To understand electronic payment systems in general it is necessary to know its basic tools and work mechanisms. It is concerned to Perfect Money also.
We will start with consideration such a notion as “encoding”. Unlike traditional encryption systems, in which the same key used for encryption and decryption, in the methods of non symmetrical encryption (public key systems) there are two keys, each of which can not be computed from the other. One key (open) is used by a sender to encrypt the information, another (closed) is necessary to decode this text.
If one in the system of non symmetrical encryption changes the roles of private and public keys, the message, signed on the secret key, can become an electronic signature. So, only a holder of a secret key can sign the message, but anyone who has his/her public key can verify a signature, processing it on a known key.
How does the technology of digital signatures work? For example, a client wants to send a message to a bank signed with a digital signature. Using a special hash-function, it creates a condensed version of the original text - digest that identifies the text, like a fingerprint - identity of the person. This hash-function guarantees that different documents will have different electronic signatures, and that even the most minor modifications of the document will cause a change in its digest. Then a client uses a special encryption algorithm to the digest of his/her message with its own private key, and the digest becomes a digital signature that sends over the network with the message. Having received it, the bank decode the digital signature via public key of the client, retrieves the message digest, uses the same hash-function to the message as the client, gets its tight text variant and compares it to the digest, recovered from the signature. If they coincide, the signature is correct, and the message really came from the client. Otherwise, the message was sent from another source, or was changed after the creation of the signature - it will be considered as invalid.
With all the advantages of cashless money transfer, whether it could be electronic interbank payments, electronic payment documents in the client-bank systems, or payment for goods and services by individuals by debit or credit cards (and the last are the main mode of payment for goods and services in western European countries and the USA) according to economists cash in these countries are not excluded from circulation, and on the contrary have a much larger percentage of the total money supply, than in Russia (amounting to 40%).
What are the main advantages of cash payments that enable them to successfully coexist with all the innovations of electronic payment systems, and even not to lose their positions? It is efficiency, reliability and, most important point is anonymity.
And then there is a good question: “Is it possible to combine all the advantages of electronic payment systems with the main advantage of the cash payments - anonymity?” Yes, it is possible and it is this idea of Perfect Money.
For the first time the idea of so-called “send money online” or “electronic cash” (E-cash) was proposed by the American specialist on the theory of complexity David Chaum in the late 70-ies when the great attention was paid to the first systems of digital signatures and digital envelopes based on transformation with two keys (passwords): “open” or accessible to the public and “private” or individual.
Now we know that on the same principles one can achieve also anonymity of operations, preserving on the same time an opportunity to prove its correctness in the following. As in usual systems of digital signature, the system of electronic money uses the keys of two types: individual keys are necessary to confirm the value of banknotes, and the public - to verify their authenticity in the transfers.
Finally, we can add that after reading this article you will learn the basic mechanisms of work as well as the concepts of Perfect Money, which makes it much easier to analyze the system.