WO2020247773A1 - Sustained off-line digital payment and viral loyalty money - Google Patents

Abstract

Currently digital money payment requires a functional Internet, which cannot be guaranteed at all times, in all places, This invention package describes means to overcome this handicap, securing digital payment continuity, and in particular serving merchants promoting loyalty money as an effective business tool.

Description

Sustained Off-Line Digital Payment and Viral Loyalty Money

[1] Field of the Invention: Novel technologies to insure robust, resilient, and versatile means for digital payment of national currencies, as well as loyalty money, and closed circuit currencies.

[2] Review of the Invention: Hard Wallet: Payment Continuity Solution: No Internet, yet Sustained Payment Regimen between Randomness -Verifiable Hard Wallets. Identity-bearing digital money (e.g. BitMint) can be paid in a private transaction between payer and payee without reliance on network authentication. The payee must trust that the paid digital coin is bona fide. The invented hard wallet (HW) will generate the required trust. Payment issued from the HW can be taken in by a second hard wallet, which will further pay to another hard wallet, creating a payment ecology of digital money for long periods without the benefit of a communication network. This off-line payment mode is applicable to fiat currency, loyalty money, or private money. Payment may be tethered to eventual terms of redemption. The hard wallet may be personalized — fitted with ownership security capability. The HW may be engineered in conjunction with a smart phone, so people can use a single device as a phone and as an off-line wallet.

Introduction

[3] The idea raised here to enable such a network-absent transaction is anchored on the notion of the Hybrid Coin (US Patent 9,471,906). A physical device that upon inspection by the payee, it generates trust. This physical appearance based trust is the traditional mode of payment for thousands of years before digital money. Payees rubbed banknotes, checked them up towards the sun; coins were bitten to assert their metal constituency, and gold was tested to withstand acids. The hybrid coin, though, is a holder of digital money, denominated as a fixed some inscribed on the surface of a physical device, where by passing it, payment is done. The physical integrity of the coin is the basis of its projected trust. The payee could hold the hybrid coin, or passing it further, or they could crack the shell of the coin, take out the electronic device with the digital bits on it, and incorporate these bits in a digital money environment. The add-on of this invention is to build a device that is upgraded from a coin to a wallet. Namely a physical device that would contain a certain amount of digital money, X, and would pay an amount Y which ranges from some minimum amount to X: 0 < Y < X. Upon examination of the wallet, to be regarded ass "hard wallet" (HW), the payee will trust the digital money passed to them from the wallet. In its basic mode, the HW is one-way. It pays out pre-installed money, but it cannot be reloaded. In the advanced mode the HW will operate two-ways. The idea: if a nominal payee can trust money dispensed from a HW, then a second HW will also so trust. So, it is sufficient for a payee HW to confirm that the source of the money bits is another trusted HW, for the payee HW to trust those money bits, and therefore use them as payment, much as the pre-loaded bits are used for payment. In other words, the two-ways payment mode is based not only the singular trust of the one-way paying HW, but on the combined trust of all the participating HW where the money was flowing in that off-line mode.

[4] So, in summary, the digital money stored in the HW will be either (i) placed in the HW by the wallet manufacturer, or (ii) passed to the wallet from another qualified hard wallet. The community-trust HW payment option leads to a gathering of mutually mistrustful parties, each holding a HW, allowing for any which way payment to support normal societal activity, and all that through periods that may be quite extended when for whatever reason the Internet is not readily available. This off-line payment mode is the missing ingredient on the road for worldwide adoption of digital money in the framework of national fiat currencies. However, it is also a necessary ingredient in the ecology of loyalty money or private currency issued on limited basis.

[5] Hardware Integrity Technology Options: This invention has two elements: innovative technology to secure physical integrity, and innovative applications to use such technology. The two elements may be regarded in separation. So, while the description of the applications regards particular hardware integrity technology, it can be exercised with different technologies. Here below we survey the technologies considered for hardware integrity. We distinguish between (i) hybrid coin technology, US Patent 9,471,906 (ii) tamper-resistant technology (US patent 10,445,730 ), and (iii) "Rock of randomness technology (US Patents, 10,467,522). Their cost is different, their efficacies are different, and one should match the technology to the application, to the denomination of the coin, and to the risk environment.

