What if every click you made online cost just a fraction of a penny? What if your favorite news site, your go-to streaming service, or even your daily email usage could be paid for at tiny increments, rather than one big chunk at the end of the month? This vision—where nearly every digital interaction could be monetized by "micropayments"—has hovered over the internet economy since its earliest days. But as Nick Szabo’s seminal 1999 paper, Micropayments and Mental Transaction Costs, pointed out, there’s a lot more than technology standing in the way.
The Core Arguments from Szabo’s 1999 Paper
In Micropayments and Mental Transaction Costs, Nick Szabo pinpointed a truth that technologists often overlooked: while computational costs can be driven down, the mental overhead of deciding, monitoring, or worrying about every tiny expense remains stubbornly high.
Sources of Cognitive Costs
1. Uncertain Cash Flows
2. Assessing Product Quality
3. Decision-Making Complexity
Why Micropayments Stalled—Despite New Tech
1. The Early "Internet Payment" Hype
2. The Rise of "Free" Services Funded by Ads
3. "Intelligent Agents" and AI: Early Promises, Slow Results
Has Anything Changed in 25 Years?
1. User Interfaces Have Improved
2. Blockchain & Cryptocurrencies
3. AI Enters The Chat
Looking Ahead: Are We Ready for a Micropayment Renaissance?
• Pay-Per-API Call
• Tips & Donations
Clever Design for Seamless Experiences
• Automated Rules & AI
• Bundled Invoices
• Intuitive Feedback
Conclusion: Szabo’s Insights Still Rule
Nick Szabo’s 1999 paper has proven remarkably prescient and held up after all these years. Even as technology has advanced, the central problem remains: People don’t want to think about small payments all the time.
References & Further Reading
• Szabo, N. (1999) "Micropayments and Mental Transaction Costs"
• Fishburn, P., Odlyzko, A. M., and Siders, R. C. (1997) "Fixed fee versus unit pricing for information goods"
• Nielsen, J. (1998) "The Case for Micropayments"
• Rivest, R. L. and Shamir, A. (1996) "PayWord and MicroMint—Two Simple Micropayment Schemes"
This is a guest post by Jacob Brown. Opinions expressed are entirely their own and do not necessarily reflect those of BTC Inc or Bitcoin Magazine.
Frequently Asked Questions
How much of your portfolio should be in precious metals?
Before we can answer this question, it is important to understand what precious metals actually are. Precious Metals are elements that have a very high relative value to other commodities. This makes them very valuable in terms of trading and investment. Gold is by far the most common precious metal traded today.
However, many other types of precious metals exist, including silver and platinum. The price of gold tends to fluctuate but generally stays at a reasonably stable level during periods of economic turmoil. It is also relatively unaffected both by inflation and deflation.
In general, all precious metals have a tendency to go up with the market. However, the prices of precious metals do not always move in sync with one another. If the economy is struggling, the gold price tends to rise, while the prices for other precious metals tends to fall. Investors expect lower interest rates which makes bonds less appealing investments.
When the economy is healthy, however, the opposite effect occurs. Investors are more inclined to invest in safe assets, such as Treasury Bonds, and they will not demand precious metals. They are more rare, so they become more expensive and less valuable.
It is important to diversify your portfolio across precious metals in order to maximize your profit from precious metals investments. Additionally, since the prices of precious metals tend to rise and fall together, it's best to invest in several different types of precious metals rather than just focusing on one type.
Can I keep physical gold in an IRA?
Gold is money. Not just paper currency. People have used gold as a currency for thousands of centuries to preserve their wealth and keep it safe from inflation. Investors use gold today as part of their diversified portfolio, because it tends to perform better in times of financial turmoil.
Today, Americans prefer precious metals like silver and gold to stocks and bonds. Even though owning gold is not a guarantee of making money, there are many reasons why you might want to add gold to your retirement savings portfolio.
One reason is that gold historically performs better than other assets during financial panics. Between August 2011 to early 2013, gold prices rose close to 100 percent while the S&P 500 fell 21 per cent. Gold was one of the few assets that performed better than stocks during turbulent market conditions.
One of the best things about investing in gold is its virtually zero counterparty risk. Even if your stock portfolio is down, your shares are still yours. But if you own gold, its value will increase even if the company you invested in defaults on its debt.
Finally, gold offers liquidity. You can sell your gold at any time without worrying about finding a buyer, which is a major advantage over other investments. Because gold is so liquid compared to other investments, buying it in small amounts makes sense. This allows you to profit from short-term fluctuations on the gold market.
How does a Gold IRA account work?
Gold Ira accounts are tax-free investment vehicles for people who want to invest in precious metals.
You can purchase physical bullion gold coins at any point in time. You don't have to wait until retirement to start investing in gold.
An IRA lets you keep your gold for life. Your gold holdings won't be subject to taxes when you pass away.
Your heirs inherit your gold without paying capital gains taxes. Because your gold doesn't belong to the estate, it's not necessary to include it on your final estate plan.
First, an individual retirement account will be set up to allow you to open a golden IRA. After you have done this, an IRA custodian will be assigned to you. This company acts as an intermediary between you and IRS.
Your gold IRA custodian will handle the paperwork and submit the necessary forms to the IRS. This includes filing annual returns.
Once you've set up your gold IRA, it's possible to buy gold bullion. Minimum deposit required is $1,000 A higher interest rate will be offered if you invest more.
You will pay taxes when you withdraw your gold from your IRA. If you take out the whole amount, you'll be subject to income taxes as well as a 10 percent penalty.
