With the onset of the
Information Age, our nation is becoming increasingly dependent upon network
communications. Computer-based technology is significantly impacting our
ability to access, store, and distribute information. Among the most important
uses of this technology is electronic commerce: performing financial
transactions via electronic information exchanged over telecommunications
lines. A key requirement for electronic commerce is the development of secure
and efficient electronic payment systems. The need for security is highlighted
by the rise of the Internet, which promises to be a leading medium for future
electronic commerce.
Electronic payment
systems come in many forms including digital checks, debit cards, credit cards,
and stored value cards. The usual security features for such systems are
privacy (protection from eavesdropping), authenticity (provides user
identification and message integrity), and no repudiation.
The type of
electronic payment system focused on in this paper is electronic cash. As the
name implies, electronic cash is an attempt to construct an electronic payment
system modelled after our paper cash system. Paper cash has such features as
being: portable (easily carried), recognizable (as legal tender) hence readily
acceptable, transferable (without involvement of the financial network), untraceable
(no record of where money is spent), anonymous (no record of who spent the
money) and has the ability to make "change." The designers of
electronic cash focused on preserving the features of untraceability and
anonymity. Thus, electronic cash is defined to be an electronic payment system
that provides, in addition to the above security features, the properties of
user anonymity and payment untraceability.
In general,
electronic cash schemes achieve these security goals via digital signatures.
They can be considered the digital analog to a handwritten signature. Digital
signatures are based on public key cryptography. In such a cryptosystem, each
user has a secret key and a public key. The secret key is used to create a
digital signature and the public key is needed to verify the digital signature.
To tell who has signed the information (also called the message), one must be
certain one knows who owns a given public key. This is the problem of key
management, and its solution requires some kind of authentication
infrastructure. In addition, the system must have adequate network and physical
security to safeguard the secrecy of the secret keys. This report has surveyed
the academic literature for cryptographic techniques for implementing secure
electronic cash systems. Several innovative payment schemes providing user
anonymity and payment untraceability have been found. Although no particular
payment system has been thoroughly analyzed, the cryptography itself appears to
be sound and to deliver the promised anonymity.
These schemes are far
less satisfactory, however, from a law enforcement point of view. In
particular, the dangers of money laundering and counterfeiting are potentially
far more serious than with paper cash. These problems exist in any electronic
payment system, but they are made much worse by the presence of anonymity.
Indeed, the widespread use of electronic cash would increase the vulnerability
of the national financial system to Information Warfare attacks. We discuss
measures to manage these risks; these steps, however, would have the effect of
limiting the users' anonymity.
Electronic cash
system must have a way to protect against multiple spending. If the system is
implemented on-line, then multiple spending can be prevented by maintaining a
database of spent coins and checking this list with each payment. If the system
is implemented off-line, then there is no way to prevent multiple spending
cryptographically, but it can be detected when the coins are deposited.
Cryptographic solutions have been proposed that will reveal the identity of the
multiple spenders while preserving user anonymity otherwise.
Token forgery can be
prevented in an electronic cash system as long as the cryptography is sound and
securely implemented, the secret keys used to sign coins are not compromised,
and integrity is maintained on the public keys. However, if there is a security
flaw or a key compromise, the anonymity of electronic cash will delay detection
of the problem. Even after the existence of a compromise is detected, the Bank
will not be able to distinguish its own valid coins from forged ones.
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