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by:
Melissa Taylor
Digital cash allows a person to pay for goods
or services by transmitting a number from one computer to another.
Like the serial cumbers on real dollar bills, the digital cash numbers
are unique in nature. Each number
is issued by a bank and represents a specified sum of real money.
There are many key features of digital cash, but the main feature is that
it is anonymous and reusable. So, when an amount of digital cash
is sent from buyer to a vendor, there is no way to obtain information about
that buyer. The other key features of the digi cash are:
1. Secure
2. Portable
3. Infinite duration
4. Unrestricted
5. Off-line capable or availability
6. Divisible
7. User-friendly
8. Wide-acceptability
9. Non-political
One key difference between
credit card systems and the digital cash system is that a digital cash
certificate can be reused. Most digital cash systems
start with a participating bank that issues cash numbers or other unique
identifiers that carry a given value. You can get a digital cash
certificate if you have an account at the bank, and it is withdrawn from
your account. You, as the payer transfers the certificate to the
vendor to pay for a product or service. And then the vendor deposits the
cash number in any number of banks that participates in this system.
Digi cash is a system that
is overtaking the practice of writing checks, using credit cards, and actual
dollars on-hand. Consumers no longer have to write checks, mail payments,
or pay bills in person. With the system of direct payment,
companies reduce payment-processing costs, obtain better funds availability,
improve collections, reduce the number of return items, and enhance customer
retention. "The estimated total number of bills paid by American
consumers in 1992 was between 15 billion and 20 billion. Only about
800 million were paid by some form of automated payment through the ACH…
With postage stamps now at 32 cents, the average consumer who writes checks
each month will save $35 to $52 in postage expenses this year"(www.oki.co.jp/OKI.html/).
The idea of digital technology
remains unrealized. There are over 55 million people that use the
Internet worldwide that still rely on stores and catalogs for their shopping
due to the fact that they have not had any good reasons to shop online
mall. But as the obstacles are torn away through better ways of securing
online transactions and more means to pay online, the consumers are turning
to electronic transfer of digital money (http://www.ptxnet.com/imf/digital-cash.html/).
The most established form of digital cash systems is electronic funds transfer.
For example, automated teller machines and direct paycheck deposits.
Businesses have been using this system to reduce expenses. The transition
to a privately owned digital cash system will require the business to gain
long-term trust. “Money does not have to be created legal tender
by government: like law, language and morals it can emerge spontaneously.
Such private money has often been preferred to government money, but government
has usually soon suppressed it.”-F.A. Hayek, Nobel Laureate
The use of the WWW as an
electronic marketplace is becoming a trend, and there is a need for a cash
payment system that is both anonymous and very secure. The
World Wide Web has great potential to become a highly efficient electronic
marketplace for goods and services. When payments are effected electronically,
there is always a risk that organizations may resort to getting information
relating to individuals with the amounts that they have spent. Specifically,
the Internet provides the ease of circulation; accessible encoded technology,
affordable currency transfer, and real-time conversion between competing
units. This is the first time that an individual has the power
to create a new value standard with an immediate worldwide audience.
If a payment system receives a support from consumers worldwide, than they
must offer the consumers a form of protection against gathering of such
information. They could use a method of effectiveness through a form
of digi cash or electronic cash where the money being spent cannot be linked
to the owner. The digi cash system consists of three main entities:
1. Banks that mint coins validate
existing coins and exchange real money for digi cash.
2. Buyers who have accounts with
a bank, from which they can withdraw and deposit Digicash coins.
3. Merchants who can accept digi
cash money in payment for information, or hard goods.
When a consumer wants to make a
withdrawal from the bank, the user “cyberwallet” software calculates how
many digital coins are needed to withdraw the requested amount. The
software then produces serial numbers for these specific coins. The
serial numbers are large enough so there is little chance that anyone will
ever produce the same serial numbers. When the bank receives the
message from the user’s private key, the bank checks the signature.
The withdrawal amount is then debited from the owner’s account. The account
is very secured due to the electronic signature by the owner.
There are three legal issues
concerned with digi cash that are limited liability, limited warranty,
and product endorsement. Digi cash will not be liable for any damages,
including loss of data, lost profits, cost of cover or any other consequential
damages due to the use of the program. In agreeing to the terms of
the license the user acknowledges this allocation of risk. Limited
warranty is provided with the programs “as is”. Digi cash does not
warrant that the functions contained in the program will meet the user’s
requirements. The entire risk concerning the use, quality, and the
performance remains with the user. If the program proves to be defective,
the user will assume the entire cost of any repair or other loss.
Product endorsement deals with the appearance of the product. This
product does not constitute any endorsement of any kind. The company
that produced the system of digi cash believes that the products named
conform to the required technical specifications, but it’s not possible
to determine the suitability. They have not claimed to have tested
the equipment and the names of products are provided simply as a way to
indicate products which might be worth considering by the implementers
who assembled the system.
Digi cash has made life easier
for some businesses and consumers, plus cutting costs. The main feature
of digi cash that has contributed to the effectiveness is the monetary
freedom. It is essential to preserve the free-market economy.
As more and more people use the Internet, the economy depends on a more
flexible monetary system and can be provided by the market competition.
When a single user of money controls the supply of money and the transactions,
the potential exists for monetary manipulation and control of the economy.
Due to inflation in the economy, the value of what is being transacted
can be seriously devalued. Digi cash could turn out to be worthless,
but at least the market determines it and individuals have choices between
the providers.