E-CASH/ DIGITAL CASH

E-cash
•Electronic money is broadly defined as an electronic store of monetary value on
a technical device that may be widely used for making payments to
undertakings other than the issuer without necessarily involving bank accounts
in the transaction, but acting as a prepaid bearer instrument. 2)
•Concept
•Digital cash is a system of purchasing cash credits in relatively small amounts,
storing the credits in your computer, and then spending them when making
electronic purchases over the Internet.
•Digital Cash (also known as e-currency, e-money, electronic cash, electronic
currency, digital money, digital currency, cyber currency) refers to a system in
which a person can securely pay for goods or services electronically without
necessarily involving a bank to mediate the transaction.
Basic Model of Digital Cash transaction
•A Digital Cash transaction usually involves three types of users:
•a Payer (P) or consumer
•a Payee (R), such as a merchant
•a financial network like a Bank with whom both Payer and Payee have accounts.
•And usually involves three transaction:
•Withdrawal, the Payer (P) transfer some money (token) from his/her account to
her wallet (which could be a computer or smart case)
•Payment, the Payer (P) transfer the withdrawn money (token) to the Payee's
(R) wallet
•Deposit, the Payee (R) transfers the received money (token) to his/her account.
Process
Important properties of a Digital Cash
system
•Security: The most important feature of a Digital Cash system is that it should ensure a
high-level of security through sophisticated authentification techniques, Which means
it should not be copied or reused by the payer, the payee or anyone else.
•Portability: The use of such a system should be independent of the location. The
transactions can be carried over computer networks and into storage devices and vice
versa.
•Transferability: The user can spend the money received in payment without having to
contact a bank for authentication
•Divisibility: This allows the digital cash to be sub-divided into smaller denominations
and the customer can choose to spend only a part of it.
•User friendly: Both the payer and payee should be able to use it with ease which would
make it widely acceptable.
Types of Electronic Cash

•Anonymous: This kind of e-cash works just like cash.

Once a specific amount is withdrawn from an
account, it can be used (or misused) without leaving
a visible trail.
•Identified: We know this category popularly as
PayPal or WebMoney. The usage and transfer of
money in these systems is not entirely untraceable.
Types of electronic cash schemes:

• Online: Obviously, it means that one needs to correspond with a bank (via the internet).
The bank, then, gets in touch with the third party.
• Validity of the transaction is checked while it is occurring. The coin is sent back to the
bank or similar authority during the transaction to verify authenticity of coin and that it
was not spent before. The advantage is that the bank can check and prevent illegal
operations as they are happening unlike the case in off-line systems.
• Off-line: One can directly conduct the transaction without any interference from the bank.
• validity of the transaction is checked after the transaction has occurred. The merchant or
bank can conduct a series of calculation to reveal the customer’s identity when a
security breach has occurred.
• Smart Card: Smart cards are like credit cards with a computer chip in them that stores the
holder's money-related information. They are used in digital cash applications.
 Pros & Cons
Pros
• Anonymity and non-traceability can be
maintained with e-cash.
• User ids are kept highly confidential.
• There are hardly any issues regarding
"double spending".
• Real-time checking of all transactions
makes the possibility of multiple
expenditures negligible.
• There is no requirement of additional
secure hardware.
• The existing POS (point of sale)
hardware can be updated and used.
Cons
• There are communication overheads;
security and anonymity cost become a
bottleneck of the system. This can
happen at times during real-time
verifications.
• The bank has to maintain massive,
detailed, and confidential databases.
• The bank needs to synchronize its
server every time transaction is made. It
would be insanely impractical to
maintain.
Summary
•Ecash
•Types
•Advantages & Limitations