A simple definition of eCash, also known as electronic cash, cybercash, digicash, and e-money, is a digital money product that provides a way to pay for products and services without resorting to the use of paper or coin currency. Transactions can be made over the internet, email, or personal computer to another workstation-securely and anonymously.
Over the years, two common models have emerged for eCash transactions:
- The online form of eCash, which was introduced by the now defunct DigiCash, worked for all types of Internet transactions.
- The offline form of e-cash involved a digitally encoded card that replaced paper money. Mondex developed and tested this model with different banks, but the company has now transitioned into the development and management of smart cards which are also used for financial transactions.
Traditionally, electronic payment systems contain one of the following basic characteristics:
- Payment by instruction. This is a credit card transaction where the payer orders their bank or financial institution to take funds from their bank account and transfer it into a payee’s account.
- Prepaid electronic cash. Essentially this is the electronic form of cash where a card or account is debited immediately and can be reloaded with electronic cash.
- On-line. This is a payment protocol between the payer and payee that also involves a third party, such as a bank or credit card.
- Off-line. This payment protocol does not involve a third party.
- Secret key. Payment protocols must be verified. With cryptography, the transaction is authenticated. A secret key is where the payer and payee have shared a key that is only between them.
- Public key authentication. Unlike secret keys, this form of authentication is available to the public, such as EMV. EMV stands for Europay, MasterCard, and Visa. The company that now manages these companies is called EMVCo, with even control split between about six different companies.
- Counters. This is where a specific amount of eCash is stored on a card in the form of counters.
- Coins. Just like ordinary money, or coins, this form of eCash has a fixed denomination for each coin.
- Software-only. This is a low-cost system that can be placed on any computer in order to exchange funds electronically.
- Tamper-resistant hardware. If security is a concern, then using special hardware that stores and uses a secret key should be used.