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\hbox to 5.75in { {\bf 6.857 Computer and Network Security
\hfill Fall Term, 1997}  }
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\hbox to 5.75in { {\Large \hfill Lecture #1 : #2 \hfill} }
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\lecture{23}{November 25, 1997}{Ron Rivest}{Lynn Qu} 
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\section {Electronic Cash}
\begin{itemize}
\item Desiderata
\item Checks
\item Payword
\item Lottery Ticket
\item Double Spending (partial discussion)
\end{itemize}


People have used different items as currency for a long time: shells, tobacco 
leaves, and such.  Now if you want to pay someone electronically, say over the
web or something...

\subsection{Desiderata}
\begin{itemize}
\item cannot be forged
\item no double spending
\item anonymity, for payer AND payee
\item divisibility, i.e. 10 = 2 * 5
\item clear value (face value)
\item designated spender -- controlled access to ``wallet''
\item ease of use
\item transferable between users
\item ``backup'' electronic cash (but not applicable with real money)
\item traceability (for law enforcement)
\item work with different banks
\item small transaction fees
\item efficient computationally
\item no adverse social effects
\item make specific payments as authorized
\item smooth transition to new scheme -- backward compatible
\item universal
\item durable
\item scalable
\item non-repudiation
\end{itemize}

There are two forms of e-cash:
\begin{itemize}
\item account-based (with a bank)
\item token-based (posession of bits)
\end{itemize}

%\begin{figure}[h]
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%\caption{Electronic cash transaction}
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\subsection{Electronic Checks}
\begin{itemize}
\item certificate from bank saying $P_{KAlice}$ is an account in good standing
as of...
\item ``To:'' field corresponds to an account number of the recipient
\item merchant needs to verify that the bank is valid: additional certificate
of bank from the Federal Reserve
\item serial number -- to prevent replay
\item background interaction between acquiring bank and issuing bank
\end{itemize}

%\begin{figure}[h]
%\begin{center}
%\mbox{\psfig{figure=notes-23-fig-2.eps}}
%\caption{Electronic Check}
%\label{fig:mm}
%\end{center}
%\end{figure}


As the world gets networked together, electronic monetary transfer will become
more important.  But at the same time, it is costly -- banks are involved each 
time

\subsection{Payword}

You want to write one check for each site you visit, and pay vendor 
the $i^{th}$ penny to spend (assumming each site costs a penny)

\begin{enumerate}
\item start off with $X_0$, and give it in check.  
\item compute all values of X for the sites you'll be visiting
\begin{center}
$X_i$ = hash($X_{i+1}$)
\end{center}
\item give vendor $X_i$, vendor checks that it hashes to $X_{i-1}$
\end{enumerate}

When done, vendor takes the chain of X's and send to bank with the check.
Bank does all the hashes to verify; it essentially processes a check for every
site visted.

\subsection{Lottery Ticket as Micropayment/Probablistic Checks}
\begin{itemize}
\item a \$10.00 check is valid with probability of $1/1000$, so it is really 
worth \$.01
\item so vendor either deposits a \$10.00 check (with chance of 1 in 1000), or
does nothing
\item now the bank processes the same amount of money but with much fewer 
transactions
\end{itemize}

Maybe we can use a random number generator based on the MASS Lottery...
\begin{enumerate}
\item vendor gives secure commitment h(w)
\item user writes check, ``worth \$10 if w is such that it has these least 
significant bits...''
\item vendor can check immediately
\end{enumerate}

So now we have each check $X_i$ and vendor commitment h($w_i$) make up an
independent trial to see whether the check is worth \$10.  This would not work
well for the vendor if he tends to have bad luck.


\subsection{Double Spending}
\begin{itemize}
\item double spending is a real concern
\item prevention is needed, perhaps with special-purpose hardware which 
disallows duplication of bits or does not honor second deposits 
\item also dectection is important to identify who double-spent
\end{itemize}

{\bf Simple ``token-based'' digital coin}
\begin{itemize}
\item coin has a message signed by bank, ``I am worth 10 cents and my serial 
number is 11235'' 
\item bank must keep track of all the serial number on its ``minted coins'' 
with a database
\item modification: bank blindly signs the message/coin, but needs a different
key for each denomination, i.e. a ``dime-key''
\item with the modification, bank cannot identify coin as belonging to the user
when it comes back
\end{itemize}

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