Mondex, CAFE and other types of bitmoney

Juha Korhonen
Department of Computer Science
Helsinki University of Technology
Tik-110.501 Seminar on Network Security


This paper presents an overview to the field of bitmoney - a digital payment system. A digital payment system is an information technology system for transferring money between its users. This paper descripes two european types of bitmoney Mondex and CAFE. In addition some other types are also presented.

Table of Contents

1. Introduction
2. Mondex
2.1 Functions
2.2 Security
3.1 Functions
3.2 Security
4. CyberCoin
5. Other Types of bitmoney
5.1. DigiCash smart cards
5.2 Netbill -project
6. Conclusions and Future

1. Introduction

Instant cash is the preferred method of payment around the world, accounting for 90 per cent of all transactions. [3] Now smart cards - storing electronic cash on an encrypted microchip - are set to revolutionise spending habits. The spectrum of stored-value card products range from pre-authorised debit cards to true electronic cash. There are single purpose cards like phone cards and mass transit cards which sometimes have some sort of general purpose use. Payment smartcards brings together the advantages of paying by cash with the convenience of paying by card. The feeling that consumer is handling "his" own money is important.

There is a growing need for consumers to purchase lower-priced and 'impulse' items on the Internet - especially digital goods and services that can be instantaneously downloaded to computer, such as software, articles, research, games and music. Purchases on the Internet are expected to exceed US$200 billion by the year 2000, and most of these will be less than $10. [3]

The markets and the customers seems to be ready for the electrical money. The surveys shows that enough customers are willing to pay the price of the electrical wallet devices up to 60 $. But large share of them requires them to be be very thin to fit in a regular wallet. The European Union is a good place for developing advanced payment systems, since development is not hampered by export restrictions for cryptologic primitives (expect for France). [6]

There are two different types of operation for electronic commerce: online and offline. In online transaction the connection to the bank is made every time when consumer hands cash to the service provider, so the authenticity of transaction is checked. In offline system the transaction is made without connection to the bank.

2. Mondex

Mondex is a stored value card. Mondex's technology platform allows for person-to-person transfer of electronic cash that is not reported to a central computer system, therefore it is offline system. Mondex is considered the most 'cash-like' of the various electronic cash smartcard products in use or being tested in pilots around the world. [3]

Mondex has been designed to allow person-to-person payments, over a telephone line or via an electronic wallet device. Mondex has been designed as a global product, with a set of language-independent symbols.

Since July 1995 Mondex has been in daily use in a public pilot project in Swindon England. In Swindon there were 8000 card holders in the first three months. In November 1995 more than 700 retailers (over 70% of all) takes the card as payment. There are also 250 Mondex-compatible payphones in streets and public places and Mondex can also be used to pay in public buses. [4]

Mondex has gained information from the pilot in Swindon. By the end of 1996 Mondex pilots will be running in parallel around the globe in Hong Kong, Canada and The United States as well as in the UK.
Mondex is also being used as a 'campus card' at two English Universities - Exeter and York.[3] From October 1996 the University of Exeter [9] will be using Mondex smart cards for a variety of purposes as an University Smart Card. Individual members of staff and students will be able to use the card as an electronic purse and it will also be used as a library card, access control card for allowing access to buildings, and for student records.

2.1. Function

Payments are made by inserting the card into a card reader in the retail terminal and funds are transferred immediately from the card to the terminal. User can check the balance with the balance reader which is a small device containing a card reader and a small screen. Cardholders will also be able to check their balance on Mondex telephones, ATMs and using the Mondex electronic wallet. The card's memory stores a log of the last ten transactions. [3]

The Mondex electronic wallet is a pocket-sized device with a keyboard and a screen. The wallet enables people to venture out carrying only minimum funds on their card, with a separate store of value held on the wallet, which might be held in the security of their home or in a hotel room. This gives the cardholder a degree of security as, if they lose their card, only the minimum amount of money is lost with it. Transfers between individuals can also be made - by inserting the card into the electronic wallet and moving cash from the first person's card to the recipient's card. [3]

