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on Digital Monies

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  • 1. On Digital Monies On Digital Monies July 2, 2011
  • 2. Digital Payment vs. Digital MoneyOn Digital Monies • Payment System < Money
  • 3. Digital Payment vs. Digital MoneyOn Digital Monies • Payment System < Money • Functions of money (texbook) 1 Payment 2 Measure of value 3 Saving / investment (store of value)
  • 4. Digital Payment vs. Digital MoneyOn Digital Monies • Payment System < Money • Functions of money (texbook) 1 Payment 2 Measure of value 3 Saving / investment (store of value) • Why bother with the “digital” part?
  • 5. Digital Payment vs. Digital MoneyOn Digital Monies • Payment System < Money • Functions of money (texbook) 1 Payment 2 Measure of value 3 Saving / investment (store of value) • Why bother with the “digital” part? • Merry Crisis!
  • 6. Digital Monies: Past, Present and FutureOn Digital Monies 1 DigiCash • David Chaum, 1990 • Emphasis on untraceability 2 WebMoney • WM Transfer Ltd., 1997 • Emphasis on finality of transactions 3 BitCoin • Satoshi Nakamoto, 2009 (2007) • Emphasis on guaranteed scarcity 4 ePoint • D. N. & friends, 2007 (2005) • Emphasis on issuer transparency
  • 7. Technical Challenge #1: Double SpendingOn Digital Monies • DigiCash Reactive security measures • WebMoney Proactive: centralized account-keeping • BitCoin Long-term proactive: approx. 1h confirmation time • ePoint (future) All of the above. :-)
  • 8. Economic Challenge #1: AcceptanceOn Digital Monies • DigiCash Backing by banking system. • WebMoney Backing by escrow services and contractual acceptance. • BitCoin Purely speculative. • ePoint (future) Backing by securitized debt.
  • 9. Legal Challenge #1: State MonopolyOn Digital Monies • DigiCash Banking license • WebMoney Ownership & purchase certificate • BitCoin Outside of state jurisdiction • ePoint (future) Purchase certificate
  • 10. Architectural considerationsOn Digital Monies • Open source infrastructure; the only secrets are keys • Most of the work is done by paranoid clients Paranoid users only need to trust their client sw/hw • Weakly coupled server nodes provide a sufficiently consistent database of transactions and balances • Server nodes are not trusted, but rewarded • There is one transaction type: transfer of a given amount of funds from one account to another. • Issuing is simply incurring a negative balance.
  • 11. Implementation detailsOn Digital Monies • Transactions are split into two: give transactions signed by the payer and take transactions signed by the recipient. • Partial balances are calculated by clients and checked by both clients and server nodes. • Transactions refer to earlier transactions by hash values, checked by all parties • References are included to • related transactions • very recent transactions • random transactions in the past • Volutary transaction fees refer to the corresponidng transactions
  • 12. User experienceOn Digital Monies • Na¨ transactions are possible ıve • Peer-to-peer payment over any channel • by cellphone • by email • over the web • in online chat • by handing over pieces of paper • ... even verbally (over the phone or in person)
  • 13. User experienceOn Digital Monies • Na¨ transactions are possible ıve • Peer-to-peer payment over any channel • by cellphone • by email • over the web • in online chat • by handing over pieces of paper • ... even verbally (over the phone or in person) • Cash-like behavior • locally stored tokens vs. centrally kept accounts • no identification (hence no risk of identity theft) • some measure of privacy
  • 14. Payment tokens: randsOn Digital Monies • Each payment token is a short random code called “rand”. • Rands have many faces: • textual representation vTOe2RutvrF8 • QR code • paper rands • electronic representation
  • 15. On Digital Monies Thank you for your attention! www.epointsystem.org