--- begin forwarded text From: iang@iang.org To: undisclosed-recipients: ; Subject: [fc-discuss] Financial Cryptography Update: On Digital Cash-like Payment Systems Sender: fc-discuss-admin@ifca.ai Date: Sat, 8 Oct 2005 18:30:56 +0100 (BST) (( Financial Cryptography Update: On Digital Cash-like Payment Systems )) October 08, 2005 ------------------------------------------------------------------------ https://www.financialcryptography.com/mt/archives/000561.html ------------------------------------------------------------------------ Just presented at ICETE2005 by Daniel Nagy: http://www.epointsystem.org/~nagydani/ICETE2005.pdf ===8<=========8<============== Abstract. In present paper a novel approach to on-line payment is presented that tackles some issues of digital cash that have, in the author s opinion, contributed to the fact that despite the availability of the technology for more than a decade, it has not achieved even a fraction of the anticipated popularity. The basic assumptions and requirements for such a system are revisited, clear (economic) objectives are formulated and cryptographic techniques to achieve them are proposed. Introduction. Chaum et al. begin their seminal paper (D. Chaum, 1988) with the observation that the use of credit cards is an act of faith on the part of all concerned, exposing all parties to fraud. Indeed, almost two decades later, the credit card business is still plagued by all these problems and credit card fraud has become a major obstacle to the normal development of electronic commerce, but digital cash-like payment systems similar to those proposed (and implemented) by D. Chaum have never become viable competitors, let alone replacements for credit cards or paper-based cash. One of the reasons, in the author s opinion, is that payment systems based on similar schemes lack some key characteristics of paper-based cash, rendering them economically infeasible. Let us quickly enumerate the most important properties of cash: 1. "Money doesn't smell." Cash payments are -- potentially -- _anonymous_ and untraceable by third parties (including the issuer). 2. Cash payments are final. After the fact, the paying party has no means to reverse the payment. We call this property of cash transactions _irreversibility_. 3. Cash payments are _peer-to-peer_. There is no distinction between merchants and customers; anyone can pay anyone. In particular, anybody can receive cash payments without contracts with third parties. 4. Cash allows for "acts of faith" or _naive transactions_. Those who are not familiar with all the antiforgery measures of a particular banknote or do not have the necessary equipment to verify them, can still transact with cash relying on the fact that what they do not verify is nonetheless verifiable in principle. 5. The amount of cash issued by the issuing authority is public information that can be verified through an auditing process. The payment system proposed in (D. Chaum, 1988) focuses on the first characteristic while partially or totally lacking all the others. The same holds, to some extent, for all existing cash-like digital payment systems based on untraceable blind signatures (Brands, 1993a; Brands, 1993b; A. Lysyanskaya, 1998), rendering them unpractical. ... [bulk of paper proposes a new system...] Conclusion. The proposed digital payment system is more similar to cash than the existing digital payment solutions. It offers reasonable measures to protect the privacy of the users and to guarantee the transparency of the issuer s operations. With an appropriate business model, where the provider of the technical part of the issuing service is independent of the financial providers and serves more than one of the latter, the issuer has sufficient incentives not to exploit the vulnerability described in 4.3, even if the implementation of the cryptographic challenge allowed for it. This parallels the case of the issuing bank and the printing service responsible for printing the banknotes. The author believes that an implementation of such a system would stand a better chance on the market than the existing alternatives, none of which has lived up to the expectations, precisely because it matches paper-based cash more closely in its most important properties. Open-source implementations of the necessary software are being actively developed as parts of the ePoint project. For details, please see http://sf.net/projects/epoint =====>8=========>8===== -- Powered by Movable Type Version 2.64 http://www.movabletype.org/ _______________________________________________ fc-discuss mailing list fc-discuss@ifca.ai http://mail.ifca.ai/mailman/listinfo/fc-discuss --- end forwarded text -- ----------------- R. A. Hettinga <mailto: rah@ibuc.com> The Internet Bearer Underwriting Corporation <http://www.ibuc.com/> 44 Farquhar Street, Boston, MA 02131 USA "... however it may deserve respect for its usefulness and antiquity, [predicting the end of the world] has not been found agreeable to experience." -- Edward Gibbon, 'Decline and Fall of the Roman Empire'