Micropayments were always a part of the World Wide Web vision.  A set of standards and an HTTP Error message 402 was even created to handle instances where a micropayment was required but not received. Why didn’t they happen?…

The World Wide Web. The original vision of the World Wide Web was an underlying web infrastructure that included a vision to enable instant micropayments for online services without need of login, subscription or payment processors.  It was to be a digital mirror of taking coins out of your pocket and putting them into a vending machine. A digital consumer could purchase a single video, song, or article. Businesses could micropay multiple services (e.g., meeting transcriptions, document processing, satellite images, chatbot conversations). Citizens could micropay for myriad public sector services covering transit, parking and much more. None of this happened and we got the commercial Web instead.

The Micropayments Trllemma blocked digital micropayments. Three challenges blocked the vision. First, the cost was too high to efficiently process payments under a dollar. Second, the technology didn’t exist to give micropayers control of their funds to micropay anywhere without being locked in.  Third, there was no universal single tap and pay online checkout experience, which degraded convenience. By 1999 the first wave of micropayment initiatives were shelved. Over the next two decades over 100 projects were launched. These attempts didn’t survive the double hit of the market ‘free content for advertising’ wave and the cost, control, and convenience trilemma of problems.

Micropayments work in the physical world with cash. Micropayments have always existed because people paid each other with coins and bills.  Physical micropayments work because the buyer and seller in a transaction do all the work bringing cost down. Physical micropayments work because coins and bills are portable between systems (e.g., bag, wallet, pocket, safe) and the bearer exercises strong control. Physical micropayments work because it’s convenient for the micropayer.  These qualities solve for cost, control and convenience and are different to how digital database and blockchain systems function. 

Finding a digital way to replicate physical assets transaction would solve the aforementioned trilemma challenge.

TODA began in early 2016, when Toufi Saliba called Dann Toliver at four in the morning with a wild idea…

That answer to the trilemma challenge is TODA File technology, the result of a 6 year deep-tech initiative led by researchers from TODAQ Labs, Cambridge University, the CRDC, UCL and  others.  Our thanks to the UKRI Ministry and ARM Technologies for their support.

TODA began in early 2016, when Toufi Saliba called Dann Toliver at four in the morning with a wild idea. They were experiencing cost, throughput, and latency issues while scaling applications with blockchain components, like a PKI for end-to-end encrypted email. The idea was to give each file a unique number, and use a Merkle tree and a fixed number of validators to ensure ownership was limited to a single node in each block of time, using just the computational power of the devices themselves. They worked on it as a science experiment for months, trying to get traction on the problem, until the pieces finally started to fit together.

In the summer of 2016 Lila Tretikov and Todd Gebhart came onboard and helped guide the early strategic steps. Later that year Hassan Khan joined forces, forming TODAQ, the first venture on TODA. Adam Gravitis took the CTO role at TODAQ in spring 2017, managing the engineering team’s work on the reference implementation of the protocol. The researchers, implementors, executives, and partners who have joined along the way would fill more than this article.

The first use case we focused on was supplementing cash in cash-primary regional economies in a nonextractive way. Doing this would improve countless lives by enabling efficient delivery of financial services. Regional products like M-Pesa and bKash help prove this hypothesis. A globally available system would have the potential to help billions of people, and a system without profit extraction could offer even greater benefits.

Doing this turns out to be rather difficult. In fact it’s impossible without something like TODA. In a world where digital things are just information, a third party must always manage that information. They must be compensated for that work. That compensation extracts value from regional economies. Deliver $100 in aide and move it around via credit cards, and in just a few years over $90 of it has been extracted from that regional economy. With the current implementation of blockchains like Ethereum and Bitcoin there can even more extraction. This is not a small problem.

It’s hard even with TODA. Building the infrastructure to maintain a locally operated, globally interoperable TODA installation can be done, with relatively minor expenditures. Even better would be relying solely on people’s mobile devices, an active area of research.

Having options like those available at all is due to having this hard case as our primary target. This shaped the protocol, forced us to hack away at inefficiencies and to focus maniacally on places of value leakage.

We embraced fragility, turning all the robustness and resiliency knobs down. This gave us access to the hardest use cases, those most sensitive to extra economic weight like micropayments, at the core protocol level. Adding robustness for use cases that need it is easy in comparison: you can easily have as much robustness as you are willing to pay for.

It also forced us to prioritize asymptotic computational complexity over constant factor optimisations. How adding more nodes impacts a single transaction, for example, is central to the protocol. How much work a single transaction requires in isolation is secondary. Indeed, there are a great many optimisations we could bring to TODA, but they add complexity and need to be weighed carefully. Asymptotic limit usage scaling. Complexity limits feature scaling. Flat foundations are easier to build on.

We made a number of other choices in those early days that were counterintuitive or contrary to market trends. We got a lot of pushback for it. In some cases even we weren’t sure they were right, but in hindsight it’s clear they laid the groundwork for TODA being what is today.

We decided early on that we didn’t want the TODA File Protocol to be a source of revenue for us, or for anyone. It was clear that the economics of blockchains, which are necessary to allow them to spread trusted state management over many untrusted nodes, also preclude their use in cost-sensitive use cases, and trend toward volatility, extraction, and consolidation. The deep integration of tokens causes them to behave more like products than protocols. Important products, that provide an important service, but TODA needed to take a different course to achieve our goals. So we worked to remove the internal currency from the protocol, and focused the revenue model on partnering to build products and services on top of TODA while leaving the protocol pure.

Internal protocol currencies cover a multitude of sins. Any time there’s an incentive misalignment, or extra work needs to be done, or you need to keep someone honest, you can throw economics at it to sort it out.

