Electronic money (also known as 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 money. Also, it is a collective term for financial cryptography and technologies enabling it.
While electronic money 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
Alternative systems
Technically electronic or digital money is a representation, or a system of debits and credits, used (but not limited to this) to exchange value, within another system, or itself as a stand alone system, online or offline. Also sometimes the term electronic money is used to refer to the provider itself. A private currency may use gold to provide extra security, such as digital gold currency. An e-currency system may be fully backed by gold (like e-gold and c-gold), non-gold backed (like eeeCurrency), or both gold and non-gold backed (like e-Bullion and Liberty Reserve).
Many systems will sell their electronic currency directly to the end user, such as Paypal and WebMoney, but other systems, such as e-gold, sell only through third party digital currency exchangers.
In the case of Octopus Card in
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.
Advantages
Most money in today’s world is electronic, and tangible cash is becoming less frequent. With the introduction of internet / online banking, debit cards, online bill payments and internet business, paper money is becoming a thing of the past.
Banks now offer many services whereby a customer can transfer funds, purchase stocks, contribute to their retirement plans (such as Canadian RRSP) and offer a variety of other services without having to handle physical cash or cheques. Customers do not have to wait in lines; this provides a lower-hassle environment.
Debit cards and online bill payments allow immediate transfer of funds from an individual's personal account to a business's account without any actual paper transfer of money. This offers a great convenience to many people and businesses alike.
Disadvantages
Although there are many benefits to digital cash, there are also many significant disadvantages. These include fraud, failure of technology, possible tracking of individuals and loss of human interaction.
Fraud over digital cash has been a pressing issue in recent years. Hacking into bank accounts and illegal retrieval of banking records has led to a widespread invasion of privacy and has promoted identity theft.
There is also a pressing issue regarding the technology involved in digital cash. Power failures, loss of records and undependable software often cause a major setback in promoting the technology. Privacy questions have also been raised; there is a fear that the use of debit cards and the like will lead to the creation of a global tracking system by the banking industry. Some people are working on anonymous ecash to try to address this issue. The issue of providing anonymity to users itself introduces more problems, however; there is the distinct possibility that a fully anonymous digital cash system could permit the "perfect crime" - i.e., where a criminal uses someone else's electronic cash to make a payment, but cannot be traced - to occur. For this reason, 'revocable anonymity' is a suggested solution: a user is fully anonymous until they commit some crime, at which point authorization is given for their identity to be revealed. However, critics of this policy point out that the anonymous users will never be caught and held trial (thus their identity will never be revealed) without tracing.
