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Digital Cash (Anonymous Online Payment Scheme)

Digital Cash (Anonymous Online Payment Scheme)



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Published by Arif Masood
Anonymous online payment scheme digital cash
Anonymous online payment scheme digital cash

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Published by: Arif Masood on Mar 08, 2010
Copyright:Attribution Non-commercial


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Digital Cash
What is Digital Cash?
Digital cash aims to mimic the functionality of paper cash, by providing such properties of anonymity and transferability of payment. Digital cash is intended to be implemented data whichcan be copied, stored, or given as payment (for example, attached to an email message, or viaa USB stick, bluetooth, etc). Just like paper currency and coins, digital cash is intended torepresent value because it is backed by a trusted third party (namely, the government and thebanking industry).Most money is already paid in electronic form; for example, by credit or debit card, and by directtransfer between accounts, or by on-line services such as PayPal. This kind of electronic moneyis not digital cash, because it doesn't have the properties of cash (namely, anonymous and off-line transferability between holders).
How does Digital Cash work?
The figure shows the basic operation. User A obtains digital cash "coins" from her bank (and thebank deducts a corresponding amount from her account). The user is now entitled to use thecoins by giving them to another user B, which might be a merchant. B receives e-cash during atransaction and see that it has been authorized by a bank. They can then pay the cash into their account at the bank.
Ideal properties of a Digital Cash system
Ideal properties:
Alice should be able to pass digital cash to Bob without either of them, or others, able to alter or reproduce the electronic token.
Alice should be able to pay Bob without revealing her identity, and withoutBob revealing his identity. Moreover, the Bank should not know who Alice paid or whoBob was paid by. Even stronger, they should have the option to remain anonymousconcerning the mere existence of a payment on their behalf.
The security and use of the digital cash is not dependent on any physicallocation. The cash should be able to be stored on disk or USB memory stick, sent byemail, SMS, internet chat, or uploaded on web forms. Digital cash should not berestricted to a single, proprietary computer network.
Peer-to-peer payments are possible without either party required to attainregistered merchant status (in contrast with today's card-based systems). Alice, Bob,Carol, and David share an elaborate dinner together at a trendy restaurant and Alice
pays the bill in full. Bob, Carol, and David each should then be able to transfer one-fourth of the total amount in digital cash to Alice.
Off-line capable.
The protocol between the two exchanging parties is executed off-line,meaning that neither is required to be host-connected in order to proceed. Availabilitymust be unrestricted. Alice can freely pass value to Bob at any time of day withoutrequiring third-party authentication.
Wide acceptability.
The digital cash is well-known and accepted in a large commercialzone. With several digital cash providers displaying wide acceptability, Alice should beable to use her preferred unit in more than just a restricted local setting.
The digital cash should be simple to use from both the spendingperspective and the receiving perspective. Simplicity leads to mass use and mass useleads to wide acceptability. Alice and Bob should not require a degree in cryptographyas the protocol machinations should be transparent to the immediate user.
These are ideal properties, and no known system satisfies them all.
Categorization of payment systems
Implementations of payment systems that don't satisfy all the requirements may be convenientlyclassified according to these criteria:
Anonymous or identified.
Anonymous e-cash works just like real paper cash. Onceanonymous e-cash is withdrawn from an account, it can be spent or given away withoutleaving a transaction trail. This however, can be considered contentious. Identifiedpayment systems such as credit card payment, or payment by Paypal leave an audittrail, and the identity of the payee and the payer is known to the Bank, and (usually) toeach other.
Online or offline.
Online means you need to interact with a bank (via a network) toconduct a transaction with a third party. Offline means you can conduct a transactionwithout having to directly involve a bank.
Requiring a trusted platform.
Some protocols may require a trusted platform, such asa smart card. Smart cards are small plastic cards like credit cards, bearing a chip. Theyare tamper-resistant and can force Alice and Bob to adhere to the protocol. This isconvenient for the protocol designer, but threatens to tie users to proprietary interfacesand to remove transparency of the system. In contrast, internet protocols endorsed bythe IETF are open and can be interoperably implemented by anyone.
Two big problems
How can we guarantee anonymity? If the bank can see which coins it gives to A, and later it seesthe same coins coming back from B. it can infer that A has paid them to B (possibly via anintermediary).How can we avoid double spending? Because electronic files can be duplicated, a big challengefor digital cash is how to stop users spending money twice. On-line solutions achieve this by

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