From: mpd@netcom.com (Mike Duvos)
Rather than have the holder and the person to whom the note is being sold go through a transaction with the issuer, one can have the issuer give his customers a cryptographically tamperproof software module which will prevent anonymous double-spending. This allows the digital cash system to work "offline" without having to connect to the bank every time two people wish to conduct a transaction.
The notion of a "cryptographically tamperproof software module" is interesting, but I'm not sure such a thing exists or could exist. The secure offline cash systems I have seen rely on tamper-resistant HARDWARE modules which at least exist although this requirement would be very inconvenient.
If you design the system so that cheating breaks the anonymity and identifies the perpetrator, then you can simply deter it in the same way we do with conventional instruments. Give the person a horrible credit rating and threaten to toss him in jail.
Again, I don't know how you handle the case of two almost-simultaneous attempts to redeem the same note (or piece of cash). Both notes are identical, so having the two notes gives you no more information than having just one, hence if one note is anonymous so will two be. You know someone is cheating in this situation, but who? One of the redeemers may have stolen a copy of the cash from the other; the two redeemers may be working together; or the note maker may be working with one of the redeemers having slipped them a copy of the note as soon as it was presented for redemption. How can a court decide who is right? Maybe the answer is simply to handle this as a my-word-against-yours kind of case, where reputations and histories of such conflicts would help decide who is likely to be telling the truth. Hal