While Mondex was primarily designed as an alternative means of payment to cash in the physical market place, in the future Mondex will also be possible to be used for purchasing goods from the Internet. The Mondex system is well-suited to the 'micro-payments' which make up the majority of transactions on the Internet. Once money is on the Mondex card, it can be spent via the Internet using computers with appropriate Mondex software and a smartcard reading device. Mondex is already conducting internal trials of existing software and it is expected that Mondex will go to public trials in 1997. [3]

2.2. Security

Mondex security begins with the hardware of the chip in the card, the software that controls the movement of values between cards, and a classification system that puts limits on the values and uses for certain types of cards. The combination of these elements allows only certain users to communicate or transmit certain information and value in certain currencies.

The first microchip to be used for Mondex is a specially-tailored security application using the Hitachi H8/310 smartcard microprocessor, which has 8 KB of memory. [3]

On these chip cards are loaded the Value Transfer Protocol, which uses sophisticated cryptography to protect value as it passes from one Mondex card to another. An important aspect of Mondex is that value can only move between Mondex cards - and can only be stored on Mondex cards. Mondex provides consumers with the ability to protect their cash by 'locking' their cards with a personal code - so that Mondex value cannot be taken from a card. [3]


CAFE is an European project, carried out be a consortium of companies active in electronic payments together with research organisations. It is supported, also financially, by the European Commission. CAFE is an acronym of Conditional Access For Europe, and its name reflects the scope of the project. It is developing an electronic wallet, to be used as a pan-European device for consumer payments, access to information services and - if required - identification. CAFE has been in test use for three years in Brussels.

Since CAFE aims at the market of small everyday payments that is currently dominated by cash, payments are off-line, and privacy is an important issue. The project has applied modern cryptographic techniques to produce a secure but also open and flexible system for consumer payments using electronic money.

CAFE proposes an open architecture for small and high value payments, post-pay (like credit-card) or pre-pay (like stored value cards). The protocols could also be run in multi-functional devices like PDAs or mobile phones. Possible future extensions include electronic personal credentials (like passports, driver's licenses or housekeys) and medical information. [6]

3.1 Functions

The main hardware is pocket-sized electronic wallets. Several versions have been designed, some simple with just two buttons, some with larger LCD screens and more buttons. The advantage with buttons are that PINs can be entered directly, so that fake-terminal attacks are prevented. [6]

The wallets have an infrared interface which makes point-and-pay transactions possible. CAFE has also a loss tolerance feature: If a user loses an electronic wallet, or the wallet breaks or is stolen, the user can be given the money back, although it is a prepaid payment system.

3.2 Security

An important aspect of CAFE is security of all parties concerned, with the least possible requirements that they are forced to trust other parties (so-called multi-party security). This means that all security requirements of a party are guaranteed without forcing this party to trust other parties.

The double-spending problem is solved in CAFE so that in every card and wallet there is a banks trusted part which is called the guardian. It will notice if the same money are tried to spent twice. No payments are accepted unless the guardian tells that it is allowed. [12]

The CAFE system is based on recent research in public key cryptography. CAFE uses the combination of a public key and a unique private key. [5] It allows the use of a smart card or an electronic wallet for signature transporting. Electronic money, issued by a bank, can be tagged with a unique electronic signature per payment, to be compared with the unique number on printed bank notes. This signature can be downloaded into the smart card or wallet.

The public key nature of the CAFE protocols makes it also possible to create an open system. Participants don't have to trust each other and don't have to negotiate on the division of the risks involved. Once in use, multiple providers of goods and services, as well as multiple issuers of electronic money can join the system.

4. CyberCash and CyberCoin

The CyberCash company is focused on providing Secure Financial Transactions Services over the Internet, including credit card transactions, electronic checks and micro transactions. CyberCash has made Internet credit card transactions since April 1995. CyberCash's Credit Card and Electronic Coin service are nowdays active. Currently CyberCash is only available in US dollars and at online merchants who have a US bank account. CyberCash's electronic check services will offer peer-to-peer transactions and will be available in 1997. [10]

According to CyberCash's announcement CyberCash is the only company with world-wide export license of 1024-bit RSA encryption algorithm. [10]

CyberCash transactions move between three separate software programs:

The merchant and consumer softwares are free.

