Business

Digital Currencies

Yet this is already happening, in small ways, and has been for some years. For example, certain public facilities accept coin like tokens mass transit systems in particular, but also many toll collecting authorities. Some mass transit systems require the use of fare cards that store value in a magnet strip, instead of coins or tokens. Some toll road authorities place tags on your car that can be scanned at low speed so a complete stop at the booth is not required. Prepaid telephone cards represent another digitized currency.

Digital currencies are differentiated from electronic payment systems on two very important ways.

1: Digital currencies can be used to maintain the anonymity of the customer in an online transaction, whereas users of online payment systems are usually identifiable, at least to the service to which they subscribe.

2: Digital currencies themselves can support an actual transfer of value by themselves, without linking to some third party credit provider or financial institution for authorization to complete the transaction.

The use of standard encryption and digital signature technologies make it possible to safely and reliably transmit payment information between customer and merchant, or between customer and online payment service provider. Encryption, particularly public key encryption, makes the contents secure from prying eyes, while digital signature techniques ensure that forgery in not possible. However, both encryption and digital signature need to be a two way process. If Julie and Ron are to exchange encrypted messages, they must identify each other with an encryption key. More critically, digital signatures work only if you can trace the public key of the person signing.

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Douglas Adams is the owner of Home Based Business News , a website dedicated to increasing knowledge of home based business issues.

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