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Network and communication Privacy Digi cash



Digicash rise and fall across the history and current revival
Network and Communication Privacy
SS-2014 Uni-Konstanz (4-July-2014)
Untraceable Electronic Cash with Digicash
Waleed Abrar
Digicash is an online payment method that has a very
unique concept regarding the privacy of their clients,
which is anonymity, David Chaum introduce a brilliant
method to ensure anonymity by introducing blind
signatures, this concept is the major milestone for
ecommerce and other financial institutions.
This report tends to through light on some important
concepts regarding DigiCash, how it works, how they
insure anonymity, what’s the price of anonymity and
how they mimic paper currency properties pros and cons
of DigiCash and what happened to the company in the
end and current revival.
Digicash, double spending, Blind-Signature, anonymity,
properties of e-cash, online vs offline DigiCash.
Digicash came into being in on 21 April 1990 after
working on a project with a colleague, David Chaum
decided to open his own company in the year 1993 he
introduce electronic cash. His Idea was to mimic the
properties of paper cash and produced them in ecash so
that to remove the concerns of people regarding buying
and selling online as much as possible. The main actors
of Digicash are shown below. The concept will be
explained later in the report.
Fig.1: Three major building blocks of DigiCash
The main motivation behind Digicash is that it ensures
anonymity of the person as long as he didn’t double spent
and at that point payment with credit card is not secured
as there are no standards for sending the data online
because SSL are not introduced yet and credit card
numbers can be intercepted. Some other factors are,
online payment transaction charges are too much and
people really avoid online transaction at that time so
DigiCash targeted those flaws and became an instant hit
in the beginning.
E- Cash should hold following properties:
1) Secure:
E-cash should be secure so that the e-cash
should not be forged.
2) Anonymous:
David Chaum argued in the paper that as people
say the paper money is anonymous, it’s not
because of the number printed on it. DigiCash
introduce anonymity by introducing blind
3) Portable:
You can easily carry the e-cash with you
anywhere this property also hold in Digicash as
4) Two way:
One can buy and sell with ecash just as normal
cash this property also holds in Digicash as
5) Off-line capable:
One can perform transaction offline as well
without active network connection. This
property also holds with Digicash as well.
6) Widely expectable
The currency should be widely acceptable and
globally recognizable. That’s not the case with
Digicash it’s basically at a small scale level.
7) User friendly
E-cash spending should be easy just like paper
cash and this property also holds for Digicash.
(Birmingham, 2004)
Fig.2: General working of DigiCash
The initial requirement for Digicash to work is that the client
and the merchants are sharing common bank which make it a
centralized network. Alice deposit some money into her
account and afterwards Alice can generate coins based on the
money in her account those coins are signed by the bank Private
key and returned back to Alice H (M) +Bk after the coins are
signed they become currency and now be used to buy some
stuff from Bob, Bob verifies the coins from the bank or give
challenge to Alice in case of Offline (Friis, 2003). After
verification goods can be shared and money will be transferred
to his account.
The mechanism is very simple instead of bank generating the
coin. Alice PC software generate the coin requests and hide it
with the encryption scheme and send it to the bank to get them
stamped .Bank honor the request put forth and sign it with its
private key and return it back without having any knowledge
about coin (Chaum).When coin is spent it’s a valid coin as
validated by the bank stamp, because the coin is hidden with
the encryption scheme bank can’t tell or link it back to the
owner of the coin
6 Cut and choose method to avoid cheating:
As the Bank has no information about the coin and it has to trust
Alice software to generate the correct sequence, it’s probable
that Alice generate a 10 $ coin and ask for 100 $ for bank to
sign and since bank don’t know about coin so its problematic,
To avoid that situation, when Alice generate the message to
bank for signature, instead of 1 message Alice generate let
suppose 100 messages and bank check other messages and then
randomly chooses any one message and sign it .The probability
for Alice to cheat in this scenario depend upon the number of
random messages generated by Alice .Since in our scenario its
o.oo1 that Alice is able to cheat.
Fig.3: Working of cut and choose methodology ‘n’
message sent instead of 1
Since bank cant link the Coin origin to its source. One
can try to spend the same coin twice , as the coin is
digitally signed ,a mechanism should be created to not
only detect double spending but get the culprit as well
.So David Chaum introduce (David Chaum) a random
number whenever the Bank sign a coin it maintain that
number into its repository with the count of the number
. Double spending is not a problem when working with
online Digicash because the Bank check the random
number with the message and if the random number
exists it will not sign on the coin. But the problem occurs
in offline Digicash, Offline Digicash is just like normal
Digicash but it has additional hardware with the
mechanism inserted to verify the identity of coin and that
hardware is trusted by both bank and vendors.
