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Electronic Currency also known as Electronic Money, Electronic Cash, Digital Money or Digital Cash refer to money or scrip which is exchanged only electronically. The emerge of electronic currency is because of the Internet and E-Commerce become an increasing commercial area. So that, electronic payment become one of the important feature between customers and sellers. Traditional payment include credit cards, private label debit cards and charge cards. However, problem arise for these traditional form of payment online. First of all, not all merchant acre accept credit card transactions because of service fee for each transaction. In addition, customers have become with “hackers” obtaining their credit card number stored on the Internet and become the victim of fraud. As a result, electronic currency are receiving attention from both customers and merchants.

How Electronic Currency Works?

Electronic currency is a system that allows a person to pay for goods or services by transmitting a number from one computer to another. The transaction is carry out electronically by transferring funds from one party to another by either debit or credit. This system can eliminate the payment risk because the money are instantly cleared and secured by using strong encryption. Thus, electronic currency is the digital representation of money or digital representation of currency.

Advantages of Electronic Currency

CONFIDENTIALITY
One of the attractive features of electronic currency is, unlike real cash, it is anonymous. That means when electronic currency is sent from a customer to merchant, there is no way to obtain information about customers. This is one of the significant differences between electronic currency and credit card. Credit card companies will collect a customer’s spending habits and sell this data to third party and the bank will not have record of customer involved in the electronic currency transaction. Thus, the bank is unable to obtain personal information about customers and protects against the privacy rights of the customer.

SECURITY
The electronic currency is provided by the use of encryption to security purpose.

Disadvantages of Electronic Currency

FRAUD
Major disadvantage to electronic currency is fraud. If customer misplace this private key and a perpetrator uses it to withdraw fund, the bank would never know and the customer will liable to the lost. Credit card can limit the customer’s liability for unauthorized activity. In addition, if the security code is broken and the message is intercepted, the hacker will be able to perpetrate the fraud on the recipient of the message.

PEER-TO-PEER DOUBLE SPENDING

Another disadvantage of electronic currency is double spending of digital coins. This is potential to happen when customer chooses a peer-to-peer transaction. In the electronic currency system, the bank able to check the serial number of each coin in a transaction against its database of spent coins, if the coin has been spent, the transaction will be denied.