This thesis is about digital cash, a way to implement anonymous electronic payments in an environment of mutual mistrust between the bank and the system users.
The present day payment systems fall into two large categories: account-based systems and token-based systems. Token-based systems such as paper cash, pre-paid phone cards or mail stamps, do not identify its users. A pre-paid phone card, for example, does not distinguish one caller from the other. Account-based systems such as checks, credit cards or bank accounts need, by design, to identify the system users and their transactions. People like to use paper cash because it is easy to carry around, they can make a payment with the received cash and they don’t need to ask a third party like a bank to perform their payments. Paper cash can, however, be stolen or lost and no one compensates for the lost or stolen money.
Credit cards reduces risk of lost cash for people, but by using electronic money people are in the risk of losing their privacy. Annually, credit card companies and banks lose large sums of money since they are required to compensate for lost cards and the costs associated with fraud and human error. In light of the explosive increase of electronic services such as Internet, the need for more efficient electronic payments has become an essential fact.
Since anonymity of payments is usually associated with anonymity of paper cash, an anonymous token-based electronic payment system is referred to as digital cash (also known as electronic cash, e-cash, D-cash). Digital cash offers a solution to the problems of paper cash and today’s credit cards; it is secure and protects people’s privacy.
The customer can use digital cash to pay over the Internet without the involvement of a bank during their