES BROKER SCRIP FOR VENDOR SCRIP (AS NEEDED) BROKERS PAY FOR VENDOR SCRIP ($$$ MONTHLY) USER BUYS BROKER SCRIP ($ WEEKLY) USER SPENDS VENDOR SCRIP FOR INFORMATION VENDOR USER (¢ DAILY) TRANSFER OF INFORMATION (CHANGE IN MESSAGE HEADER) SOURCE: COMPAQ

24. Millicent • Broker • issues broker scrip to user • exchanges broker scrip for vendor scrip • interfaces to banking system • collects funds from users • pays vendors (less commission) • User • buys broker scrip from brokers • spends by obtaining vendor-specific scrip from broker • Vendor • sells scrip to brokers • accepts vendor scrip from users • gives change to users in vendor scrip

25. MilliCent Components • Wallet • integrated with browseras a “proxy” • User Interface(content, usage) • Vendor software • easy to integrateas a web relay • utility for pricemanagement • Broker software • handles real money Vendor Server Tokens Wallet New tokens Spent tokens User Vendor $ Broker Server $ Broker

26. Broker (tens?) Vendor (thousands) Broker Server Price File Price Configurator HTTP Document Tree Site Map User (millionsof consumers) Browser Wallet Vendor Server Web Server HTTP Browser Cache Wallet Contents MilliCent System Architecture

27. Client Vendor Web Browser Web Server Scrip Broker Server Broker Millicent Scrip Verification • Token attached to HTTP requests • Scrip can not be: • Spent twice • Forged • Stolen • Scrip is validated: • By each vendor, on the fly • Low computational overhead • No network connection • No database look up

28. Vendor Value ID# Cust ID# Expires Props Stamp MilliCent Scrip Secret wellsfargo.com / 0.005usd / 0081432 / 101861 / 19961218 {co=us/st=ca} 1d7f4a734b7c02282e48290f04c20

29. Vendor server acts as a proxy for the real Web server Vendor server handles all requests: MilliCent relay to web-server MilliCent processing: Validates scrip and generates change Sells subscriptions Handles replays, cash-outs, and refunds Vendor Server Vendor Server Web Server Price File Document Tree Vendor Site

30. Major Ideas • Micropayment systems must be very fast and inexpensive • Are brokers necessary? • Must give up some level of security or authentication • Low losses because each transaction (and item of scrip) is very small • Micropayments are integrated into browsers and wallets • Best application: Internet content

31. Q A &