12th June 2020 1 By indiafreenotes

E-Cash was a digital-based system that facilitated the transfer of funds anonymously. A pioneer in cryptocurrency, its goal was to secure the privacy of individuals that use the Internet for micropayments. eCash was created by Dr. David Chaum under his company, DigiCash, in 1990. Though there was interest in the platform from large banks, eCash never took off and DigiCash filed for bankruptcy in 1998. DigiCash, along with its eCash patents, was eventually sold off. In 2018, Chaum launched a new startup focused on cryptography.

The idea for eCash came from Dr. David Chaum in 1983. He was ahead of his time in thinking about privacy concerns in the age of the Internet. And not only did he advocate for privacy but he took it a few steps further in creating an anonymous based payment system for the digital age. This was even before the Internet was available for public use. In 1990, Chaum created the company, DigiCash, to realize his idea for eCash.

The core concept behind eCash was blind signatures. A blind signature is a type of digital signature in which the message’s content is invisible prior to signing. In this manner, no user is able to create a link between withdrawal and spend transactions. The money used in the system was called “CyberBucks.”

E-Cash’s Rise and Fall

DigiCash gained a lot of traction in the 1990s when Internet companies were taking off. The company signed deals with many banks that intended to use the platform. These banks included Deutsche Bank (DB), Credit Suisse (CS), and other banks across the globe. Microsoft was also interested in eCash for Windows 95 but the two companies couldn’t agree to a deal.

The banks that decided to implement eCash started testing the platform but never sold it as a viable product to its customers. The only bank that actually used the platform was Mark Twain Bank in St. Louis, Missouri. The service was free to buyers, but sellers had to pay a transaction fee. Mark Twain Bank had signed up 300 businesses and 5,000 individual users but the platform never gained traction. According to Chaum, “As the Web grew, the average level of sophistication of users dropped. It was hard to explain the importance of privacy to them.”

DigiCash eventually filed for bankruptcy in 1998. It was sold off to eCash Technologies along with its patents for eCash. The trademark for the name is now with Due Inc.

E-Cash and Online Security Today

Despite the failure of DigiCash and with it eCash, online security is an ongoing issue in the digital realm to this day. Financial information, stored on a computer or electronic device, or the Internet more generally (e.g., the cloud) is vulnerable to hackers. Cryptocurrencies, such as Bitcoin, are extremely popular and owe their foundations to eCash. In fact, many consider Chaum to be the father of digital currency.

In 2018, Chaum launched a new startup called Elixxir, whose purpose is to create a cryptography network focused on communication anonymity, that is controlled by users to protect their information, as opposed to the current setup, where companies have detailed access to consumer information and use it for targeting ads to generate revenue.

The electronic cash-system is deliberate to contribute to the consecutive replacement of money in the retail sector. One among its attractive assets from the merchant’s perspective is the payment guarantee given by the issuing bank after the effectual authorization. Due to its efficiency, electronic cash is ready to grow even in competition with different POS-systems. For cardholders, electronic cash transactions are free of charge.

E-cash actually globalizes the economy, since the user will transfer cash into his cyber-wallet in any currency desired. A merchant will accept any currency and convert it to local currency once the cyber cash is uploaded to the bank account.

To the extent a user needs E-cash off-line; all that’s necessary is smart card technology. The cash is loaded onto the smartcard, and the special electronic wallets are used to offload the cash onto different smartcards or directly to an on-line system. Smartcards are used successful in different countries for such transactions as phone calls for a number of years.

Four major elements in an electronic cash system:-

  • Issuers
  • Merchants
  • Regulators
  • Customers

For E-Cash dealing, we want to go through a minimum of three stages:-

  • Account setup
  • Purchase
  • Authenticatio

We can classify E-Cash payment systems:-

  • Account -based systems
  • Token- based systems
  • Notational systems
  • Smart card-based notational systems.

Pros and cons of e-cash payment system:


  • We can transfer funds, purchase stocks, and offer a variety of other services without having to handle physical cash or checks as long as bank is providing such services online.
  • Debit cards and online bill payments allow immediate transfer of funds from an individual’s personal account to a business’s account regardless the designated place.
  • Consumers will have greater privacy when shopping on the Internet using electronic money instead of ordinary credit cards.


  • E-cash and E-Cash transaction security are the major concern.
  • Frauds on E-Cash are on the catch recent years.
  • Hackers with good skill able to hack into bank accounts and illegally retrieve of banking records has led to a widespread invasion of privacy and has promoted identity theft.
  • There are many other tricks including through phishing website of certain banks and emails.
  • With the continued growth of E-Cash, money flow in and out of countries at immediate speed without being traced will weaken the government’s ability to monitor and income in tax.

Properties of Electronic Cash:

  • Digital cash must have a monetary value; it must be backed by cash, bank-authorized credit, or a bank-certified cashier’s check.
  • When digital cash created by one bank is accepted by others, reconciliation must occur without any problems.
  • Digital cash must be interoperable or exchangeable as payment for other digital cash, paper cash, goods or services, lines of credit, deposits in banking accounts, bank notes or obligations, electronic benefits transfers, and the like.
  • Digital cash must be storable and retrievable.
  • Digital cash should not be easy to copy with while it is being exchanged.
  • It should be possible to prevent or detect duplication and double-spending of digital cash.