Electronic Currency

" The money screamed across wires, its provenance fading in a maze of electronic transfers, which shifted it, hid it, broke it up into manageable wads which would be withdrawn and redeposited elsewhere, oblitering the trail."
Nest of Vipers, a banking thriller by Linda Davies.

Electronic Currency ia also know as e-money, electronic cash, electronic money, digital currency, digital cash and digital money that can be use to pay goods or services. This involves the use of computer networks, the internet and digital stored value system. Electronic Funds Transfer (EFT) and direct deposit are example of electronic currency. EFT refer to the computer-based system used to perform financial transaction electronically while direct deposit is a banking term used to refer to certain systems used to transfer money. It is also a collective term for financial cyptography and technologies enabling it.An e-currency system may be fully backed by gold (like e-gold and c-gold), non-gold backed, or both gold and non-gold baked (like e-Bullion and Liberty Reserve).

In the use of off-line electronic money, the merchant does not need to interact with the bank before accepting a coin from the user. Instead he can collect multiple coins spent by users and deposit them later with the bank. In principle this could be done off-line, which the merchant could go to the bank with his storage media to exchange e-cash for cash. Nevertheless the merchant is guaranteed that the user's e-coin will either be accepted by the bank, or the bank will be able to identify and punish the cheating user.

How does electonic currency works??
There are a number of electronic cash protocols. To a degree, all digital cash schemes operate in the following manner: A user installs a "cyber wallet" onto computer. Money can be put in the wallet by deciding how much is needed and then sending an encrypted message to the bank asking for this amount to be deducted from the user's account. The bank reads the message with private key decryption and verifies if it has been digitally signed in order to identify the user. The bank then generates "serial numbers", encrypts the message, signs it with its digital signature and returns it. The user is now entitled to use the message (coin or token) to spend it at merchant sites. Merchants receive e-cash during a transaction and see that it has been authorized by a bank. They then contact the bank to make sure the coins have not been spent somewhere else, and the amount is credited to the merchant's account.