Friday, May 15, 2009

Technologies of Perfect Money Payment System. General Information

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For today there are many articles about electronic payments and, in particular, about electronic currency. They are described in sufficient detail the prerequisites for the appearance of the payment tool and algorithms for its work. In this article we have attempted to consider a system of electronic cash from a technological point of view. During the article, we will allow a significant simplification and deliberate terminological inaccuracies, which do not affect the essence of the described technology. It will be based on the work of Perfect Money. For people who are interested in it, in the article there are the original links.

The number of actually operating e-cash is not very big. This is due to the complexity of establishing an appropriate algorithmic system and labour intensity of its implementation. Experience has shown that model systems of e-cash can be realized quite easily, but writing of a practical system serving a large number of payments and resistant to fraud requires much time and work of big team of highly qualified mathematicians and programmers. Payments are, in fact, a command to a bank to convert an amount to an account.
This system is quite good, but some disadvantages compared with conventional money it has. First, any e-money payment in any way refers to the account in general, and intercepted and decoded a single payment, the offender gains access to the account as a whole. Secondly, all these payments can be tracked. This raises problems not only for criminals. For example, if one buys a lot of drugs using a card, one may be denied to selling insurance policy. Thirdly, all these systems are based on full confidence with a bank, and sometimes to the shop also where one makes a purchase. Besides the problem of social trust to each individual money transaction, we return to the issue of public confidence to banks as a whole. The reasons for it can be such - a single bank can go into bankruptcy, or that banks, by virtue of own interests, use accumulated funds to act, which do not coincide with the interests of the country and, ultimately, investors. Fourth, a bill can be arresting, blocked, that is, referring to legal language, selectively prosecute a holder. Fifth, one can transfer money from the card, but not to the card.

These reasons have prompted developers of Perfect Money to create software and hardware system, which would emulate maximum in Internet the traffic of conventional cash. The distinction between these systems is difficult to hold. It is obvious that any software system can be encrypted in a specialized microprocessor (smart card) and provided with an additional hardware protection. Let’s agree that the software system will be such a system, the protection of which remains in any attempt to see and modify its source code. For hardware systems, in turn, it is assumes that there is an element (module ROM, for example), in which the data can be written, read and modified only by authorized manufacturer.

The description of technology development in its real historical perspective is a very lengthy subject for independent study. Therefore, abstracting ourselves from the real history of events, let’s present us being at the place of Internet Bank developers, which are as close as possible want to simulate in the Internet the traffic of conventional notes.

The easiest way from an organizational point of view is to make an electronic analog of ordinary banknotes, and guarantee the free currency exchange into the conventional money to bearer (conversion). To do this one need to solve a number of objectives: to develop electronic notes, put them in mass production (emissions), to provide an authentication mechanism and to ensure the circulation (money transfer, exchange, conversion into conventional money, etc.).

Banknotes, as any product, have a few options. First, informative, that is it has the number, face value, and the data about the issuer. Secondly, it is protective. All this information is protected against forgery or, more detail, against various types of forgery. In other words, it is necessary to oppose attempts of counterfeiter to copy an existing note (on a color Xerox), significantly modify the data on the existing note and produce a unique bill with out using genuine.

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