Electronic Cash the Way It Ought To Be
Suppose we had it our way. Suppose we sat down to create digital cash that had all the right properties. What would these be? Think of the attractive properties of currency--physical cash. [27]
1) Physical cash is a portable medium of exchange. You carry it in your pocket to give to people when you make purchases. The digital equivalent of this process could be provided by smart cards, which would have the mobility of physical cash and even improve on it. The weight of $1,000,000 in digital money is the same as the weight of $1.
2) You would want the ability to make digital cash payments off-line, just like you can with physical cash. A communication link between every store you shop at and your bank's authorization computer shouldn't be required. Moreover, if digital cash is to have all the desirable qualities of physical cash, you should be able to transfer digital cash directly to another smart-card-carrying individual. Smart cards that could connect directly to other smart cards would be ideal in this respect, and would represent an improvement over physical cash. Even if everyone observed two smart cards communicating, they would have no way of knowing whether the transaction involved $5 or $50,000. There would be no need to slide money under the table.
3) Digital cash should be independent of physical location--available everywhere and capable of being transferred through computer and other telecommunication channels. So we want a smart card that can jack into the communication nodes of the global information network. One should be able to pop into a phone booth to make or receive payments.
4) Got change for a dollar for the quarter slots in the pool table? Just as we "make change" or divide physical currency into subunits, so should electronic cash be divisible. Is this a problem? Hmm. Electronic calculators can perform an operation know as division, and so can third-graders. So smart cards ought to be able to handle this also, even if it presents a few difficulties for theoretical cryptology.
5) To be secure against crooks and rip-off artists, digital cash should be designed in such a way that it can't be forged or reused. We wouldn't want people spending the same money twice, or acting as their own mini-Federal Reserve Systems and creating money from nothing. This cryptological problem is different between on-line and off- line cash systems. In on-line systems the bank simply checks whether a piece of cash has been spent before.
Proposed off-line systems rely on a framework developed by David Chaum. Chaum has been the preeminent cryptological researcher in the field of digital cash [28]. In his framework for off-line systems, one can double-spend the same piece of digital cash only by losing one's anonymity. This has considerable value, because the bank or the person defrauded, knowing the identity of the devious double- spender, can send out a collection agent.
But I consider this way of enforcing the "no double- spending" rule a serious flaw in Chaum's framework. Catching thieves and rip-off artists is not the comparative advantage of either banks or the average citizen. (Banks are usually only good at providing transactions services, and charging interest and fees.) Would you really want to see, say, The First Subterranean Bank of Anonymous Digital Cash merge with the Wackenhut Corporation? Luckily, however, there are alternative approaches that will prevent double-spending from ever taking place [29].
6) The most important requirement for individual freedom and privacy is that digital cash transactions should be untraceable, yet at the same time enable you to prove unequivocally whether you made a particular payment. Untraceable transactions would make impossible a PROMIS- type data sorting of all your financial activities. In Joe Blowup's financial chronology, discussed previously, you wouldn't be able to connect Joe Blowup's name to any of his purchases. Similarly, no one would know about the money you wired to Lichtenstein, your purchase of Scientology e- meters and the banned works of Maimonides, or your frequent visits to the Mustang Ranch. Privacy-protected off- line cash systems can be made nearly as efficient as similar systems that don't offer privacy.
source: http://www.orlingrabbe.com/money2.htm
1) Physical cash is a portable medium of exchange. You carry it in your pocket to give to people when you make purchases. The digital equivalent of this process could be provided by smart cards, which would have the mobility of physical cash and even improve on it. The weight of $1,000,000 in digital money is the same as the weight of $1.
2) You would want the ability to make digital cash payments off-line, just like you can with physical cash. A communication link between every store you shop at and your bank's authorization computer shouldn't be required. Moreover, if digital cash is to have all the desirable qualities of physical cash, you should be able to transfer digital cash directly to another smart-card-carrying individual. Smart cards that could connect directly to other smart cards would be ideal in this respect, and would represent an improvement over physical cash. Even if everyone observed two smart cards communicating, they would have no way of knowing whether the transaction involved $5 or $50,000. There would be no need to slide money under the table.
3) Digital cash should be independent of physical location--available everywhere and capable of being transferred through computer and other telecommunication channels. So we want a smart card that can jack into the communication nodes of the global information network. One should be able to pop into a phone booth to make or receive payments.
4) Got change for a dollar for the quarter slots in the pool table? Just as we "make change" or divide physical currency into subunits, so should electronic cash be divisible. Is this a problem? Hmm. Electronic calculators can perform an operation know as division, and so can third-graders. So smart cards ought to be able to handle this also, even if it presents a few difficulties for theoretical cryptology.
5) To be secure against crooks and rip-off artists, digital cash should be designed in such a way that it can't be forged or reused. We wouldn't want people spending the same money twice, or acting as their own mini-Federal Reserve Systems and creating money from nothing. This cryptological problem is different between on-line and off- line cash systems. In on-line systems the bank simply checks whether a piece of cash has been spent before.
Proposed off-line systems rely on a framework developed by David Chaum. Chaum has been the preeminent cryptological researcher in the field of digital cash [28]. In his framework for off-line systems, one can double-spend the same piece of digital cash only by losing one's anonymity. This has considerable value, because the bank or the person defrauded, knowing the identity of the devious double- spender, can send out a collection agent.
But I consider this way of enforcing the "no double- spending" rule a serious flaw in Chaum's framework. Catching thieves and rip-off artists is not the comparative advantage of either banks or the average citizen. (Banks are usually only good at providing transactions services, and charging interest and fees.) Would you really want to see, say, The First Subterranean Bank of Anonymous Digital Cash merge with the Wackenhut Corporation? Luckily, however, there are alternative approaches that will prevent double-spending from ever taking place [29].
6) The most important requirement for individual freedom and privacy is that digital cash transactions should be untraceable, yet at the same time enable you to prove unequivocally whether you made a particular payment. Untraceable transactions would make impossible a PROMIS- type data sorting of all your financial activities. In Joe Blowup's financial chronology, discussed previously, you wouldn't be able to connect Joe Blowup's name to any of his purchases. Similarly, no one would know about the money you wired to Lichtenstein, your purchase of Scientology e- meters and the banned works of Maimonides, or your frequent visits to the Mustang Ranch. Privacy-protected off- line cash systems can be made nearly as efficient as similar systems that don't offer privacy.
source: http://www.orlingrabbe.com/money2.htm
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