~welcome to e-commerce world~

Post by Jackie, 3 July 09 @ 10:07 pm

Electronic currency is a digital symbol of physical money. It allows consumers to pay for goods or services by sending a number from one computer to another. It is done by transferring funds electronically, from one party to another, where it is cleared and protected by a strong encryption. This benefits the users as it offers more safety and less risk to them.

Furthermore, as E-commerce is evolving to be used widely, electronic currency is making it simpler for consumers to spend online. Usually, a user can purchase electronic currency by connecting to the Internet and certifying ownership of their account. This is followed by the user withdrawing the required amount and the bank issues a unique random number in an electronic coin format. The electronic coin has a serial number whereby the bank signs with their private key. The user will then store the electronic coins on their hard drive.

A unique type of electronic currency is E-Gold. E-Gold is an electronic currency issued by e-gold Ltd., a Nevis corporation. It is done by integrating an account system that allows the consumers to use gold as money. When one consumer carries out the e-gold payment, only the rights over it changes to the other party. The gold however, is still kept in the treasury vault.

1. Mondex.

• Electronic currency can be transferred by a system called Mondex. Mondex is a type of smart card that keeps 5 different types of currencies and transmits cash on the internet. A consumer can make a purchase from any online vendors that accept Mondex by inserting their Mondex card into the card reader and validating with the vendor’s Mondex device, the value of the transaction will be transferred onto the vendor’s card.
  

2. Mark Twain.

• Another type of electronic currency system is Mark Twain. Firstly, a consumer must open a World Currency Access (WCA) account. The WCA is a money market deposit account that bears interest and is accessible to customers free of the electronic currency program. To use electronic currency from their WCA account, a consumer must make transfer of funds by telephone, facsimile, mail or e-mail, from the WCA account to an individual "electronic currency mint" non-interest-bearing account. Following this, the electronic currency amount is downloaded from the electronic currency mint to the consumer’s computer via the internet. The funds are then transferred again to a pooled account at Mark Twain’s. Vendors who are paid by electronic currency can then cash in the amount received.
  

Electronic currency provides some of the benefits as follow:

1. Confidentiality

• Electronic currency is known to be anonymous. For instance, when a consumer sends electronic currencies to a vendor, the vendor will have no idea who the consumer is. This is a completely different feature as compared to credit cards. Furthermore, using electronic currencies can protect the confidentiality of the consumer as banks are also unable to obtain consumer’s personal information.
  

2. Security.

• Electronic currency is protected by encryption of RSA cryptography which makes it difficult to crack the code. Cryptograph is created by using digital signature. Digital signatures require an electronic private key on the sender’s part and a public key on the recipient’s part. Thus, even though people have doubts about internet safety, consumers carrying out electronic currency transactions are probably more secured while carrying out transactions online as compared to conventional way of doing business.
  

There are still some of the disadvantages of electronic currency:

1. Fraud.

• When a consumer misplaces their private key and funds are withdrawn by an unknown party, the bank will not know about it. The consumer will then be liable for any transaction carried out. Furthermore, if the security code is hacked and message interrupted, the unknown party can commit fraud on the intended recipient of the message.

2. Peer-to-peer double spending.

• This only occurs when consumer decides not to have the bank as an intermediary. This is because if the consumer includes the bank as an intermediary, the bank will check for double spending on behalf of the consumer and stop it immediately. However, if the consumer chooses a peer-to-peer transaction, nothing can be done if there is double spending on a transaction.