Electronic currency

Electronic currency refers to transactions carried out electronically with a net result of funds transferred from one party to another. It is anonymous and reusable. An amount of money must convert to electronic currency before we can spend it. The electronic currency has serial numbers. Each one is issued by a bank and represents a specified sum of real money.

One of the most attractive features of electronics currency to the consumers is confidentiality. Other people will not obtain the information about the buyer during the electronic currency amount being sent to the seller as the bank will have no record of the customer involved in the electronic currency transaction. Unlike credit card companies, they collect customer’s data and may have the probability to sell it to third parties. Therefore, it provides safety protection of customers’ privacy.

The security of electronic currency is provided by the use of encryption. The use of RSA cryptography makes it almost impossible to break the code of a digital signature. In addition, the enacted digital signature statutes require a certification authority to use a trustworthy system. Thus, this improves the security of the transaction.

However, there are some drawbacks of electronic currency. Fraud committed to electronic currency is one of it. If a consumer misplaces his private key and perpetrator uses it to withdraw funds, the bank would never know and the consumer would be liable for it. Besides, if the security code is broken and the message is intercepted, the hacker will be able to perpetrate fraud on the recipient of the message.

Another potential problem is double spending of digital coins. This is only a potential drawback if the consumer chooses a peer-to-peer transaction. This is because the bank is able to check the serial number of each coin in the transaction against its database of spent coins. The transaction will be denied if the coin has been spent. Thus, the consumer will be protected if he includes the intermediary (bank) in the transaction. Otherwise, the consumers have to bear the risk that coins may be intercepted or sent to wrong recipient.