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scalability: the system should be able to grow without significant lack of
interoperability: the system must make it possible to exchange payment means
between different systems,
audit-ability: audits must be possible to look for individual records of operations and
detect possible errors,
anonymous transactions: the system should support anonymous transactions, i.e. the
buyers and sellers identity remains unknown.
There are two broad categories of payment systems in use today, that build on different
models to fulfil the above-mentioned criteria: token-based systems and notational-based
systems.Token-based or cash-like systems use tokens instead of money.The tokens have a
certain value assigned to them and must be bought from a central authority before they are
ready to use.
Token-based system - how it works
1. Bank: exchanges real money into e-money and applies a digital signature for
the verification process.
2. E-currency: is transferred to the client in form of an electronic wallet card
or a software client.
3. Client can spend electronic money with suppliers.
4. Suppliers: exchange e-money against real money at pre-defined banks.
anyone could sell and buy,
algorithms against copying of monetary units and overspending as well as
fraud records,
information on usage/statistics are available.
Notational-based or credit/debit systems, on the other hand, make use of an account and
a central authority keeps a record of this account. Consumers exchange documents that are
equivalent to the value transfer, debiting the consumer's account and crediting the seller's
Notational-based systems how it works
1. Client sends credit card data, seller ID and selected products to the server
(encrypted with a public key and also a symmetric key)
2. Server executes the operation with a financial institute
3. Server transmits to the seller the client ID, products he wishes to buy, number of
transaction and symmetric key (encrypted information)
4. Seller encrypts information with symmetric key and sends it to the client
cryptography guarantees security and privacy to the client.