On the Viability of Digital Cash in Offline Payments

Abstract: Background. As the financial systems around the world become more digitized with the use of a card and mobile payments - we see a decrease in willingness to accept cash payments in many countries. These digital payments require a stable network connection to be processed in real-time. In rural areas or during times of crisis where these network connections may be unavailable there is a need to resort to some payment method that works offline. Paper cash is preferred by some because of its anonymous nature and with the realization of blind signatures the concept of digital cash was constructed. Digital cash is a digitized version of the traditional paper cash that values payer privacy and can be spent while both parties are offline with the use of smart cards or other mobile devices. Unlike physical paper cash, digital cash is without additional mitigations easily copied and forged as they only consist of information. Objectives. The objective of this work is to determine the viability of digital cash as a replacement or complement to today’s paper cash. The results will describe our findings on what technologies are necessary to securely exchange digital cash offline, as well as our findings on whether arbitrary payment amounts can be exchanged efficiently as well as exchanged between users of different banks. Methods. This work consists of threat modeling to identify the necessary technologies to securely exchange digital cash and what they accomplish. An extensive literature study and theoretical evaluations of state-of-the-art digital cash schemes are also part of the work. Results. The results show that digital cash can be constructed and exchanged securely with various optional features that make it more or less resemble its physical counterpart. With payer anonymity in the center and the inevitable risk of fraudulent users’ double-spending coins - the identified technologies do their best to reduce the cost-effectiveness of double-spending. Cryptographic solutions, as well as hard-to-tamper-with hardware, are the two key technologies for this. Advancements in cryptography have enabled more efficient storage and spending of digital cash with compact wallets and divisible digital cash. Conclusions. Digital cash has been a theoretical concept for almost four decades and is becoming more secure and efficient by being reconstructed using more modern cryptographic solutions. Depending on the requirements of the payment system, some schemes support arbitrary amount payment exchanges in constant time, be-tween users of different banks, transferability and some can run efficiently on privacy assuring hard-to-tamper with hardware. No scheme can do it all, but this work shines a light on some important considerations useful for future practical implementation of digital cash.