Very often in various online discussions, people cite the word "cash" from the Bitcoin whitepaper title as evidence that Bitcoin should be used for everyday transactions.

I've seen mentions that the term "Electronic Cash" as it appears in the whitepaper title has a very specific meaning in the cypherpunk/computer science community. I've tried looking for a definition online, but I couldn't readily find a more elaborate definition of the term.

What is the meaning of "Electronic Cash" in the computer science lingo?

Digital cash is supposed to be a digital equivalent to our legacy physical cash (coins and banknotes).

Therefor digital cash needs to fulfill certain criteria:

  • payments can be made without a middleman
  • the receiver has a means of verifying the transaction and be sure that they have been paid
  • the transaction cannot be reversed

These criteria are met no matter if I hand you a banknote or send you a Bitcoin transaction. They also create privacy and non-confiscatability as no middlemen carry out the transaction for you or hold your money for you.

My assumption is that most references to the concept of electronic cash before Bitcoin refer to Chaumian tokens, or at least systems with properties like it.

Chaumian tokens are created by a central server, following this procedure. As an example, say party A has a coin (a random string R1, plus a valid signature S1 from the central server), and wishes to pay party B:

  • Party A sends the coin (R1, S1) to B.
  • Party B anonymously connects to the central server (for example though Tor), and hands the server (R1, S1), and also sends a newly generated random string R2 in blinded form (R2').
  • The central server verifies that S1 is a valid signature, and that R1 was never spent before, marks R1 as spent in a (growing) database, and creates a signature S2' on the blinded string R2', sending it back to B.
  • B now removes the blinding from S2', and obtains a new valid coin (R2,S2), which nobody else has.

The security of this scheme relies on the server not knowing what it is signing. So it cannot track (even pseudonymous) ownership of coins. In fact, the server doesn't actually know what coins exist at all, just which ones have been spent.

Schemes like this have very different properties than Bitcoin (and in fact would be a nice complement to it):

  • It is extremely centralized (everything depends on the central server).
  • As long as anonymously connecting to the server is possible, it has very good privacy. Nobody (including the server) basically observes any transaction except their own.
  • Is very scalable (only the server needs to create many signatures, and maintain a database of spent coins).

I was made aware by the opinion piece Why Bitcoin Shouldn’t Be Scaled: How Bitcoin Will Become A Commodity Money That Inspires Our Existing Financial System To Reach A Global Monetary Equilibrium of a definition laid out by Tatsuaki Okamoto and Kazuo Ohta in their 2001 paper Universal Electronic Cash copied below [sic]:

What then is the ideal cash system? The criteria describing the ideal cash system are as follows:

(a) Independence: The security of electronic cash cannot depend on any physical condition. Then the cash can be transferred through networks.
(b) Security: The ability to copy (reuse) and forge the cash must be prevented.
(c) Privacy (Untraceability): The privacy of the user should be protected. That is, the relationship between the user and his purchases must be untraceable by anyone.
(d) Off-line payment: When a user pay the electronic cash to a shop, the procedure between the user and the shop should be executed in an off-line manner. That is, the shop does not need to be linked to the host in user’s payment procedure.
(e) Transferability: The cash can be transfered to other users.
(f) Dividability: One issued piece of cash worth value C (dollars) can be subdivided into many pieces such that each subdivided piece is worth any desired value less than C and the total value of all pieces is equivalent to C.

Arguably, Bitcoin doesn't fit the above definition perfectly as it for example isn't completely untraceable, currently can not be transferred off-line, or does not have unlimited divisibility.

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