Micro-transactions

It is now possible to convert electricity to money using an Internet browser (like the one you’re likely using to read this post) in amounts lower than $0.001, which is the smallest unit of account for the US Dollar. Jobs earning that amount are constantly available by doing math on your computer that works on supporting open ledger systems called blockchains.

The product of the math work turns into cryptocurrency fractional coins which, when accumulated in large enough amounts can be sold for dollars, euros, yen, or any other conventional currency around.

The transaction costs are orders of magnitude lower than in the conventional banking system, enough that large classes of transactions that were impractical are now merely somewhat expensive. There’s a lot of room for efficiency improvements at present.

You can see an experiment running the first iteration I’m working with this concept at the project blog for Charleston Dry Feet. It’s currently generating litoshi from anyone who visits. Proceeds go to the worthy project of fixing Charleston, SC’s deficient storm water drainage system. You can turn the widget on or off with a button click.

20 thoughts on “Micro-transactions”

  1. OK. This is how you convert electricity into crypto money:

    https://www.ebay.com/i/132336814105?rt=nc

    Now this will break even in perhaps a year. After that you can make a small amount above your costs. Mining is very hard on Bitcoin’s blockchain now but it’s worth a lot. There are several other crypto blockchains one can mine and they are not as hard but are worth less.

    TANSTAAFL (There ain’t no such thing as a free lunch) applies strongly here.

  2. I’m absolutely convinced that blockchain technology is potentially MORE revolutionary than the Internet itself. The Internet decentralized the flow of information. As a result, it disrupted and disintermediated (love that word) every industry on the planet. But money still flows through, and is controlled by, highly centralized organizations, primarily banks, exchanges and governments. Blockchain technology threatens all of that.

    Much of the value of banks and exchanges (and governments) is in their function as ledgers (and final arbiters) for transactions. What happens when that is replaced by a virtual blockchain ledger? Would banks and exchanges, as they exist now, be really necessary? How do you regulate transactions (any kind of transaction) when all that is required to set up a private transaction ledger is a common agreement on an algorithm? How are contracts enforced when they are on a blockchain? What happens to the government’s ability to tax when most transactions can take place anonymously on a blockchain? What happens to the government’s ability to regulate anything on a ledger (and most regulated things are) when that ledger is on a blockchain? What happens when anybody with a computer can start a new currency (there are over 50 cryptocurrencies already, and probably many more I don’t know about)?

    And, of course, there will entirely new problems to deal with–wallet hacking, 51% attacks, etc. We haven’t even begun to discover those.

    Thus, although I am not sure how or who or when, I’m sure there will be POLITICAL revolutions because of blockchain technology. There’s been a lot of talk about “populism” here and abroad with the obvious growing dissatisfaction at the performance of the global elite. But much of their power stems from their control of these highly centralized systems. Obviously, the global elites will not give up their wealth and power willingly. But what happens when they discover those institutions are no longer needed and have been supplanted? And who will be in the new elite?

    I’m still very much at the research stage, although I do believe that there is a LOT of money to be made. However, I have concluded that mining for cryptocurrencies is probably not the best way to go. As a tech guy, I could build a fairly powerful cryptocurrency mining engine. But the payoff is incremental and random. Turn on your engine and you could find a bitcoin tomorrow (Hallelujah!) or you could grind for 5 years (with 5 years worth of electrical bills) and never find one. Most of the other cryptocurrencies have many more coins to be found, but it is still a random process of finding one. Pools are a way to mitigate that risk, but the returns are correspondingly lower. Like all gold rushes (and that is what blockchain is right now), the real money is not made by the miners, but by the ones who sell goods and services to them.

    I’ve held extensive discussions with a Senior VP at one of the largest brokerage houses in the US and we are both convinced that there are potential 100-1 or 1000-1 payoff opportunities in blockchain technology. But what they are, exactly, remains unclear.

  3. First point: When I followed your link, AVAST popped a warning and blocked the mining script. This was not surprising, I rather expected it. In this case a false positive, but it does parallel some recent malware.

    PenGun’s point: The fate of successful crypto/pseudo currencies will be for the value to equilibrate just above the break-even for the power to produce it on the most efficient hardware with access to the lowest cost of electricity. There may be brief arbitrage opportunities on the way down but the future is in those places in China where electricity is essentially free. Nothing producible on a common PC will have any value, let alone, Java Script.

    The fate of the unsuccessful ones is to be ignored.

    If Block Chain has a value, it will be in things like transaction authentication. (Scott’s point) It will have to become exponentially more efficient in order to compete with other crypto schemes that are designed from the outset for computational efficiency rather than the opposite.

    Otherwise, an interesting concept.

  4. PenGun – Sure, an antminer is *a* way to do it. Unless you’re saying that the miner script doesn’t actually generate income from a mining pool, it’s not *the* way to do it.

    Yes, if you’re paying for the electricity on the computer and you’re willing to devote the minimum effort and money necessary for the project, the antminer is the way to go.

