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Secrets of Making Money
Digital Cash
by Brad Puffer

In the last few years scores of companies have been formed, sporting appropriately cyber-sounding names, all aiming to be a part of the future of money. Some use the internet to facilitate secure transactions through credit card sales. Others, through complex algorithms, convert your bank dollars to digital code - complete with your digital signature - which can be sent to online vendors. Still others are setting up independent systems of electronic money which use their own network of vendors and users.

What is digital money, and where is it taking us?
Digital cash acts much like real cash, except that it's not on paper. Money in your bank account is converted to a digital code, stored on a microchip, a pocket card, or on the hard drive of your computer, and can be used for anonymous transactions by any vendor who accepts it. Your special bank account code can be used over the internet to purchase a new CD, or can be presented in card form at the local supermarket for food. Everybody involved in the transaction, from the bank to the user to the vendor, all agree to recognize its worth, and thus create this new form of exchange.

The internet may be the natural environment in which digital cash will flourish. In fact, if the internet is to continue to grow, many experts argue that it must become commercial. But fears that credit card numbers and other personal information could be snatched away by a clever hacker make many users apprehensive about buying goods over the internet.

To bring consumers to the internet, many corporations have rushed into developing new technologies to create secure and efficient transactions over the World Wide Web. Many of the new technologies depend on systems, like credit card purchases, that are already familiar to users. By pre-registering your credit card numbers in a secure computer, users can send a special code over the internet to authorize use of your number. The card number itself never travels over the internet and you even receive an e-mail confirming your purchase. Another system uses a complex encryption method so that if someone did manage to steal your number, the number would be completely useless to them. These forms of electronic transactions are the first, and most familiar step, for commercializing the web and beginning the process of electronic monetary exchange.

But the use of digital cash, though convenient, may bring with it complex problems. Because digital money is anonymous, criminals could use untraceable digital money to evade taxes or launder money. Money could flow instantly between countries without being traced. Computer hackers could break into digital cash systems and instantly download the wealth of thousands of customers.

The potential problems go beyond those posed by anonymity. If your hard drive crashes, would you lose not only a hard drive and valuable information, but all of your digital cash as well? Could digital cash wreak havoc on traditional bank and government-controlled monetary systems? Would large private companies take power away from traditional banks by controlling and regulating large holdings of digital cash? And will digital cash be available to those who cannot afford personal computers?

Along with potential problems, digital cash brings with it clear advantages over traditional money. For the user, electronic money is precise, simple and convenient. For banks, it could mean the elimination of thousands of paper transactions and, in turn, the reduction in user fees. For corporations, it could mean the ability to circumvent banks entirely to create direct company to company transfers. Most experts believe that the use of the internet for electronic transactions and the use of digital cash will rapidly increase over the next ten to twenty years, but it won't replace the real cash you can crinkle in your hand any time soon.

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