NetCard — A practical electronic-cash system

Abstract

Our recursive hashing technique greatly reduces the computational complexity in applications where a series of low value payments are made to the same merchant. We have shown how it can be used in simple payment schemes based on both the smartcard and the online processing models of electronic commerce, and can also provide some novel and valuable features, such as a security recovery facility that does not depend on either the legacy systems or the SET protocols. It is an open problem whether hashing techniques can be combined with the more complex anonymous cash schemes.

In December 1995, we learned that three other groups had independently developed micropayment systems that are rather similar to our second protocol. These are the ‘Tick Payments’ of Torben Pedersen of the CAFE project, the ‘PayWords’ of Ron Rivest and Adi Shamir [RS], and a scheme from the iKP team at IBM Zürich [HSW].

From the scientific point of view, one of the more interesting lessons learned from implementing our first protocol and developing the others from it has been that local and global trust interact in interesting and often unexpected ways. The details of this will be the subject of a future paper; the high order bit appears to be that the global trust has to go somewhere. In a payment system, the global mechanism to prevent double spending can be a centralised system of online authorisation, authorisation using end-to-end authentication, tamper resistant objects or (more realistically) some combination of these. Moving the primary locus of trust, even slightly, can have profound effects; and very small design changes can greatly improve the system's resilience and robustness.