e-Cash Payment System

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WELCOME:

WELCOME

To the Seminar:

To the Seminar On . . . . .

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e - cash payment system By Suhail U

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ABSTRACT With the onset of the Information Age, our nation is becoming increasingly dependent upon network communications. Computer-based technology is significantly impacting our ability to access, store, and distribute information. Among the most important uses of this technology is electronic commerce: performing financial transactions via electronic information exchanged over telecommunications lines. The need for security is highlighted by the rise of the Internet, which promises to be a leading medium for future electronic commerce.

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Electronic payment systems come in many forms including digital cheques , debit cards, credit cards, and stored value cards. The usual security features for such systems are privacy, authenticity, and no repudiation .

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INTRODUCTION Paper cash has such features as being: easily carried, recognizable hence readily acceptable, transferable, untraceable (no record of where money is spent), anonymous (no record of who spent the money) and has the ability to make "change." The designers of electronic cash focused on preserving the features of un traceability and anonymity. Thus, electronic cash is defined to be an electronic payment system that provides, in addition to the above security features, the properties of user anonymity and payment un traceability.

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1. What is Electronic Cash ? This term is often applied to any electronic payment scheme that superficially resembles cash to the user. However, electronic cash is a specific kind of electronic payment scheme, defined by certain cryptographic properties.

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Properties Electronic Payment Conceptual Framework

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Electronic Payment The term electronic commerce refers to any financial transaction involving the electronic transmission of information. The packets of information being transmitted are commonly called electronic tokens. the storage medium as a card since it commonly takes the form of a wallet-sized card made of plastic or cardboard.

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The electronic payment scenario assumes three kinds of players A payer or consumer, whom we will name Alice, A payee, such as a merchant. We will name the payee Bob. A financial network with whom both Alice and Bob have accounts. We will informally refer to the financial network as the Bank.

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Conceptual Framework There are four major components in an electronic cash system: Issuers Customers Merchants Regulators. Issuers can be banks, or non-bank institutions; customers are referred to users who spend E-Cash; merchants are vendors who receive E-Cash, and regulators are defined as related government agencies. For an E-Cash transaction to occur, we need to go through at least three stages:

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Account Setup: Customers will need to obtain E-Cash accounts through certain issuers. Merchants who would like to accept E-Cash will also need to arrange accounts from various E-Cash issuers. Issuers typically handle accounting for customers and merchants. Purchase: Customers purchase certain goods or services, and give the merchants tokens which represent equivalent E-Cash. Purchase information is usually encrypted when transmitting in the networks. Authentication: Merchants will need to contact E-Cash issuers about the purchase and the amount of E-Cash involved. E-Cash issuers will then authenticate the transaction and approve the amount E-Cash involved.

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2. Classification of e-Cash On-line Off-line

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3. Properties of Electronics Cash Monetrary value Interoperable Storable & Retrievable

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4. E-Cash Security Security is of extreme importance when dealing with monetary transactions. Faith in the security of the medium of exchange, whether paper or digital, is essential for the economy to function. Physical security Signature and Identification Secure Hashing

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5. E-Cash and Monetary Freedom Prologue This paper describes the differences between mere encrypted credit card schemes and true digital cash, which present a revolutionary opportunity to transform payments. The nine key elements of electronic, digital cash are outlined and a tenth element is proposed which would embody digital cash with a non-political unit of value.

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Why monetary freedom is important ? If all that e-cash permits is the ability to trade and store dollars, francs, and other governmental units of account, then we have not come very far. Even the major card associations, such as Visa and MasterCard, are limited to clearing settling governmental units of account. For in an age of inflation and government ineptness, the value of what is being transacted and saved can be seriously devalued. Who wants a hard drive full of worthless "cash"? True, this can happen in a privately-managed digital cash system, but at least then it is determined by the market and individuals have choices between multiple providers.

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Key elements of a private e-cash system Secure Anonymous Portable (physical independence) Infinite duration (until destroyed) Two-way (unrestricted) Off-line capable Divisible (fungible) Wide acceptability (trust) User-friendly (simple) Unit-of-value freedom

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Achieving the non-political unit of value The transition to a privately-operated e-cash system will require a period of brand-name recognition and long-term trust. Some firms may at first have an advantage over lesser-known name-brands, but that will soon be overcome if the early leaders fall victim to monetary instability.

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6. E-Cash Regulation A new medium of exchange presents new challenges to existing laws. Largely, the laws and systems used to regulate paper currency are insufficient to govern digital money. The legal challenges of E-cash entail concerns over taxes and currency issuers. In addition, consumer liability from bank cards will also have to be addressed (currently $50 for credit cards). E-cash removes the intermediary from currency transactions, but this also removes much of the regulation of the currency in the current system. Tax questions immediately arise as to how to prevent tax evasion at the income or consumption level. If cash-like transactions become easier and less costly, monitoring this potential underground economy may be extremely difficult, if not impossible, for the IRS.

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7. Electronic Cash under Current Banking Law The current federal banking system originated during the Civil War with the enactment of the National Bank Act of 1864 and the creation of a true national currency.