However, if you only take out a small percentage, you may not have to pay taxes. However, there are some exceptions. There are some exceptions. For instance, if you take out 30% or more from your total IRA assets, federal income taxes will apply plus a 20 percent penalty.
It's best not to take out more 50% of your total IRA investments each year. You'll be facing severe financial consequences if you do.
What precious metals can you invest in for retirement?
These precious metals are among the most attractive investments. Both are easy to sell and can be bought easily. Consider adding them to the list if you're looking to diversify and expand your portfolio.
Gold: This is the oldest form of currency that man has ever known. It's stable and safe. It's a great way to protect wealth in times of uncertainty.
Silver: Silver is a popular investment choice. It's a good choice for those who want to avoid volatility. Silver, unlike gold, tends not to go down but up.
Platinium: Platinum is another form of precious metal that's becoming increasingly popular. Like gold and silver, it's very durable and resistant to corrosion. It is however more expensive than its counterparts.
Rhodium – Rhodium is used to make catalytic conversions. It is also used to make jewelry. And, it's relatively cheap compared to other types of precious metals.
Palladium: Palladium, which is a form of platinum, is less common than platinum. It's also much more affordable. For these reasons, it's become a favorite among investors looking to add precious metals to their portfolios.
How can I withdraw from a Precious metal IRA?
First decide if your IRA account allows you to withdraw funds. Then make sure you have enough cash to cover any fees or penalties that may come with withdrawing funds from your retirement plan.
A taxable brokerage account is a better option than an IRA if you are prepared to pay a penalty for early withdrawals. You will also have to account for taxes due on any amount you withdraw if you choose this option.
Next, calculate how much money your IRA will allow you to withdraw. This calculation depends on several factors, including the age when you withdraw the money, how long you've owned the account, and whether you intend to continue contributing to your retirement plan.
Once you know how much of your total savings to convert to cash, it's time to choose the type of IRA that you want. Traditional IRAs let you withdraw money tax-free after you turn 59 1/2, while Roth IRAs require you to pay income taxes upfront but allow you access the earnings later without paying any additional taxes.
Once you have completed these calculations, you need to open your brokerage account. Many brokers offer signup bonuses or other promotions to encourage people to open accounts. To avoid unnecessary fees, however, try opening an account using a debit card rather than a credit card.
When you do finally decide to withdraw from your precious metallic IRA, you will need a safe space where you can safely store your coins. Some storage facilities will accept bullion bars, others require you to buy individual coins. You will need to weigh each one before making a decision.
Bullion bars are easier to store than individual coins. You will need to count each coin individually. However, individual coins can be stored to make it easy to track their value.
Some prefer to store their coins in a vault. Some prefer to keep them in a vault. Regardless of the method you prefer, ensure that your bullion is safe so that you can continue to enjoy its benefits for many years.
What is the tax on gold in an IRA
The fair value of gold sold to determines the price at which tax is due. When you purchase gold, you don't have to pay any taxes. It isn't considered income. If you sell it later you will have a taxable profit if the price goes down.
As collateral for loans, gold is possible. Lenders look for the highest return when you borrow against assets. In the case of gold, this usually means selling it. However, there is no guarantee that the lender would do this. They may keep it. They may decide to resell it. You lose potential profits in either case.
To avoid losing money, only lend against gold if you intend to use it for collateral. Otherwise, it's better to leave it alone.
Statistics
- You can only purchase gold bars at least 99.5% purity. (forbes.com)
- Contribution limits$6,000 (49 and under) $7,000 (50 and up)$6,000 (49 and under) $7,000 (50 and up)$58,000 or 25% of your annual compensation (whichever is smaller) (lendedu.com)
- The price of gold jumped 131 percent from late 2007 to September 2011, when it hit a high of $1,921 an ounce, according to the World Gold Council. (aarp.org)
- (Basically, if your GDP grows by 2%, you need miners to dig 2% more gold out of the ground every year to keep prices steady.) (smartasset.com)
- If you take distributions before hitting 59.5, you'll owe a 10% penalty on the amount withdrawn. (lendedu.com)
External Links
cftc.gov
finance.yahoo.com
wsj.com
- Saddam Hussein's Invasion Helped Uncage a Bear In 1990 – WSJ
- You want to keep gold in your IRA at home? It's Not Exactly Legal – WSJ
investopedia.com
- Do You Need a Gold IRA to Get Retirement?
- What are the Options Types, Spreads, Example and Risk Metrics
How To
3 Ways To Invest in Gold For Retirement
It's important to understand how gold fits in with your retirement plan. There are several options to invest in precious metals if your employer has a 401k. You might also consider investing in gold outside your workplace. For example, if you own an IRA (Individual Retirement Account), you could open a custodial account at a brokerage firm such as Fidelity Investments. You may also want to purchase precious metals from a reputable dealer if you don’t already have them.
These are the three rules to follow if you decide to invest in gold.
- Buy Gold with Cash – Avoid using credit cards or borrowing money to fund investments. Instead, cash in your accounts. This will protect your against inflation and increase your purchasing power.
- Own Physical Gold Coins – You should buy physical gold coins rather than just owning a paper certificate. It's easier to sell physical gold coins rather than certificates. Physical gold coins are also free from storage fees.
- Diversify your Portfolio – Don't put all your eggs in one basket. This means that you should diversify your wealth by investing in different assets. This can reduce market volatility and help you be more flexible.
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By: Jacob Brown
Title: Szabo’s Micropayments and Mental Transaction Costs: 25 Years Later
Sourced From: bitcoinmagazine.com/technical/szabos-micropayments-and-mental-transaction-costs-25-years-later-
Published Date: Tue, 11 Feb 2025 18:21:31 GMT