    But if you’re looking to toss a bit of money in a virtual tip jar without having to sign up or do anything more than approve a script running, this works too. The vast majority of the population is fine with converting a hundredth of a cent of their electricity as they’re reading a web page, so long as they’re not being robbed and it’s going to a good cause.

    Scott Eudaley – You’re looking at efficiency and you’re probably correct. Mining is a scheme that is not very profitable on average so long as electricity is unsubsidized. If you’ve got dirt cheap electricity or even electricity that somebody else is paying for, things get more interesting. The randomness of mining is generally fixed by joining a reasonably large mining pool. You get a portion of the income of all pool participants.

    I’m not looking at efficiency. I’m looking at transactions that won’t happen at all absent this sort of arrangement. Making those transactions happen creates entirely new markets. Imagine if clicktivism was actually effective because it produced money that was applied to the problem. Now you’re not just talking about empty virtue signalling but real resources devoted to the problem.

    MCS Yes, I expect that I’ll be having conversations with the anti-virus people to get these things white listed. Thanks for the heads up.

    As I said both to PenGun and Scott, this is not a get rich quick scheme but rather an exercise in lowering the amount of money that is practical to devote to a project or cause before the transaction costs swallow up the whole value of what you’re willing to give. By creating hashes in a mining pool, you’re actually not creating transactions on the blockchain. If that tiny creation of value can be tracked and accurately assigned to an endowment, I believe you have a way to privately finance public goods.

  5. If you want you can set up in Arizona. There are some people who have built solar powered setups that do generate revenue. It’s just that the gold rush is over and now we mine the hard stuff.

    As MCS points out the Chinese have some places with very low power costs.

    It will pay for it’s self, so you can start mining as a hobby and try various ways to make it work better. I might even do that, just for fun though. If you are serious, disappointment lurks in your future.

  6. PenGun – The security of any particular blockchain depends on the portion of available processing power devoted to maintaining the integrity of the ledger. 51% attacks are always a risk.

    Again, you’re looking at the wrong thing. There are certain projects that have real demand but are foundering on the difficulty of moving tiny amounts of money into the project. Mining in a pool with an account controlled by someone else is a way to move money, not earn it.

    Yes, nobody talks about mining this way. That’s why it’s innovative. Converting electricity to money that lands in your account demands that you pay less electricity than you get in earnings. Converting electricity to money that lands in someone else’s account is worth doing if the electricity spent minus the money that other person earns is less than the transaction costs of transferring money some other way.

    When all you’ve got is dollars, you can’t send less than a mil under any circumstances. It’s the smallest unit of the currency. The real world minimums are orders of magnitude higher. To buy cryptocurrencies and send smaller amounts is expensive in terms of time, setting up a wallet, buying the currency, and then doing the transfer.

    The cheapest, pretty often, is to click to activate a widget and run it for awhile. It’s an activity available to anyone on the Internet and is dead simple to do.

  7. There are numerous ways of using bitcoin. Wallets of various kinds abound and fractional payments are the norm for crypto currencies.

    “The security of any particular blockchain depends on the portion of available processing power devoted to maintaining the integrity of the ledger. 51% attacks are always a risk.”

    I don’t even know what you are talking about. Security is not particularly hard.

  8. If a Java Script miner produces 1 coin per minute, well optimized X86 code should produce 1,000 to 10,000. Move to a GPU with dozens to hundreds of cores specifically designed for running numerics, probably another factor of 10 at least. Design an ASIC and you can run 100’s to 1,000’s for the power of a single PC. This is where Bit Coin is now.

    All block chains are subject to this math. Bit Coin, by being first, and by being the favorite of every shady operator around is in a special position. There is a significant demand for it and the algorithm requires more effort to mine each succeeding coin which limits the supply. Yet the marginal value of a Bit Coin versus the cost of production is close to zero. I can see no reason for crypto currencies to behave any differently then any other commodity with an almost infinitely elastic supply.

    The only reason that small time gold miners can live in the same universe with huge heap-leach mines is the very uneven distribution of gold. If gold was distributed at its average abundance, nothing short of a gargantuan operation could possibly break even.

    There is also the un-quantifiable risk that a way to short circuit the process could be discovered at any time and be exploited in secret. If it were disclosed, it would be the equivalent of transmuting gold into nothing at all.

    As far as micro payments go, I don’t see this as the answer.

  9. PenGun – Look up 51% attacks. It’s not that security is conceptually hard. Blockchains are known vulnerable to a sort of expensive heckler’s veto. If someone wants to poison your blockchain ledger and devotes more computing resources to spreading a lie than the truth has, the lie will be accepted on the chain and there’s really little you can do about it without a trusted authority’s ability to intervene. The point of most of the popular cryptocurrencies is to avoid having trusted authorities.

    The more hashes per second that are honestly calculating the truth, the more an attacker has to devote to corrupt a chain.