[6] HW Ecology: HW payment is seen on one hand as a replacement for customary cash payment, and on the other hand as a payment continuity solution for periods (which may be extended) when no network connection is available at the required level.

[7] Much as in the original days of paper money when it was a claim check against gold, so the HW paid digital money is regarded as a claim check against the more common, more historic form of money. Cash payment was traditionally anonymous payment. So it is, or may be, if so designed, for the HW payment. The payee may not care who the payer is, he only cares that the money paid is bona fide, in other words, is redeemable for more legacy cash.

[8] For OW HW (One Way Hard Wallet) the cash payment is terminal, when all the wallets are empty there is no more activity. But with TW-HW (Two Ways Hard Wallet) the trade can go on forever, as long as the traders have confidence that the transacted digital money is eventually redeemable at par value. It is important to note that HW payment is well fitted into a global digital money ecology, in particular money that bears identity.

[9] The ecology where HW payment is happening depends on the money used. If used for generic fiat national currency, then the range of payment is worldwide, in the most general sense, and in that case HW payment is very much like cash.

[10] If used for tethered money then the tethering features may restrict the trading community. Say only members of a club or of a given community can redeem the money, and then the payees will be limited de facto to this community. If the HW paid money is tethered to be redeemed only by grocery stores, then the payees will be restricted to those who wish to use the money for groceries.

[11] Tethering may impose complicated and abstract restrictions. If the HW paid money is only redeemable after a certain future date then, the trade is limited to people who can forgo redeeming the money in the present. If the money is redeemed upon the occurrence of certain future conditions, then the trade is limited to risk taking investors. [12] When HW is used for loyalty money, then it is limited to the loyalty circle. If the loyalty money may be reverse converted to generic cash, then the loyalty money has characteristics of fiat currency.

Brief description of the invention:

[13] This invention is referred to a method involving computer servers, personal computing devices, hard digital wallets, and smart phones with payment applications wherein secure digital money is used by a merchant extending a discount by returning a portion of the purchase price in the form of a digital coin, thereby turning the purchaser into the first recipient of the digital coin, which the first recipient can redeem in whole, or in successive parts, at the merchant's store according to preset terms of redemption; the first recipient can also split the digital coin, and any splittable portion thereto is transferrable through any bit-wise communication method to a personal computing device used by a second recipient; wherein the second recipient can similarly split the coin given to them to arbitrary parts, and pass each split to a third recipient, and so on, to a forth recipient and further recursively, all these splitting and passing is carried out between the various recipients without intervention or exposure to the merchant minting the coin, and where each split of the original coin is redeemable according to preset terms of redemption associated with the redeemed split.

[14] The invention is also referred to a "hard digital wallet" (HDW) in the form of a specially constructed material box to effect transactions of digital money, or money equivalent, without reliance on a communication network, wherein the money or money equivalent digits are dispensed from the HDW, and are being trusted by the payee, following a material construction test ("MCT") to ascertain that the HDW was prepared by a trusted mint, and wherein the payee measures the HDW, verifies the measurement through a public database, published by the mint.

Brief Explanation of Drawings

[15] Fig.-l: No-Internet, Sustained Hardwallet to Hardwallet Payment

[16] The top of the figure shows unit marked R, a hard wallet (HW) comprised of a shell constructed according to the "Rock of Randomness Technology" with digital money inside. Unit R is shown with two contact pad: c* and d*. The former is used by a hardwallet to conduct authentication test to another hardwallet, and the latter is used to transfer digital money to and from another hardwallet. The figure also shows two hard wallets P and Q held in contact with each other so that HW Q conducts an authentication test to hardwallet P, and if the test is OK, then HW Q accepts digital money from hardwallet P.

[17] Fig.-2: Hardware to Hardware Payment Regimen: The figure shows four people (A, B, C, D) practicing hardwallet to hardwallet transactions. At time point 1 trader A is shown to have 6 digital coins in his wallet. At time point 2 trader A interacts with trader B. First trader B verifies the bona fide status of the hardwallet used by trader A— using the contact pad marked at the top of the contact line between the two wallets. Once the bona fide status is verified, trader B accepts 4 digital coins from trader A. At time point 3 trader B interacts with trader C. Trader C first verifies the bona fide status of trader B (upper arrow in the contact line between HW B and HW C), then trader C accepts 3 digital coins from trader B. At time point 4 the payment dynamics continues by repeat of the former protocol, resulting in payer C paying 2 digital coins to payer D. Payer D, at time point 5, runs the trade protocol with trader A, passing to him a single digital coin. At the end of this sequence the 6 digital coins that were all held by hardwallet A are divided to 3 coins held by A, one coin held by B, one coin held by C and one coin held by D. These 6 coins may be further transacted back and forth throughout the trading community. This transaction regimen sustains itself indefinitely without the service of the Internet.