It’s the duct tape of decentralised protocol design. If the protocol doesn’t understand a currency then those patches have to be torn out, and all those areas ground down and restructured. It was a lot of work, and it wasn’t clear it was even possible.

When we finished, though, what we were left with was something small and simple and clean. A protocol that describes how to create a globally unique digital thing, how to efficiently transfer the ownership of that thing, and little else.

By extracting the base currency we’d forced efficiencies, removed a variety of economic weaknesses, and made it a protocol instead of a product. Removing the internal currency means all things created on TODA are treated as equals. It means the protocol works for any kind of asset. Anything you can print on paper, we used to say. And more, as it turned out.

Another big decision came in balancing privacy and compliance. This is actually quite a bit easier in a cash-style system than a stateful, managed model. Cash already has a decent story around privacy and anonymity, but regulatory compliance is difficult because it’s hard to prove where it came from. TODA’s proof of provenance changes this dynamic, though, by allowing files to have additional metadata attached during each transfer. This metadata could contain identifying material, or proof of limited attestations (like “I am legally allowed to drive” or “this is a legitimate business account”). Voluntarily adding this to the file’s POP would allow entities like financial institutions, governments or other large organizations to fulfill their compliance requirements.

In order to preserve the ability for this particular file to be used in those use cases, then, one ought to ensure that its POP contains all the required material. Otherwise it will be difficult to use in those situations, reducing the utility of the file. Thus we render unto governments their due for assets they manage, while keeping impedance low for things like stickers, songs, and micropayment assets.

Over time we came to identify the qualities physical things had that digital things lacked as transferability, agency, possession, and permanence. Transferability means when the owner transfers it they don’t need to notify a third party. No one else has to do any work, no one else needs to be compensated. We refer to this ability to be transferred losslessly as value preservation. Agency means you can do all the things you can usually do with a physical item: give it away, sell it, rent it, lend it, and so on. Possession means the source of truth of the ownership is in your hands, and decisions made in some corporate headquarters can’t take it away from you. And permanence means if you take care of it well there’s a chance you can pass it down to your kids. Those qualities imbue every file in TODA, providing an important part of the foundation for restoring ownership and control of identity, assets, and data to every individual human.

Today, the TODA File Protocol has been implemented as a Web integrity network. The integrity network powers issuance, updating and transferring between any system of a new type of unique digital bearer asset, called a TODA file.  TODA files are a new file type that are digitally unique bearer assets (e.g., coins, bills, credentials, and paper documents. TODA files can be controlled, stored, and updated by any empowered system, and can be transferred without need to connect to the issuing system. These qualities strip transaction costs, restore bearer control, and extend the convenience of universal tap and pay of physical store checkout to the online experience.

During 2023, the first version of a working micropayments solution called TAPP (Tapp And Privately Pay) was built by TODAQ Micro which you can find out more about here: https://www.todaq.net. It’s a low code solution allowing any digital content or service to accept micropayments, provide instant paybacks and micro-distributions.  Everyone controls their own assets and records, and best of all anyone can issue any type of asset that can be micro transacted as well.

Rather than explain a brand new tech stack, it seemed easier to just put it into everyone’s hands with an accessible, powerful and fun demo.  So the team went retro. In addition to bringing on sports, media, entertainment, gaming, healthcare, education and AI partners to deploy micropayments, we’re very pleased to release old game with a new twist.

PONG, created in 1972 was one of the earliest video games.  It is available online for free and is largely unchanged from it’s basic 2D form from 52 years ago.  Earlier variations of micropong included a micropong where the form factor reduced the playable game to the size of a penny, and a micropong version that allowed players to control the game through a microphone.  As homage, we thought the natural next step of micropong, was a micropayable release that demonstrated the capabilities of TODA files and TAPP micropayments.  Given the years of work that led to that moment, we had no idea that it would take another 8 months of work to make the transaction dance of micropayments, instant paybacks, micro-distributions, and more flow in just the right way.

This latest version of micropong fuses micropayments, gaming, rewards, and music.   The micropong experience starts when an unknown visitor goes to the micropong  website.  They instantly pay 30 cents, no processing fees, and start a 2 person PVP game. Player 1 also picks a song which will play for both players. Player 1 invites one of their friends to join, who also micropays 30 cents and joins as Player 2. The game session now has 60 cents. They play each other to be the first to 10 points. The winner is instantly paid 40 cents, the music artist is instantly paid 10 cents, and the game treasury gets 10 cents. The music studio that helped produce the chosen song is paid a penny from the artist’s 10 cents.  The audio marketplace that provided beats and samples for the song is paid 2/10th of a penny from the artist’s 10 cents.  Three emerging and ground breaking musicians - Tara Jam, Sean Leon, and Nanu - joined the micropong team so game players could enjoy their music.   Their larger goal was to change the game and show that fair, transparent, and real-time compensation for all artists is possible.

For consumers, these kind of one TAPP micropayments will enable a new complementary option to subscriptions. Non-subscribers can directly micropay for content or micropayable content can be shared by empowered subscribers. For streaming and publishing platforms, this will add revenue streams. It’s not just a consumer thing, platforms can instantly split a single micropayment and distribute to sharers, creators, copyright holders, suppliers, and their staff – removing nearly all back office and processing costs. These frictionless circular payment flows between systems and devices apply to cloud API marketplaces, embedded finance and insurance services, municipalities, e-commerce, and supply chains. New micropayment markets will bring power to creators and consumers, generate new sources of revenue, speed up cash cycles, and greatly reduce back-office costs and liabilities for businesses.