A Comparison Of Electronic Cash Schemes and Their ImplementationsECE 646 AS-3 Group ProjectWook JungAndrew KirbyRajesh KolluriKenneth ShannonYeo-won YoonA. Introduction:Much has been written about the opportunities created by global connectivity via theInternet. However, one of the more significant consequences of this connectivity may bethe potential to transfer money anywhere in the world, at any time, and to do so bothprivately and anonymously. This study presents an analysis of various electronicpayment schemes that to varying degrees make the anonymous transfer of electronic casha present reality. While there are easily hundreds of different electronic payment systemsand applications, the scope of this study is limited only to systems that allow the creationof electronic “tokens” having their own persistent and intrinsic value. In the literature,such systems are typically called “electronic cash,” “digital cash,” or “token-based”schemes [Gen Ref 1-9].Electronic cash schemes seek to reproduce all the advantages of paper currency but in avirtual world. It has been estimated that cash transactions constitute over 80% of allmoney transferred in the US during a given year [Gen Ref 1 ]. Paper currency is said tohave many desirable properties accounting for its popularity. The properties often citedinclude portability, divisibility, untraceability, and the fact that cash can be transferredinstantly without cost to the user or the scrutiny of a financial network or government.However, overlooked in the discussion of paper currency in the literature is the fact that itreally has no intrinsic value. Gold or silver coins have been traded for thousands of yearsdo to the rarity and value of the metal with which they are made. In contrast, papermoney is valuable only because a large population of users have confidence in itsacceptability which is in turn is tied to more complex issues such as faith in the issuinggovernment, various institutions, economic practice, etc. Furthermore, users of papercurrency believe that it is genuine and not counterfeit or they would immediately reject it.Therefore, in order for an electronic cash scheme to be a successful alternative to cash; itmust have most of the properties of cash. Among these must be a level of security thatallows anonymity and privacy and that prevents counterfeiting. In other words, integrityand authenticity must be guaranteed. There must be convenient divisibility of amountsthat can be spent and as few restrictions as possible on the chosen amount. It must costlittle or nothing to use. It must be easily and instantaneously transferable. And it musthave a sufficiently wide base of acceptability. This means any electronic cash schemeconquer the complex issues of faith that some regulatory body or institution willultimately back the transaction. An appropriate set of comparison criteria for variouselectronic schemes should take into account the degree to which these desirableproperties are present. Therefore the criteria for comparison we have defined below aredesigned around these properties.B. Classification:There are many types of electronic payment schemes possible over a communicationsnetwork, including credit cards, debit cards, digital checks, and stored value cards.Therefore it is necessary to briefly describe electronic payment schemes generally and todefine how electronic cash schemes are distinguished more from the more generaldescription. In general, an electronic payment scheme involves a number ofelectronically transmitted transactions that culminate in the transfer of value from oneparty to another. Usually there are three major parties: A “payer” (typically abuyer/customer), a payee (typically a seller/merchant), and a financial institution(typically a bank). Most electronic payment transactions are cryptographically secured tothe extent they provide confidentiality, integrity, authentication, and non-repudiation.Usually the payer has real money in a bank or financial network which becomes “tied”during the transaction so that it is either transferred immediately from the payer’s bank tothe payee or the payee is able to recover it from the payer’s bank later, or the payerbecomes legally bound to make the transfer at some point in the future. The “value” inthe transaction is “extrinsic,” in that the payee knows he will get the money becauseultimately a third party financial institution will back the transaction.An “electronic cash” payment has most of these properties except that a significantdifference is a payer always transfers value immediately. In fact, the payee typicallywithdraws money in advance from the bank to pay for electronic tokens of the samevalue that can be transferred by the payer to a payee at some time in the future. Thesetokens have guaranteed value because the bank teams with the payer at the time of tokencreation to insure the tokens are valid and it charges the payee for the tokens at that time.The value in the transaction is “intrinsic,” in that the payee knows a third party financialinstitution has already guaranteed the transaction in advance. In a way, it is somewhatanalogous to an electronic cashier’s check. However, there is a key difference: while theelectronic token is authenticatable and can be returned to the bank for money, the tokenreveals nothing about the payer’s identity. Therefore, “electronic cash” schemes areclassified as those with the additional following specific properties: anonymity of payerto payee, untraceability of valid payment, and traceablity of an invalid payment.“Macropayment” vs. “Micropayment:”Some additional definitions are necessary regarding the way in which we have classifiedour payment systems. A natural dividing line between electronic cash systems relates tothe denominations and consequently the applications for which their designs are intended.“Micropayment” systems are intended for cash-like transactions where the value of thetransaction is less than the value of the smallest denomination of the cash systemrepresented (although typically the literature gives 1$ as the dividing line). While cash iscertainly the preferred means for more than 80% of all transactions, it is unsuitable forindividual transactions less than 1 cent (in US currency) and perhaps undesirable fortransactions less than $1. There are several services for which the value may be
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