\documentclass[11pt]{article}


\title{ {\Huge ROUGH DRAFT} \\
        On-line versus Off-line Electronic Cash Systems }
\author{Chris Laas}
\date{June {42}, 2000}

\pagestyle{myheadings}
\markright{Chris Laas \hfil On-line versus Off-line Electronic Cash Systems}


\begin{document}
\maketitle

{\center \small
 \verb|$Id: online-offline.tex,v 1.3 2000/07/19 06:55:20 golem Exp $|}



\section{Introduction}


\section{Several On-line Systems}

\subsection{}
Dan Simon's chits

\subsection{}
Chaum's cash checks

\subsection{}
Brands stored value (worth even mentioning?)

\subsection{}
Non-anonymous systems?  PayWord, MicroMint, Millicent, Mini-Pay
(micropayment systems, not necessarily representative)?


\section{Several Off-line Systems}

\subsection{}
Brands '95, a popular one.
+ Loss tolerance.

\subsection{}
Ferguson's system --- counterpoint to Brands.

\subsection{}
Chaum has offline cash checks too.

\subsection{}
Pick-a-provably-secure-system, all broken?

\subsection{}
Okamoto's ``Universal Electronic Cash''


\section{Um, Arguments}

Complexity: on-line systems are relatively simple.  E.g. Dan Simon's
chits.  Off-line systems are complex to implement.  E.g. Universal
Electronic Cash.  Also note that other operational aspects of the
system are bound to be equally complex to the actualy cryptographic
aspects.

Level of anonymity: definitions of anonymity vary subtly.  For
example, Dan Simon's system is anonymous in a different sense than
most systems.

Double-spending:  on-line systems prevent double-spending, short of a
break in the cryptographic security.  Off-line systems only provide
detection of double-spending.  OTOH, off-line systems provide
immediate prevention of double-spending when in on-line mode.
However, an off-line fallback mode invites DOS attacks, which are not
easily avoidable.  However, widespread DOS attacks can be countered by
communication through out-of-band mechanisms (i.e. phone, radio, TV,
etc).

Liability for fraud.  Who is liable if Mallory spends a \$50 bill 1000
times simultaneously and then skips the country?  The situation is
theoretically impossible in a totally on-line system (which shuts down
if the network is unavailable); however, it is possible in an off-line
fallback scenario in which Mallory disrupts the network at the central
bank.  Who loses money in this case?  Does the bank charge a
percentage on each transaction to cover fraud?  (But is this
compatible with the concept of ``cash''?)  OTOH, do the merchants
simply suck it up?  (This is what happens with forged cash today;
however, note that there exists the Secret Service; also, consider
perceptions of electronic money, in which banks seem to be expected to
suck up damages.)  Consider that perhaps there must exist some form of
``insurance'' in the system if merchants are not to suck up these
damages.

Perceptions of liability.

Detection of fraud.  In which systems is fraud detectable?  By which
channels?  Is framing detectable?  Where can the concept of ``hidden
predicates'' be used?


\section{Conclusions}

Tentative? conclusion: off-line systems, which normally operate in an
on-line mode, provide the greatest level of flexibility to the
system's users.  Merchants may choose the tradeoff between security
and continuing business in the case of network unavailability.  In the
face of a network outage, Max's Diamond Shop may disable electronic
cash payments altogether (perhaps falling back to personal checks or
another mechanism); the Coop might decide to require additional
identification of some sort along with payments (for example,
``anonymous'' digital photos); LaVerde's Sub Shop might decide to
enable off-line electronic cash after phoning in to the Bank to
confirm that the outage is local; and the Coke machine on the corner
might decide to simply fall back to off-line mode.  (After all, it
probably costs Mallory more than 75 cents per Coke machine to
perpetrate his crime.  And even if he succeeds, how is he going to
sell a thousand stolen cans of Coke on the black market?  We can't
consider Mallory to be a prankster kid who is stealing Cokes, either,
because the double-spending will be detected and punishment meted out
after the fact.)

Tradeoffs to weigh:
\begin{itemize}
\item
Cost of potential fraud due to network outages versus cost of lost
business due to network outages.

\item
Likelihood of fraud via various channels (double-spending,
cryptosystem break, embezzlement).

\item
Perception of liability in the system.

\end{itemize}


\end{document}
