Digital Cash refers to a system in which a person can securely pay for goods or services electronically without necessarily involving a bank to mediate the transaction. it is broadly defined as an electronic store of monetary value on a technical device that may be widely used for making payments to undertakings other than the issuer without necessarily involving bank accounts in the transaction, but acting as a prepaid bearer instrument.
How Does It Work
A Digital Cash transaction usually involves three types of users, Payer, Payee, and financial network like a Bank with whom both Payer and Payee have accounts. And usually involves three transaction
Withdraw the Payer transfers some money from his/her account to her wallet which could be a computer or smart case.
Payment the Payer transfer the withdrawn money to the Payee’s wallet.
Deposit the Payee transfers the received money to his/her account.
To know definitely how it works read this case. The bank creates a digital banknote by signing a message which specifies the serial number and value of the note, and sends it to Person A. Person A, as he withdraws it, uses
Cryptography technique to alter the serial number so that the bank will not recognize the note as being from this withdrawal. This note is now returned to the bank with the new serial number. The bank now has a note with a new serial number. Person A then pays Person B electronically by sending the banknote to him. Person B checks the note’s validity by decrypting using the bank’s public key to check its signature. Person B then sends the note to the bank, which checks the serial number to confirm that this banknote hasn’t been spent before. The serial number is now different from that in Person A’s withdrawal, thereby preventing the bank from linking the two transactions. The enabling bank merely checks the new serialized key account for the amount of the transaction and transfers the money by sending out a depository notice. Person B using the same encrypting technique returns the depository notice with the new serialize account. The enabling bank does not know who the merchant is only that money is available for payment. In some respects, this is a debit card transaction with no information other than the amount of the transaction. All initial depositor information is in the primary key account, not the password account.