Token money
Encyclopedia
Token money is money
made from tokens
of some form, as opposed to account money. Coins are token money, as are paper notes.
Token money has a strong privacy feature in that it works as money without the intervention of any other party in each transaction between two parties. Privacy makes money safe from interference by more powerful third parties. Where property rights are not strong, privacy is required to protect assets and permit trade, and token money works well in this regime.
blinded coins is a form of financial cryptography
invented to achieve privacy and thus safety in money over the Internet. In this form, a digital packet is a token that can be passed from hand to hand over a network. However, to defend against infinite copying, the coin should be rolled over at the server in an exchange for a fresh coin, so these forms of token money are at best a simulation of physical tokens, as they permit traffic analysis
.
Another simulation of token money is that of smart card
money. In this system, the smart card is a token that can be carried, and the money is on the card. However the underlying system has account money on the card, and most smart card money systems employ sophisticated tracking software in order to ensure the safety of the system at the expense of the privacy of the transactions.
and bullion. The cost of production of token money is less than its actual value.
Money
Money is any object or record that is generally accepted as payment for goods and services and repayment of debts in a given country or socio-economic context. The main functions of money are distinguished as: a medium of exchange; a unit of account; a store of value; and, occasionally in the past,...
made from tokens
Token coin
In the study of numismatics, tokens are coin-like objects used instead of coins. The field of tokens is part of exonumia. Tokens are used in place of coins and either have a denomination shown or implied by size, color or shape...
of some form, as opposed to account money. Coins are token money, as are paper notes.
Token money has a strong privacy feature in that it works as money without the intervention of any other party in each transaction between two parties. Privacy makes money safe from interference by more powerful third parties. Where property rights are not strong, privacy is required to protect assets and permit trade, and token money works well in this regime.
Hybrid forms
There are some interesting hybrid forms of token money. ChaumianDavid Chaum
David Chaum is the inventor of many cryptographic protocols, including blind signature schemes, commitment schemes, and digital cash. In 1982, Chaum founded the International Association for Cryptologic Research , which currently organizes academic conferences in cryptography research...
blinded coins is a form of financial cryptography
Financial cryptography
Financial cryptography is the use of cryptography in applications in which financial loss could result from subversion of the message system.Cryptographers think of the field as originating in the work of Dr David Chaum who invented the blinded signature...
invented to achieve privacy and thus safety in money over the Internet. In this form, a digital packet is a token that can be passed from hand to hand over a network. However, to defend against infinite copying, the coin should be rolled over at the server in an exchange for a fresh coin, so these forms of token money are at best a simulation of physical tokens, as they permit traffic analysis
Traffic analysis
Traffic analysis is the process of intercepting and examining messages in order to deduce information from patterns in communication. It can be performed even when the messages are encrypted and cannot be decrypted. In general, the greater the number of messages observed, or even intercepted and...
.
Another simulation of token money is that of smart card
Smart card
A smart card, chip card, or integrated circuit card , is any pocket-sized card with embedded integrated circuits. A smart card or microprocessor cards contain volatile memory and microprocessor components. The card is made of plastic, generally polyvinyl chloride, but sometimes acrylonitrile...
money. In this system, the smart card is a token that can be carried, and the money is on the card. However the underlying system has account money on the card, and most smart card money systems employ sophisticated tracking software in order to ensure the safety of the system at the expense of the privacy of the transactions.
Value
Token money is also money whose face value exceeds its cost of production, i.e the intrinsic value is lower than the extrinsic value. This means that the actual worth of a note or coin is much less than what we use it for. See fiat moneyFiat money
Fiat money is money that has value only because of government regulation or law. The term derives from the Latin fiat, meaning "let it be done", as such money is established by government decree. Where fiat money is used as currency, the term fiat currency is used.Fiat money originated in 11th...
and bullion. The cost of production of token money is less than its actual value.