Electronic Currency......

Today, cash is known in various forms as a means of exchange and of storing value. Electronic currency is refers to money or scrip which is exchanged only electronically. Electronic currency is essentially a system of representation of debits and credits used to exchanged value that allows a person to pay for goods and services by transmitting a number from one computer to another. Electronic currency is also known as electronic money, electronic cash, e-money, digital money, digital cash, digital currency, internet currency, cybercash or cyberbucks. Money in the 21st century will surely prove to be as different from the money of the current century as our money is from that of the previous century. Electronic currency has been widely use through the world, just as electronic currency replace the paper money and coins, electronically initiated debits and credits will become the popular payments modes nowadays. New development in electronic currency is emerging, as a result such as smartcards, online banking, electronic currency are being use to discuss money.


Nearly all of the deposit currencies in the world's banking systems are handled electronically through a series of interbank computer networks. Although banks have been able to move currency electronically for almost 10 years, but only recently has the average consumer had the capability to use electronic transfers in any meaningful way. Thus, the increasing of the power of communication technology and decreasing cost of computer, these factors make the digital transfer of funds a reality for million individuals around the world. Beside that, the internet and e-commerce have become an increasingly commercial area, where daily payments for buying goods, service or informations online.


As there, electronic payments are becoming the central part to online business between seller and buyer. Compare to electreonic currency, traditional payments method include credit card, debit card and charge card. However, these traditional payments method have posed problems to both seller and buyer. Not all of the merchant accept credit card payment transaction because the credit card companies may charged the merchants a 2 to 6 percent of service fee for each transaction, so this will cause the merchant to gain more lowest profits.


Using electronic currency is like using a virtual ATM. A users simply connects to the internet and verifies the ownership of the account. The user may then withdraw the desired amount of the electronic currency. By this, the bank issues a large, unique random number in an electronic coin format to the user, which the bank signs with the private key. The user's software stores these electronic coins on the hard drive on the computer. Many systems will sell their electronic currency directly to the end user, such as Paypal and Webmoney, but other systems such as e-gold, sell only through third party digital currency exchangers.


While, electronic currency have its advantages and diasdvantages on the payments system.

Advantages of electronic currency paymant systems:

Confidentiality/Privacy

One of the most attractive features of electronic currency is that, unlike real cash, it is anonymous. That is, when a electronic currency amount is sent from a customer to a merchant, there is no way to obtain information about the customer. This is one significant difference between electronic currency and credit card systems. Unlike credit card companies that collect a customer's spending habits and sell this data to third parties, the bank will have no record of the customer involved in the electronic currency transaction. Thus, by using electronic currency, the bank is unable to obtain personal information about the consumer. Therefore, this protects the privacy rights of the customer.

Security

The security of electronic currency is provided by the use of encryption. Some experts are weary about the security of online transactions. However, it use of break the code of a digital signature to a longer key. Additionally, the enacted digital signature statutes require a certification authority to use a trustworthy system. Therefore, even though there is speculation about the security of the Internet, electronic currency consumers are probably more secure in their transactions than the more traditional ways of doing business.

Disadvantages of electronic currency payment systems:


Fraud

A major disadvantage to electronic currency is fraud. If a consumer somehow misplaces his private key to withdraw funds, the bank would never know and the consumer would be liable. Credit cards on the other hand, limit the consumer's liability for unauthorized activity. Additionally, if the security code is broken and the message is intercepted, the hacker will be able to perpetrate fraud on the recipient of the message. Thus, although fraud is a potential drawback of electronic currency, this risk is no greater than the traditional forms of payment.

Peer-to-peer double spending

Double spending of digital coins is another potential disadvantage of electronic currency. However, this is only a potential drawback if the consumer chooses a peer-to-peer transaction. In all other transactions in the electronic currency system, the bank is able to check the serial number of each coin in a transaction against its database of spent coins, and if the coin has been spent, the transaction will be denied.

Conclusion

Although digital cash can provide many benefits such as convenience and privacy, increased efficiency of transactions, lower transaction fees, new business opportunities with the expansion of economic activities on the Internet, there are many potential issues with the use of digital cash. The transfer of digital currencies raises local issues such as how to levy taxes or the possible ease of money laudering. There are also potential macroeconomic effects such as exchange rate instabilities and shortage of money supplies (total amount of digital cash versus total amount of real cash available, basically the possibility that digital cash could exceed the real cash available).


In conclusion, electronic currency is at the early stages of implementation. As we progress into the 21st century, a consumer's wallet will hold less paper cash, coins and magnetic strip cards. Instead, smart cards, will contain electronic currency and other financial information that will automatically execute a transaction. In the physical world, consumers will gain immediate access to public transportation, concerts and movie theaters using smart cards. Additionally, a cyberspace mall will allow all entrepreneurs and retailers the ability to instantly reach the global market. Yet, the major issues will continue to be trust and security in ensuring consumers that the chance of a fraudulent transaction or misuse of personal information is slim or non-existent. However, once the electronic currency industry is able to ensure consumers that these transactions are secure and trustworthy, it will change the way we conduct our daily lives.