Electronic Commerce (Charles River Media Networking/Security)

Digital currencies enable new types of payments, goods, and services (information and online entertainment)—such as microproducts and micropayments. They share some fundamental properties, namely:

• They represent monetary value.

• They are exchangeable as payments for goods and services, currency and coin, and other tokens.

• They can be stored and retrieved.

• They are tamper-resistant in that they are difficult to copy or forge^[2].

• Digital currencies are intended to permit their users to move funds electronically within an environment. They include “tokens” of value expressed in digital form, in the same sense that a casino chip is a token of value expressed in physical form. Furthermore, digital currencies are designed to serve as the electronic version of paper cash, carrying the same attributes as the physical medium—anonymity and liquidity. There are basically two types of digital currency systems: purely electronic digital cash refers to digital money systems that use computers to transfer value over networked environments, such as the Internet, and stored-value “smart cards” retain value on a microchip embedded on a card, and are used in the “physical” world at the point of sale, or through computers equipped with a smart card reader.