Throughout the last few years, personal computers have increasingly
found their way into private homes. Many service providers offer modem
access to the Internet, a world-wide network used to connect
universities, but that now offers all kind of services and information
to everyone. With the arrival of user-friendly, graphical browsers,
small merchants saw their chance to advertise their goods. Slowly,
commerce has found its way into the Internet.
Some way of payment over the net
had to be found.
Of course, real money - the trillions of dollars handled each day by banks, other financial institutions, and government clearinghouses - is already digital. No physical tokens are exchanged: all transactions are conducted using streams of bits. But digitizing the final mile of electronic money will make all the difference in the world. It will not only change the physical way you spend your money, it will alter the way you view your own economic being. And depending on the manner in which it is implemented, digital money might allow others to view your financial status with a decidedly discomfiting intimacy.
The advent of high-quality color copiers threatens the security of paper money. The demand of guarding it makes paper money expensive. The hassles of handling it (such as vending machines) make paper money undesirable. The use of credit cards and ATM cards is becoming increasingly popular, but those systems lack adequate privacy or security against fraud, resulting in a demand for efficient electronic-money systems to prevent fraud and also to protect user privacy.
In order to clarify the important aspects that have to be considered when designing a digital cash system, section 3 will elucidate the history and use of ordinary money. Section 4 gives an introduction to cryptographic methods used in almost every current implementation of digital cash. In section 5 we will lay stress on the important key elements of an electronic monetary system. Then, we present an overview of some possible implementations of digital cash throughout section 6 and discuss their advantages and disadvantages in section 7 and section 8.