CyberCash Wallet

CyberCash Wallet is a software program that offers consumers several ways of paying online. Users can choose to transfer money into the Wallet from an existing bank account or from their major credit cards. The Wallet is secure as the funds do not leave the bank until payment is rendered. If the computer or a hard disk which cantains the Wallet crashes the money will be transferred back to the consumers bank account. [10]

There is a limit to the amount of cash a consumer can put in his wallet. Consumer can load up to $80 over one month.

The CyberCash, the Checkfree, and Compuserve Wallets are the same and are completely compatible. Each company has added a few of its own features, but the wallets can be used with any CyberCash, Checkfree, and Compuserve merchants. [10]

The illustration below shows the six steps that occur when consumer decides to purchase goods from the merchants online server with CyberCash credit card payment system or with CyberCoin.

From Step 1 to Step 6 takes approximately 15-20 seconds. [10]


In October 1996 CyberCash Inc. introduced a service which is called CyberCoin - a secure micropayment service for purchasing goods online.
CyberCoin enables Internet consumers to purchase low-priced items, ranging in price from $0.25 to $10.00. CyberCoin service is available now for merchants, consumers, and several banks. However, CyberCoin is not a peer-to-peer solution between individual consumers on the Internet.

In CyberCoin transaction, the financial information is encrypted and digitally signed, but the message itseld is not. CyberCoin uses RSA encryption technology. [10]

In October 1996 CyberCash made a technology and marketing agreements with Netscape. Netscape plans to bundle CyberCoin with future versions of its LivePayment server software, and will also integrate the technology with future versions of Navigator. [8]

5. Other Types of bitmoney

5.1. DigiCash smart cards

DigiCash has developed many smart card masks, which we here are having a view of two of the DigiCash's latest project: SAKE and Blue.


The SAKE card is a proven technology Secure Application KErnel for cards of the Motorola 6805 smart card family. The SAKE card is a set of routines on which secured applications are built.

The application is programmed into the Sake card itself and doesn't have to operate from the card reader alone, so there is a better grip on the functionality and security aspects. [11]

The application software (or part of it) can be added to the mask of Sake. There is also an ability to add, change or delete parts of an application (or whole applications) after production, even in the field. These modifications are signed using RSA allowing the modifications to happen off-line and securely. However the 512-bit RSA keys that are used are not very adequate today.

Features of SAKE[11]:


The standard Blue mask is ready for most applications: pre-paid cash replacement cards, loyalty schemes, file storage, access control, or any combination of these. The Blue system uses dynamically confirmed public key digital signatures. Payments can be made using either public-key signatures for large-scale open systems, or secret key authentication for smaller-scale systems. [11]

Public Key Debit allows off-line secure payments without tamper-resistant terminals. Each of the payments uses a unique public key signature in a way that allows thousands of payments between two reloads. Public-key signatures also eliminates system-wide secret keys in the card accepting devices.

The signature transporting technique and specialized compression schemes used in Blue allows the card to generate 500 public-key signatures using only 550 bytes of EEPROM storage. Blue is designed on ordinary low-cost smart cards like the Motorola SC26 and the Thomson 601. [11]


DyniCash is an automatic electronic payment of road-use fees system co-developed by Amtech and DigiCash. DyniCash uses Amtech/DigiCash's high-speed read/write Dynicom technology, which is recently selected as the standard for European rail electronic vehicle for vehicle trackside communication. Dynicom operates on the European high speed trains at velocities of up to 400 km/h, and in the road use fees are collected at up to 300 km/h.

The DyniCash smart card can also be used for a growing variety of other services where coins and bank notes are traditionally used, such as parking, vending, pay phones and point-of-sale. [11]

DyniCash has patented a data encryption technology in an ISO-compatible smart card that does not reveal tag or card identity during payment.

