Electronic Currency

Electronic currency refers to money or scrip which is exchanged only electronically. In a more simple way, it means the money used over the internet. Electronic currency allows its holder to buy the goods and the services that the vastness of the Internet offers. Typically, this involves use of computer networks, the internet and digital stored value systems. Electronic Funds Transfer (EFT) and direct deposit are direct examples of electronic currency. Electronic funds transfer (EFT) refers to the computer-based systems used to perform financial transactions electronically. Direct deposit refer to certain systems used to transfer money.

There are a lot of company that provide electronic currency services in the world. One of the example is Click and Buy, a company that provides payment systems on the internet. It is currently used by Apple iTunes, Skype, msn, T-Online, Electronic Arts, Meetic, Playboy, SanDisk, Yamaha, UNICEF and many more. The second example is Paystone, a company that provides micropayments and money transfer solutions. It is an online, real-time payment solution that allows user to send funds to anyone who has an email address, pay for online purchases, cash out to your bank account or ATM card and receive payments for goods and services.

Now let's look at the tern electronic currency trading. It simply means buying and selling of this internet money. Just like the money currencies we use in normal everyday, electronic currencies are varied. Each one of them is backed by an underlying monetary currency or even valuable or precious metals. People profit by trading on these electronic currencies. It requires strategies especially when it come to buying the currencies in low prices and selling them in the higher prices.

Now let's identify the benefits of electronic currency trading. One of the primary benefits that electronic currency trading brings is that it allows you to do business and earn with only a few dollars of investments. Experts suggest that beginners should start with only a few dollars so that they can first learn the ropes about electronic currency. It does not demand much and it is up to the trader if he wants to increase his investment. Traders are give many opportunities to profit without spending much on investment.

Another benefit is that electronic currency is versatile and convenient to the persons involved. Since people do business online, they are given much leeway on how to schedule their day. People can work with any electronic currency trading market that best suits their needs for any time of day. The business does not sleep in night or day, so the world is merely at fingertips. Besides the schedule flexibility, electronic currency traders can also conduct business anywhere, whether at home, regular work place, parks, coffee shop or virtually anywhere, so long as there is an internet connection, electronic currency can be done. It is not only very profitable, but also convenient.

Furthermore, electronic currency trading is that is it has low transaction cost. Unlike other businesses that consumes profits with exorbitant fees, it allows people to do business with minimal fees, which results in more profit and more money.

However, there are many potential issues or disadvantages with the use of digital cash. The transfer of digital currencies raises local issues such as how to levy taxes or the possible ease of money laundering. There are also potential macroeconomic effects such as exchange rate instabilities and shortage of money supplies, there is basically a possibility that digital cash could exceed the real cash available.

Desirable Properties for an Electronic Currency System

There are several requirements for an electronic currency system, which are: Security, Anonymity, Scalability, Acceptability, and Interoperability.

Security: Forging paper currency is difficult.Unfortunately, electronic currency is just data and is easily copied. Copying or double spending of electronic currency should be prevented or detected. Ideally the illegal creation, copying, and reuse of electronic cash should be unconditionally or computationally impossible. Some systems rely instead on post-fact detection and punishment of double spending.

Anonymity: The identity of an individual using electronic currency should be protected; it should not be possible to monitor an individual’s spending patterns,nor determine one’s source of income. An individual is traceable in traditional transaction systems such as checks and credit cards. Some protocols are unconditionally untraceable, where an individual’s spending can not be determined even if all parties collude . For some transactions,weaker forms of anonymity may be appropriate, e.g. traceability can be made difficult enough that the cost of obtaining such information outweights the benefit.

Scalability: A system is scalable if it can handle the addition of users and resources without suffering a noticeable loss of performance. The existence of a central server through which transactions must be processed limits the scale of the system. The mechanisms used to detect double spending also affects scalability. Most proposed e-cash protocols assume that the currency server will record all coins that have been previously spent and checkt his list when verifying a transaction. This database will grow overtime, increasing the cost to detect double spending. Even if the life of a coinis bounded, there is no upper bound onthe amount of storage required since the storage requirement depends onthe rate at which coins are used, rather than on the number of coins in circulation.

Acceptability: Most e-cash proposals use a single bank . In practice,multiple banks are needed for scalability,and because not all users will be customers of a single bank. In such an environment, it is important that currency minted by one bank be accepted by others. Without such acceptability, electronic currency could only be used between parties that share a common bank. When currency minted by one bank is accepted by others, reconciliation between banks should occur automatically

Interoperability: Users of the Internet will select financial instruments that best suit their needs for a given transaction.It is likely that several forms of electronic currency will emerge, providing different tradeoffs for security,anonymity, and scalability. In such an environment it is important that funds represented by one mechanism be easily convertible into funds represented by others.