Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: MONDAY, October 23, 1995 TAG: 9510240015
SECTION: NATIONAL/INTERNATIONAL PAGE: A-4 EDITION: METRO
SOURCE: Associated Press
DATELINE: AMSTERDAM, NETHERLANDS LENGTH: Medium
The new digital currency will be offered by Mark Twain Bancshares Inc., a regional bank holding company based in St. Louis, Mo., using technology developed by the Amsterdam-based company Digicash.
David Chaum, a mathematician who founded Digicash, is a highly regarded expert on protecting privacy in the information age.
The electronic cash system is geared toward small purchases and toward extending the ability of small companies to reach a global audience with a limited investment.
Despite the Internet's explosive growth, less than $200 million in business was done on the global web last year - and that was just processing credit or debit card transactions. Security concerns and the absence of a cash-type payment system were the main reasons.
While those transactions involve little more than putting cardholders' numbers in encoded software envelopes to protect them from theft, the Digicash software actually creates a new form of currency.
The U.S. government, which is in charge of the issuing of U.S. currency, has so far made no policy statement on digital currency. But no one has told Mark Twain Bancshares it can't go ahead with the project.
During an 11-month Internet trial run using play money, the ``e-cash'' system attracted more than 30,000 users and 70 merchants, Chaum said.
To use ``e-cash,'' both merchant and buyer must have accounts with Mark Twain Bancshares and pay a fee for ``e-cash'' privileges. The bank has a ``mint'' that creates ``coins'' - specially encoded symbol strings - based on the actual deposits.
To buy something with ``e-cash,'' depositors download the ``coins'' to their computer hard drives and transmit them to the seller. The seller sends the ``coins'' to the bank, which verifies their authenticity.
Because Chaum's system involves using software, there are concerns it could be compromised. Hackers are certain to mount attacks.
The Internet's security was called into question this month by student programmers at the University of California at Berkeley, who found flaws in its most popular program, Netscape Navigator.
Computer security experts - including Whitfield Diffie, who invented public-key cryptography, the essential security element of digitally encoded communications - consider Chaum's system sound, but agree that, theoretically, it could be broken into.
If someone figured out the secret key that makes the money, they could produce counterfeit ``e-cash.'' That might eventually be discovered only when an issuing bank's books stopped balancing.
Mark Twain Bancshares is initially limiting ``e-cash'' to 10,000 accounts and keeping transactions among its account holders, said vice president Frank Trotter. But it hopes one day to use ``e-cash'' in concert with other banks, and add ``e-cash'' in other currencies besides U.S. dollars.
Sweden's state-owned Postbank has bought a license to issue ``e-cash,'' but a launch date has not been set, Chaum said.
by CNB