[18] Fig-3: Hardwallet (TW) Architecture: The figure shows two-ways hard wallet through its parts. The rock of randomness shell, S is depicted. On it the figure shows O— the biometric implement (e.g. fingerprint), the HMI— human machine interface, where the HW trader communicates with their wallet. It shows the Verification pad, V, through which the HW verifies a payer HW, and through which another HW may verify the bona fide status of the current HW. It shows the transaction pad T through which the HW transacts digital coins with another HW. Inside the shell, the figure shows the electronic processor P that manages the digital operation. It shows the memory location for the money (C) and the memory location for (i) verification information (the HW ledger), the biometric data, etc. A one-way HW will also be equipped with an optional WiFi element, Bluetooth, or NFC.

[19] Fig.-4: Two-Ways Hard Wallet Payment: This figure shows two hard wallets configured to touch each other such that the authentication pad (V) and money transfer pad, (T) are aligned so that one HW may authenticate the other, and one HW may make payment to the other. The figure shows the two human machine interface screen (H) where the money content is shown and where through touch-screen technology the HW owner communicates with the wallet. The figure shows the "pay" button, P, on both hardwallets. The design of the wallets may be different from shown, as long as the functionality is maintained.

[20] Fig.-5: Conductivity Measuring Points: This figure shows a rock of randomness shell for a HW. It shows the authentication pad at the bottom. The ports on the pad are connected to embedded insulated wires, which terminate with an exposed point at some random spot in the shell. The effective resistance is measured by grouping some ports into one polarity of a battery and grouping the other ports (or some of them) into another polarity, which is determined by the randomized structure of the shell.

[21] Fig.-6: Randomized Rock Resistance: This figure shows the inside of a HW shell. Three ports are shown on the left, all connected to the positive side of an electrical setting, and three ports are shown on the right, all connected to the negative side of same electrical setting. The voltage difference between these ports creates an electrical current that depends on the location where these ports terminate within the body of the rock (the shell). The ports connect a randomized point in the shell with a point on the authentication pad on the surface of the HW. The connection is via an insulated wire so that all the electrical current is flowing only through the terminal points of these ports. The insulated wires are shown as drawn inside the shell which is comprised of a randomized arrangements of randomized blocks of variable conductivity. The figure shows conductivity materials marked as: a, b, c, d, e, f, g. The current is measured. Its value depends as noted on the terminal point of the participating ports and on the randomized arrangement of the variant conductivity blocks inside the shell. The measured current is compared to a database record of same measurements taken from the same or identical rock when it was manufactured. In some cases, a copy of the shell may be kept with the manufacturer, in other cases only the measurements will be kept. The agreement of the current measurement and the manufacturer recorded value serves to authenticate the shell, and hence the hardwallet.

[22] Fig.-7: Independent Authentication Pad: This figure shows an independent authentication pad that authenticates each hard wallet to the other, instead of contact authentication between two HWs. The HW will only have to carry authentication data for the authentication pad, nor for each other. The authentication pad will hold the full ledger of all manufactured HW, The authentication pad will be WiFi equipped to update itself on authentication data. The authentication pad will be shell-protected like the phone (rock of randomness option). The money itself flows through the independent authentication pad.

[23] Fig.-8: Hard Phone Wallet: This figure shows a hard wallet fitted into the back side of a smart phone (C). It also shows the phone and the wallet separated (P, W) and the contact pad between them shown. The wallet uses the phone for communication with its owner, potentially for ownership security, too. This connection is functionally protected from abuse of the money in the wallet. The digital money in the wallet will be paid through the pad to a second phone after the second phone will be validating the identity of the first phone.

[24] Fig.-9: HPW Payment: This figure shows a payment occasion between two HPW (hard phone wallets) in the form of a wallet fitted into the phone. The wallet is matched back to back so that their authentication and verification pads (V) and their transaction pads (T) aligned, so that authentication and transaction can take place.

