By Joanna Glasner

In the quest for a simple method to make micropurchases online, more people are finding it works to pay in gold.

Well, not real gold exactly, but its virtual equivalent, a currency known as e-gold. According to Douglas Jackson, a Florida doctor who founded e-gold seven years ago as an alternative online currency backed in gold, customers increasingly use the system to make micropayments for everything from music singles to online content.

In one typical 24-hour period last week, for example, Jackson said the firm processed about 36,000 payments for a dime or less. While the company makes barely any profit from the transactions, Jackson believes that allowing miniscule payments can benefit the company by bringing in new customers, who may later have larger accounts.

"It's not a great business to be in," Jackson said. "We mostly do it because we think it's a good way for someone to get some familiarity with the system."

Although it's unclear to what degree micropayments have helped in building up accounts, Jackson believes the eternal appeal of gold as a medium for storing wealth has helped e-gold stay afloat while other alternative online currencies have crashed and burned.

Currently, Jackson estimates, the company has more than $15 million worth of its currency (or 1.65 metric tons of gold) in circulation, with the largest number of customers coming from the United States, China and Indonesia. The way it works, customers put money into their e-gold account, and the company backs it up with the equivalent amount of gold, or another precious metal they choose, at current market prices.

While he's not surprised at customers' preference for holding money backed in gold, given that it can provide some protection from currency-market risks, Jackson says he hadn't counted on it taking off as a micropayment method.

He had good reason for doubt. Anyone with a cursory historical knowledge of the decline and fall of the great Internet bubble know that alternative currencies and micropayment schemes were supposed to collapse with the rest of the dot-bomb economy.

In fact, most of them did. Back in the late 1990s, when entrepreneurs with shortsighted business plans routinely received millions in venture capital, so-called Internet currencies abounded. But, faced with competition from credit card firms and a public reluctant to shell out real money for Internet money, they never took off.

Not surprisingly, the best-known brands (generally those who burned through the most money on advertising), including Flooz, Beenz and Cybergold, are no longer around. As for firms that dabbled in providing micropayments in established currencies, none fell into widespread use.

Now, however, with the early guard long vanquished, a handful of upstart firms are entering the micropayments fray. Two newcomers, BitPass and Peppercoin, similar to the popular PayPal service, build on the existing financial infrastructure of bank accounts and credit cards, as opposed to offering an alternative currency.

Since few websites can support themselves on advertising dollars alone, they say, the time is ripe for developing a micropayment business.

"The need is great on the part of sellers to be able to charge small amounts for their music, or shareware software, or just about anything you want to click on," said Kurt Huang, co-founder of BitPass, a startup based in Palo Alto, California, that is beta-testing a payment system for purchases as low as a penny.

The way BitPass works, customers set up an account with a minimum of $3, using their credit cards, and use the money to buy things from merchants that use the service. Merchants pay a transaction fee of 15 percent for items under $5 and 5 percent plus 50 cents for more expensive things.

Currently, only a few songs, photographs and other bits of content are up for sale. Since the launch of the beta test, though, Huang says he has received inquiries from several hundred merchants interested in using BitPass.

Perry Solomon, chief executive of Peppercoin, another payment processing startup, also believes that Internet users will be more receptive to websites that seek small payments rather than giving away their content for free.

"Consumers increasingly are aware of the fact that content that has value has to be paid for," he said.

To help them pay, Peppercoin, like BitPass, provides a system for processing transactions as low as a few cents. With its platform, developed by a duo of Massachusetts Institute of Technology professors, merchants pay a fee of about 7 percent per transaction.

With e-gold, the setup is a bit different. The company charges a 1 percent annual fee to maintain the account. When account-holders make purchases, they pay a fee of 1 percent or 50 cents, whichever is less, processed through e-gold's sister company, OmniPay.

Over the next few years, Solomon believes the market for micropayments will grow big enough to support several players. He expects the largest catalyst for growth will be enthusiastic adoption by merchants, musicians and publishers looking for ways to make a living from small contributions.

"It's really in at the lower price points, the sub-five dollar levels, that merchants are really feeling the pain economically," he said.

Andrew Whinston, director of the Center for Research in Electronic Commerce at the University of Texas at Austin, says that micropayment systems face the same "chicken and egg" problem they encountered years ago.

In order for people to use new payment systems, merchants must accept them. And in order for merchants to accept them, people must use them.