digital banking

Norman Hardy norm at
Fri Dec 4 15:51:08 PST 1992

As I understand Chaum's Digi-Cash scheme the bank customer is 
protected both against bank fraud and merchant fraud but not 
against collusion between the two. The customer need not be 
unknown to the bank in order that her purchases with bank notes be 
unknown to the bank. This is where blind bank signatures come in. 
Neither need the merchant be unknown to the bank. Remailers are 
unnecessary to hide connection between the merchant and his 
customers. The bank knows both but has no way to associate them.
This being the case, the bank customer is protected against a 
false denial of deposit. When one deposits Digi-Cash in a bank he 
presumably waits for an indication from the bank that the cash was 
still valid (not previously deposited). The customer retains this 
indication as a receipt which is signed by a private bank key. A 
bank's positive reputation is useful but not necessary at this 
Another concern is the false denial of payment by the merchant. If 
the merchant's customer is willing to reveal to a judge that she 
paid the merchant, and she retained the note with which she paid, 
and the bank retains a record of the merchant's deposits then she 
can argue that it was she that caused the bank to mint the note 
since only the person for whom the note was minted and the 
merchant who had cashed it (and the bank) should know its bits. 
This would require that the bank respond to the judicial query 
"has bank customer M deposited note x?".

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