Economic Studies. An Electronic Money Scheme- A Pr

IMESDISCUSSIONPAPERSERIESINSTITUTEFORMONETARYANDECONOMICSTUDIESBANKOFJAPANC.P.OBOX203TOKYO100-91JAPANAnElectronicMoneyScheme-AProposalforaNewElectronicMoneySchemewhichisbothSecureandConvenient-YasushiNakayama,HidemiMoribatake,MasayukiAbe,EichiroFujisakiDiscussionPaperNo.97-E-4NOTE:IMESDiscussionPaperSeriesiscirculatedinordertostimulatediscussionandcomments.ViewsexpressedinDiscussionPaperSeriesarethoseofauthorsanddonotnecessarilyreflectthoseoftheBankofJapanortheInstituteforMonetaryandEconomicStudies.IMESDiscussionPaperSeries97-E-4June1997AnElectronicMoneyScheme-AProposalforaNewElectronicMoneySchemewhichisbothSecureandConvenient-YasushiNakayama,HidemiMoribatake,MasayukiAbe,EichiroFujisakiAbstractAstheInternetexpands,avarietyoftrialsforrealizingelectronicpaymentsystemshavebeenmadeinmanycountries.Inparticular,electronicmoney,whichemployselectronicdataembodyingmonetaryvalueexchangeablethroughopennetworks,hasbeenextensivelyresearchedandexperimented.Itisregardedastheinfrastructuraltechnologyfortherealizationofelectroniccommerce.Thispaperdiscussestherequirementstobemetforelectronicmoneytobecomeanewsecurelow-costmonetaryservice,i.e.security,uniqueconvenience,andinheritanceofmeritsfromcash.Wethenproposeabasicdesignofanewelectronicmoneyschemewhichfulfillstheserequirementsandpresenttheoutlineoftheprotocolofthisnewelectronicmoneysystemwhichincludessomenewideas.Keywords:electronicmoney,electroniccash,issuinginstitution,privacy,directtransferabilitybetweenindividuals,blindsignature,tamperresistanceJELclassification:E49*ResearchDivision2,InstituteforMonetaryandEconomicStudies,BankofJapan(E-mail:[e-mail])**InformationandCommunicationSystemsLaboratories,NipponTelegraphandTelephoneCorporation(E-mail:[e-mail],[e-mail],[e-mail])TheauthorswouldliketothankAssociateProfessorTsutomuMatsumoto(YokohamaNationalUniversity)forhelpfulcomments.1AnElectronicMoneyScheme-AProposalforaNewElectronicMoneySchemewhichisbothSecureandConvenient-1.IntroductionAstheInternetexpands,avarietyoftrialsforrealizingelectronicpaymentsystemshavebeenmadeinmanycountries.Inparticular,electronicmoney,whichemployselectronicdataembodyingmonetaryvalueexchangeablethroughopennetworks,hasbeenextensivelyresearchedandexperimented.Itisregardedastheinfrastructuraltechnologyfortherealizationofelectroniccommerce.Thispaperdiscussestherequirementstobemetforelectronicmoneytobecomeanewsecurelow-costmonetaryservice.Weproposeanewelectronicmoneyschemewhichachieveshightechnicalquality:acommonelectronicmoneyschemeinwhichanumberofbankscanparticipate,compatibilityofanonymityandtraceabilityofinvaliduse,divisibility,andtransferabilitybetweenindividuals.2.RequirementCurrently,variousmethodsofpaymentareproposedwiththeaimofrealizingelectroniccommerce,i.e.electronicmoney(inanarrowsense),electronicmethodsforcreditcardpayment,electronicchecks,andon-linebanking.Withtheexceptionofelectronicmoney,thesemethodscanbeconsideredtobeonesthatprovideconsumerswithanewaccesschanneltoconventionalpaymentorbankingservices,suchascreditcardservicesorelectronicfundstransfers,utilizingcomputernetworkssuchastheInternetorothertelecommunicationsnetworks.Electronicmoney,bycontrast,isproposedundertheconceptthatthedataaremoney,andthosethemselvescontainvalue,andhasdrawnmuchattentionrecently.Althoughsomeelectronicmoneyprojectshaveproceededtothestageofafieldtestorlimitedpracticalusage,manyexpertssaythatmuchmoreimprovement,i.e.upgradingthelevelofsecurityandofconvenienceforusers,isneededbeforefull-fledgedimplementation.Thischapterdescribestherequirementstobemetforelectronicmoneytobeacceptedwidelyinsociety.Theyare:(1)security,(2)uniqueconvenience,and(3)inheritanceofmeritsfromcash.(1)SecurityForelectronicmoneytobesecure,invalidusebyalteration,forgery,orduplicationmustbealmostimpossible.Inorderforelectronicmoneytobecomewidelyacceptedasa2mediumfortransactionsettlements,itssecuritymustbetrustedbysociety.Tothisend,multiplesecuritymeasuresfrommultipleviewpointsareessential,sothatevenif,byanychance,oneofthesesecuritymeasureswerecompromised,theothersecuritymeasurescouldstillthwartillegalactions.Anexampleofcombiningsecuritymeasuresisminimizingthepossibilityofillegalactions(premeasure)andprovisionofmethodfortracingthesuspectifanillegalactionhasoccurred(postmeasure).(2)UniqueconvenienceElectronicmoneyhasthepossibilityofprovidingahigherlevelofconveniencethancash.Thisconvenienceisconsideredtobetheprimaryincentiveforsocietytoacceptitswideuse.Forexample,itispossibletodesignanelectronicmoneyscheme,inwhichelectronicmoneycanbeusednotonlyinordinarystoreslikecash,butalsooveropennetworkssuchastheInternet,providinganewmediumofpaymentforelectroniccommerce,whichisexpectedtoincreaseinthefuture.Itisalsopossibletodesignaschemeinwhichnochangeisneededforpayment,becausedivisionintoanyamountismadepossibletomakeexactpayment(divisibility).(3)InheritanceofmeritsfromcashForthewideuseofelectronicmoney,itisimportanttodesignitsothatitcontinuesthemeritsofcash,manyofwhichareuniqueascomparedwithotherpa