Digital Money

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Digital Money

From the Netsurfer Focus on Cryptography and Privacy, volume 01, issue 03 of Wednesday 21 August 1995:

Applied cryptography for a little fun and mostly profit

While mail privacy is an important topic to many, cryptography also contributes to an area of far greater monetary value: online commerce. Public key cryptography enables digital signatures that verify the authenticity of a document, confirms the authorization of the sender, and non-repudiation of the transaction - all critical components to financial transactions. It contributes in other areas as well.

Timing is important to many transactions, e.g., tax returns must be filed by midnight, April 15, in the US, There needs to be a secure mechanism to timestamp the corresponding electronic documents. Surety Technologies provides a Digital Notary System that produces electronic timestamping. It is based on combining message digests (created as part of the digital signature process) and timestamp values from a tamper-proof clock to create "super" messages that can be uniquely identified. The contents of the original document need not be revealed to the timestamp service.

Current trends in electronic payment systems is firmly towards the development of a stored-value card. Money is "downloaded" and stored in an integrated circuit on the card. This can be for used for any purchase where cash can be used. Up to this point, cash has remained the last anonymous, untraceable method of payment. With the capabilities of a "smart" card such as the stored value card, all "cash" transaction information would also be captured, creating an associated loss of privacy. However, we need not lose our privacy to gain the use of electronic cash. Dr. David Chaum of Digicash has created algorithms for "blind signatures" that allow anonymous use of cash through a smart card mechanism. Whether this will be adopted by major card organizations, though, remains an open question.

A discussion of the psychology of currency and the related economics would be beyond the scope of these web pages and me :-) Suffice it to say that some of the characteristics of cash that make us comfortable accepting it include that our governments guarantee the currency (by gold or reputation), you can't spend a coin (or bill) more than once, coins can't be traced to the spender, and so on.

These characteristics also hold true for a digital analogue to cash, "digicash." There are several groups in cyberspace attempting to bring digicash to you, including an offshore bank that will convert digicash into "real" currency.

Web-based resources seem to fall into two categories: theory and press releases. ("In theory, there's no difference between theory and practice. In practice, however, ....")

To see digital cash in action, and to see more links to web pages with information about ECash, visit the our EShop.

Have you found errors nontrivial or marginal, factual, analytical and illogical, arithmetical, temporal, or even typographical? Please let me know; drop me email. Thanks!
 

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