    MCS – Fair enough on most of your comment but the supply of bitcoin is limited by rule and not for any other reason.

    If the marginal value of 1BTC is ~1BTC then the transaction cost of producing a satoshi (bitcoin’s smallest unit of account) for somebody else’s benefit is the inefficiency of your production vs the most efficient producers. The person receiving the benefit has a marginal cost of zero. They do no work. The person doing the work is not trying to make money. They’re trying to donate it.

    Some people would prefer to take some coin and just send it, but if you don’t already have cryptocurrency, there’s a pretty hefty buy in to get some that far exceeds the inefficiencies that you’re talking about at the amount of money generated.

    Donation micro-transactions are different than production or consumption micro-transactions.

  10. There are ways to block this activity as really it’s not useful for the user. It allows people to run a distributed miner on your machine, to their benefit.

    Ad Block will block this activity, among many apps that will.

    “Fair enough on most of your comment but the supply of bitcoin is limited by rule and not for any other reason.”

    Not by rule, it’s part of the design, the math, it’s how scarcity is generated. You display a fundemeental misunderstanding here.

  11. PenGun – What is the design of a cryptocurrency if not a series of rules? If you’re dead set on the word design, I’ve no objection to it and don’t think I’ve changed anything of substance.

    As for blocking the widget, yes, you can make it so that the javascript doesn’t run. The whole point is to harness the rules of mining in order to facilitate a value transfer in a way that’s comfortable for the clicktavist set. This method is not the highest efficiency method. If you’re already a holder of cryptocurrency, it’s not even the fastest method. But the set of people who don’t want to think too much about this stuff and are willing to contribute a tiny amount so long as it’s not too much trouble is a pretty hefty portion of the population.

    Or at least I think the set is well populated.

  12. No crypto currency producible with a Java Script ap of any kind will ever have a value appreciably greater than zero. Any hint of value will disappear under a flood currency.

    Thus its use as a micro payment, while ingenious, and admirable is not practical. Advertising was the ideal way to produce small increments of value in bulk. At this point, its been gamed so many ways that only a few operators seem to be able to generate any revenue.

    I expect most ICO’s will disappear without a trace. How much scrutiny, what kind and for how long will it take for a new crypto currency to be accepted? It’s not like there will ever be some sort of government seal of approval. My math surely isn’t up to it and there is a long history of problems that were thought unsolvable that suddenly are. The process for Bit Coin took years and isn’t over.

  13. MCS – The statement “a value appreciably greater than zero” is a number but I don’t know what that number is. It’s the nice, comfortable, blue sky type of concept that is itself relatively low in value. No matter how small the value created on an individual basis, the sum total could become relevant if there are enough participants running the code.

    What order of magnitude of participants are you thinking would be running this? I’m thinking thousands to tens of thousands of people in order to make a difference. How many would need to run for you to concede that it’s creating hashes at “a value appreciably greater than zero”?

    ICO’s are mostly irrelevant for this discussion. They are startup currencies seeking to find product/market fit and become a going concern. Becoming accepted means having enough participation in defense of their blockchain that they become resistant to knuckleheads like Mircea Popescu who would run a 51% attack on a currency that drew his attention just for the lulz. And he has.

    From an ICO’s perspective, this type of javascript work would be an odd sort of mining pool buttressing up their hash rates and making them more resistant while having a lower overhead because you only have to talk to the person controlling the web page, not the people running the hashes. That’s orders of magnitude of complexity thrown out of their lives.

  14. A very small number.

    Obviously, if it generates enough revenue to deposit in a bank, I’ll be wrong. Won’t be the first time but I’m not going to hold my breath.

    I wouldn’t mind being wrong. If this actually worked, it would open up a lot of possibilities.

    Let us know how it turns out.

  15. “How many would need to run for you to concede that it’s creating hashes at “a value appreciably greater than zero”?”

    I doubt there enough people who will run this, to make any amount you can use.

    “The Bitcoin network has more than 1.7 Ehash/s (Oct 2016) now which is 1,700,000,000,000 Mhash/s. Your graphics card will be running full blast to churn out a few hundred Mhash/s, your CPU maybe a few dozen.”

  16. Don’t be ridiculous, no such “defense” is possible. The happy marketing faggots club couldn’t do it for DOGE, MIT couldn’t do it for ETH and the USG arrayed couldn’t do it for BCH. It can’t be done.

  17. LOL. I’m downloading bitcoins’s blockchain now, some 153 G right now.

    I get as a poor person a GST kickback, about $135 CAN every 3 months or so, and I thought I’d invest that in the blockchain.

  18. So I own 0.0139 BTC right now, $100 CAN. I bought that online at a place with a wallet, so I can leave it there, or transfer it to my wallet on my machine.

    A new toy. Now I’m waiting for it to fall as it does on a regular basis. Goldman Sachs expects a moderate one soon and I have another $100 ready. I’m having such a good month I could make that $200 if it falls a lot. ;)

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