Electronic Money

Electronic money (also known as e-money, electronic cash, electronic currency, digital money, digital cash or digital currency) refers to money or scrip which is exchanged only electronically. Typically, this involves use of computer networks, the internet and digital stored value systems. Electronic Funds Transfer (EFT) and direct deposit are examples of electronic currency. Also, it is a collective term for financial cryptography and technologies enabling it.

While electronic currency has been an interesting problem for cryptography (see for example the work of David Chaum and Markus Jakobsson), to date, use of digital cash has been relatively low-scale. One rare success has been Hong Kong's Octopus card system, which started as a transit payment system and has grown into a widely used electronic cash system. Singapore also has an e-money implementation for its public transportation system (commuter trains, bus, etc), which is very similar to Hong Kong's Octopus card and based on the same type of card (FeliCa). There are also one implementation is in the Netherlands, known as Chipknip.

Alternative systems

Technically electronic or digital money is a representation, or a system of debits and credits, used to exchange value, within another system, or itself as a stand alone system, online or offline. Also sometimes the term electronic currency is used to refer to the provider itself. A private currency may use gold to provide extra security, such as digital gold currency. Also, some private organizations, such as the US military use private currencies such as Eagle Cash.

Many systems will sell their electronic currency directly to the end user, such as Paypal and WebMoney, but other systems, such as Liberty Reserve, sell only through third party digital currency exchangers.

In the case of Octopus Card in Hong Kong, deposits work similarly to banks. After Octopus Card Limited receives money for deposit from users, the money is deposited into banks, which is similar to debit-card-issuing banks redepositing money at central banks.

Some community currencies, like some LETS systems, work with electronic transactions. Cyclos Software allows creation of electronic community currencies.

Ripple monetary system is a project to develop a distributed system of electronic money independent of local currency.

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