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2 Existing and Proposed Retail Payment Systems Automated Teller Machines Debit Cards POS Systems

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Digital cash systems Electronic cash used over computer networks (usually without involving a plastic card), variously called "digital cash," "electronic cash," "e-cash," "cyber currency," or "cyber cash," among other phrases, may have various characteristics. For example, it may require on-line third-party payment servers to process transactions, or it may be designed so that value can be exchanged directly between remote transacting parties (e.g., purchaser and vendor) without the involvement of on-line or off-line third-party payment servers. Digital cash systems are under development in Europe and the U.S.

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8. Cash Management Services E-Banking for Business - real-time access to your accounts . Sweep accounts - automatically transfer cash to interest bearing accounts Lockbox Service - quick way to convert receivables to cash . Account Reconciliation - manage your checking accounts more efficiently Wire Transfer Services - quick and secure method to send and receive funds Electronic Funds Transfer - economical way to send and receive funds for next day availability .

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9. A Simplified Electronic Cash Protocol PROTOCOL 1: On-line electronic payment. Withdrawal: Alice sends a withdrawal request to the Bank. Bank prepares an electronic coin and digitally signs it. Bank sends coin to Alice and debits her account. Payment/Deposit: Alice gives Bob the coin. Bob contacts Bank and sends coin. Bank verifies the Bank's digital signature. Bank verifies that coin has not already been spent. Bank consults its withdrawal records to confirm Alice's withdrawal. (optional) Bank enters coin in spent-coin database. Bank credits Bob's account and informs Bob. Bob gives Alice the merchandise.

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PROTOCOL 2: Off-line electronic payment. Withdrawal: Alice sends a withdrawal request to the Bank. Bank prepares an electronic coin and digitally signs it. Bank sends coin to Alice and debits her account. Payment: Alice gives Bob the coin. Bob verifies the Bank's digital signature. (optional) Bob gives Alice the merchandise. Deposit: Bob sends coin to the Bank. Bank verifies the Bank's digital signature. Bank verifies that coin has not already been spent. Bank consults its withdrawal records to confirm Alice's withdrawal. (optional) Bank enters coin in spent-coin database. Bank credits Bob's account.

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modify the above protocols to include payment untraceability . For this, it is necessary that the Bank not be able to link a specific withdrawal with a specific deposit. This is accomplished using a special kind of digital signature called a blind signature. Untraceable Electronic Payments

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PROTOCOL 3 : Untraceable On-line electronic payment Withdrawal: Alice creates an electronic coin and blinds it. Alice sends the blinded coin to the Bank with a withdrawal request. Bank digitally signs the blinded coin. Bank sends the signed blinded coin to Alice and debits her account. Alice unblinds the signed coin. Payment/Deposit: Alice gives Bob the coin. Bob contacts Bank and sends coin. Bank verifies the Bank's digital signature. Bank verifies that coin has not already been spent. Bank enters coin in spent-coin database. Bank credits Bob's account and informs Bob. Bob gives Alice the merchandise.

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PROTOCOL 4: Untraceable Off-line electronic payment. Withdrawal: Alice creates an electronic coin and blinds it. Alice sends the blinded coin to the Bank with a withdrawal request. Bank digitally signs the blinded coin. Bank sends the signed blinded coin to Alice and debits her account. Alice unblinds the signed coin. Payment: Alice gives Bob the coin. Bob verifies the Bank's digital signature. (optional) Bob gives Alice the merchandise. Deposit: Bob sends coin to the Bank. Bank verifies the Bank's digital signature. Bank verifies that coin has not already been spent. Bank enters coin in spent-coin database. Bank credits Bob's account.

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PROTOCOL 5: Off-line cash. Withdrawal: Alice creates an electronic coin, including identifying information. Alice blinds the coin. Alice sends the blinded coin to the Bank with a withdrawal request. Bank verifies that the identifying information is present. Bank digitally signs the blinded coin. Bank sends the signed blinded coin to Alice and debits her account. Alice unblinds the signed coin. Payment: Alice gives Bob the coin. Bob verifies the Bank's digital signature. Bob sends Alice a challenge. Alice sends Bob a response (revealing one piece of identifying info). Bob verifies the response. Bob gives Alice the merchandise. Deposit: Bob sends coin, challenge, and response to the Bank. Bank verifies the Bank's digital signature. Bank verifies that coin has not already been spent. Bank enters coin, challenge, and response in spent-coin database. Bank credits Bob's account.

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10. The trouble with E-cash The main problem with Ecash may be the size of the database of spent coins. If a large number of people start using the system, the size of this database could become very large and unmanageable. Keeping a database of the serial number of every coin ever spent in the system is not a scalable solution.

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How does E-cash work? Basically, it's an ordinary card, made by Shlumberger , but with a very smart mind. Instead of a magnetic strip, you have an actual microchip containing all the data about that particular account is built into the card. All you have to do is operate the card with a unique Personal Identification Number (PIN) that gives you credit facilities as well as full security against misuse as long as you keep it to yourself. The customer has to pay an annual sum for the use of the card.

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Conclusion Electronic cash system must have a way to protect against multiple spending. Token forgery can be prevented in an electronic cash system as long as the cryptography is sound and securely implemented, the secret keys used to sign coins are not compromised, and integrity is maintained on the public keys

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