5.2. Netbill -project

The NetBill project is an electronic commerce project at Carnegie Mellon's Information Networking Institute which is researching design issues of survivable and secure distributed transaction processing systems. NetBill project is developing the protocols and software to support network-based payments for goods and services over the Internet. NetBill is currently in its Alpha trial on the Carnegie Mellon campus. [13]

NetBill enables consumers and merchants to communicate directly with each other, using NetBill to confirm and ensure security for all transactions.

NetBill acts as a third party to provide the authentication, account management, transaction processing, billing and reporting services for network-based clients and users.

NetBill is designed as a "system of a systems". NetBill depends on an infrastructure of authentication, certificate management, internet access (including DNS lookup), databases, real-time customer service and dispute resolution servers, etc. NetBill uses ACID (atomic, consistent, isolated and durable) transactions. NetBill uses a combination of public-key cryptography and symmetric-key cryptography.

6. Conclusion and Future

Speed, convenience and security are central features in electronic money. It is also important to give the consumer the psychological safety feeling of not handing over his money or his wallet to another person or to a machine. One possible attack against smart cards is to open the card to get to the chip itself and then expose it to UV light to modify some of the EEPROM bits. Some of the cards (e.g. Blue) are designed to withstand these attacks. [11]

The World Wide Web is the marketplace of the Internet and is never closed.
Most of the smart cards (e.g. Mondex) were primarily designed as an alternative means of payment to cash in the physical market place. But over the past few years the electronic commerce in the Internet has been growing rapidly and that has started the card developer's interest to make the card suitable for the Internet usage. Smart cards are quite easily transferable to be used in the Internet.

As the Internet grows there is an increasing need to have secure methods of paying for goods and services as easily and spontaneously as in the physical market place. A proper electronic cash payment system has been the challenge for many years. As technology has advanced and costs have fallen electronic cash has become a reality.

Currently there are many different smart cards and bit money technologies. Time will show which one will be chosen to become the global standard for electronic cash. It seems like some kind of combination and agreements has already been made.

Mondex International has recently made many agreements with some of the other electronic commerce supplier. In September Mondex International made an alliance with CyberCash to integrate smart cards with online electronic commerce. CyberCash plans to incorporate the Mondex smartcard into its CyberCash Wallet. Users can charge purchases to their Wallet-enabled smart cards using a smart card reader connected to their PCs. [7]
In August 1996 Mondex made a strategic alliance between Netex Communications Corporation that will enable the delivery of global smart card applications using Netex's Internet Transphone product. [7]
In November 1996 Mastercard International and Mondex International announced an agreement that Mastercard will acquire 51% of Mondex International, and for Mastercard to adopt Mondex's technology as its future choice of strategic chip platform. [3]


Koskinen Jussi Multimedian käyttö kaupallisissa sovelluksissa USA:ssa, TEKES, January 1996
Raymond Pyle, Electronic Commerce and the Internet, Communications of the ACM, June 1996, ISSN 0001-0782
Mondex Home Page
Mondex -- Newsletter,
issue 1. January 1995
issue 2. June 1995
issue 3. November 1995
CAFE -project pages at:
University of Hildesheim
Sintef Delab, Trondheim
CWI Amsterdam
Schunter M, Weber A, News from CAFE -- High Security Digital Payment Systems
iWorld Home Page, iWorld
Web Week, Volume 2, Issue 15, October 7, 1996
University of Exeter -- Mondex project
Cybercash Home Page
DigiCash products -- smart cards
The ESPRIT Project CAFE -- High Security Digital Payment Systems article at ESORICS 1994, Berlin,
NetBill -project Home Page at Carnegie Mellon's Information Networking Institute
NetBill Home Page


CAFE Conditional Access For Europe
PDA Personal Digital Assistant
ATM Automatic Teller Machine
electronic wallet A small (pocket-size) portable computer, similar to a pocket calculator or PDA. It has its own battery, keyboard, display and its own means of communicating with other devices (e.g. infrared)
Public-Key Cryptography With public-key cryptography you have two keys- a public key and a private key. The private key is protected by your password, and never shared with anyone. Anyone can access the public key.
Symmetric-Key Cryptography In symmetric-key cryptography, a single key is shared by both the sender and the recipient of a message.

This page has been updated on 16.12.1996.

Juha Korhonen