[fc-discuss] Financial Cryptography Update: On Digital Cash-like Payment Systems

[R.A. Hettinga]

--- begin forwarded text


 From: iang at iang.org
 To: undisclosed-recipients: ;
 Subject: [fc-discuss] Financial Cryptography Update: On Digital Cash-like
Payment Systems
 Sender: fc-discuss-admin at 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 at ifca.ai
 http://mail.ifca.ai/mailman/listinfo/fc-discuss

--- end forwarded text


-- 
-----------------
R. A. Hettinga <mailto: rah at 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'