So to avoid double spending the mechanism is very
simple whenever Alice send coins to Bob. Bob give
Alice a challenge and just like a Hang man game ask
Alice to revel some part of identity and match it with
some part that is attached to the Coin for example
ALICE A=1,L=2,I=3….
BOB randomly ask Alice to open 3
Index and check
with the part of identity already sent with Coin not the
full identity. If I=3 than the Bob can ask about 1 which
is A.
If the challenge is successful than the coin is legitimate
and Bank update the account of Bob if Alice Try to
double spend Say give the same coin to Lisa.
Lisa has let say ICE part attached with its coin which is
, 4th and 5
index. Lisa challenge and now bank have
the same random number and the other half of the
Identity which is Anonymous until she double spend.
Now bank can XOR both part of Alice Identity with the
padding that was inserted in case of double spending.
The mechanism is explained in below table where two
transaction are monitored by bank by BOB and LISA
and the bank Identify the Culprit ALICE. (Birmingham,
Fig.4: Getting the identity if person do double
7 Advantages and Disadvantages of Online
vs Offline DigiCash.
At that time the connections are not very reliable and the
merchants are too much focused on having an offline
product as well, their advantages and disadvantages are
explained below:-
A) Online Advantages:-
-Fully anonymous and untraceable unless
double spend
-No dual spending problems (coins are
checked in real time during the transaction).
-additional hardware is not required.
Online Disadvantages:-
-Communication problems in case of network
-Huge number of coin database to maintain and
match when verifying the coin
-Coin are actually not reusable.
B) Offline Advantages:-
-User identity is hidden unless double spend
-Bank can detect double spender accurately.
-Banks don’t need to synchronize database in
each transaction.
-Reusable coins
Offline Disadvantages:-
-No prevention for double spending.
-Extra security and hardware needed so
additional cost.
8 What happened to Digicash and why?
Digicash got bank corrupted in the year 1998 and as pointed out
in the article (RH, 1999). It’s Mostly because of lack of David
Chaum managerial Skills. He is a very good mathematician but
not a very good manager due to this they missed many
opportunities to do good business with other companies and in
the end the board of directors meet and said either you quit or
we quiet so at that point he quite the company and short after
his departure the company collapsed and all its patients are sold
to other companies on very cheap rate.
9 Revival of Digicash:-
As I was going through some literature I found out that
DigiCash is going to be reinitiate with a new concept a modern
touch (DIGICASH, 2014) .They introduced QR code and
software on smartphones which are doing the same stuff as
introduced by David Chaum in his paper and they said that it
ensures anonymity of user as well, but firstly you have to
connect your bank account with it. A simple scenario is
explained in diagram below:
Fig.5: A scenario of a Bill payment with Digicash
Run the app on the smartphone secondly read the QR code
on the bill by the camera, App ask to enter the security code
and your payment is done.
10 Summary:-
Digicash was an example of an excellent idea went in vein due
to some wrong managerial decisions while reading an article
(RH, 1999) Jan Kees Dunning is convinced that the business
could have turned out differently to the fatal chain of events
that seems to have happened. He estimates that DigiCash
needed only another six months to secure a breakthrough. But
the company fell during that time. Digicash gave an excellent
alternate for paper cash but fell due to some clashes with credit
card companies and some people fear that Digicash can be used
in money laundering.
11 Lesson Learned:-
According to me Digicash is still very attractive as it has the
catch of Anonymity as every end user want not to be followed
and leave a transaction trail. But there are some proven attacks
now on the security of the RSA which is the basic building
block in Digicash for getting Signature. So I won’t recommend
using Digicash unless those security flaws are removed.
Removing physical cash is possible only from the
technological perspective but actually it not possible to let
people believe that their money actually is in their USB Drive.
Works Cited
Birmingham, L. R. (2004, 02 21). University of
Birmingham Lecure Repository. Retrieved
from Digital Cash:
Chaum, D. (n.d.). Blind Signature System. US
Patent #4759063.
David Chaum, A. F. (n.d.). Untraceable Electronic
Cash. Advances in Cryptology - CRYPTO
'88 Proceedings.
DIGICASH. (2014). Retrieved from
Friis, J. B. (2003). Digicash implementation.
University of Aarhus.
RH, I. (1999, 2 10). How DigiCash Blew Everything.
Retrieved from Next! Magazine:
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University of Birmingham Lecure Repository
  • L R Birmingham
Birmingham, L. R. (2004, 02 21). University of Birmingham Lecure Repository. Retrieved from Digital Cash:
How DigiCash Blew Everything
  • I Rh
RH, I. (1999, 2 10). How DigiCash Blew Everything. Retrieved from Next! Magazine: