HOW TO REALLY CIRCULATE ELECTRONIC CASH ON THE INTERNET by Katsuhito Iwai Professor of Economics, The University of Tokyo 7-3-1 Hongo, Bunkyo-ku, Tokyo, Japan 113
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[email protected] August 28, 1995 (Japanese version: March 30, 1995) 1. An introductory remark The recent world-wide explosion of the Internet community has encouraged many individuals and groups to propose a variety of electronic payment systems that can be used safely and efficiently for the economic transactions on computer networks. Some proposals are mere variations on the traditional credit card system. But the more ambitious ones are aiming at an electronic cash system which turns an electronic stream of numbers, the only "thing" moving on lines, into 'electronic cash', or 'e-cash', that can be spent directly on on-line commercial wares. One such attempt is the DigiCash system of David Chaum.1 Since any message transmitted through the Internet is accessible to anyone who cares to look, and since any copied number is as good a number as the original one, the basic problem is to devise a copy-proof and cheat-proof transmission procedure among computer users. The DigiCash system has solved this by adopting the public-key cryptography for digital signatures that can secure the privacy of communicated messages as well as the authenticity of their communicators. It has also incorporated a device of blind signatures which assures the complete anonymity of its users. The DigiCash system (and other schemes based on similar principles) perhaps comes closest to the ideal of e-cash.