A few decades ago people used to go to bank and stand in a queue to deposit or withdraw money from their bank accounts. Today, it is possible for anyone to access money in their bank account with the help of a computer. This is possible because the monetary value of your bank balance is stored electronically on the computers of your bank. This electronic form of money is referred to as electronic cash or digital cash. Digital cash boosts your purchasing power by making your money available to you.

Digital cash technology uses computers, local area networks, and the Internet for the transfer of money paid in exchange of services obtained. This process involves 3 entities: the buyer, the seller, and the service provider. Using this technology, money can be transferred online or offline. There are certain organizations which facilitate a secure transfer of money over the Internet between the seller and buyer. This enables one to do the transaction over the Internet while sitting in his house or office, in fact, from anywhere in the world. This saves time and physical efforts that one has to put in while physically going out and buying a ticket for air travel or for a movie, etc. Digital cash transfer systems depend on cryptology and the use of private and public keys for the encryption and decryption of the information that represents one’s demand for transfer of money. It also uses digital signatures to verify the authenticity of source of demand.

It is granted that using this system you can access your money from anywhere in the world, however, the Digital Cash Technology may leave you hanging by the thread in case the main computer or the server of this system is down because of some problem. The disadvantage of electronic payment systems is that your money becomes useless, if the servers of these systems are not online and accessible. In case of a computer virus attack, a computer can lock in and make a significant percentage of the liquid cash redundant. Of course, the chances of happening this kind of things are getting smaller and smaller with the advances in the Internet security measures employed.

Adapted from: http://www.buzzle.com/articles/what-is-electronic-cash.html
By Shrinivas Kanade
Published: 9/1/2010