[25] Fig.-lO Viral Loyalty Coalition: This figures shows the viral loyalty coalition configuration n stores are grouped into a loyalty coalition. All the stores are connected to the loyalty bank. The figures show a customer of store i, Bob, making a purchase (line a) in which he receives a discount in the amount V. The discount is expressed by store-i collecting the full price of the sold item, but forwarding to Bob a loyalty coin denominated as V. The store, getting the full price for the item takes the V portion of it and sends that sum to the loyalty bank along with the digital image of the loyalty coin it minted and forwarded to Bob (line b). Bob, on his turn, offers Alice to pay her with that coin to honor some debt he has to her. Alice may not be a customer of store-i, so at first glance she should reject Bob's proposal to pay her with loyalty money from store i. However, on second glance, Alice realizes that the store she shops in, store-j is affiliated in a coalition that includes store i, so she accepts the coin as payment, and sometimes later forwards it (or part thereof) to the store she shops in, store-j. Store-j routes the digital coin from Alice to the loyalty bank (line d). The bank checks that the coin is the exact image of the coin they have in their coin database, and that it was not redeemed before, and when everything checks out, the loyalty bank credits the account of store-j at the amount V and notifies store-j of that credit. Store-j then accepts the digital coin forwarded by Alice and gives her the item she paid for with this coin. That way the coalition loyalty coin operates as digital cash throughout the commercial universe defined by these n stores.

[26] Fig. 11 Anatomy and Dynamics of a Viral Loyalty Coalition: This figure shows the elements of the coalition. Store i in the group is shown with its bank account and its BitMint mint. When Bob buys merchandise at price X with discount V, he pays X and gets a coalition loyalty coin denominated at V. The coin is minted in the shown hύhί ( F) mint. It is given to Bob— routed to his e-wallet, and a copy of it (image thereto) is routed (line c) to the loyalty bank. The bank is shown with its loyalty account and its database where it keeps track of the coins submitted to it for management and disposition. The figure shows Bob passes the loyalty coin to Alice who at some point submits the coin for redemption at another store, store j. Store j does not recognize the coin because it did not mint it, so it routes it to the loyalty bank (line d). The loyalty bank checks that the coin submitted by store-j is kept in its database, and finds that it is kept there and is a valid coin minted by store i. The bank also checks that the coin was not redeemed, and when everything checks out, the loyalty bank passes the value of the coin, V to store-j which stores the money in its bank account shown in the figure. Store j is shown with a mint too because it also serves as a mint of coins delivered to the loyalty bank for safekeeping and redemption management. No store redeems any coin on its own, even if that coin was minted by it. All the coin redemption decisions are carried out in the loyalty bank.

[27] Fig. 12: Cash Redemption in Coalition Loyalty: This figures shows the dynamics of cash redemption. Bob is shown getting a loyalty coin from store i in the coalition (line a). He uses the coin to pay Alice a payment of V (line b). Alice ends up using that coin when she buys something from the merchant. The merchant who is not part of the coalition wishes to exercise his right for cash redemption of the coin, so he contacts the minting store (identified on the coin), requesting its cash

[28] redemption (line d). Store i evaluates the due redemption sum, W < V based on the terms specified in the coin. The store then sends this evaluation, and the coin itself to the loyalty bank (line e). The bank confirms that the coin is good to be redeemed and clears the account of store i with the redemption amount W (line e). The store then passes the redemption sum, W to the requesting merchant.

[29] One-Way Hard Wallet (OW-HW)

[30] A one-way hard wallet (OW-HW) is a physical device pre-loaded with a sum of digital money, X, equipped with a mechanism to pay off successive amount Yi, Y₂, .... Y_n where: Yi < X - å Y_j for j=l,2,..(i-l) for i = l,2,...n. The payment can be carried out through any means used to transfer digital money. The payer is the HW, but the payee may be any device, or facility fitted to accept bit-wise money. The payee will be given the opportunity to examine the HW, be satisfied of its bona-fide, and accept the passed bits as due payment. Eventually the paid digital money will be submitted for redemption at the redemption center. If it turns out that the bits do not represent good money then, the payer will be subject to criminal investigation like any money counterfeiter. The OW- HW cannot be reloaded. Once all its pre-loaded money is exhausted the HW can make no more payments.

[31] Architecture (OWHW): The OWHW system is a configuration of the following items: 1. The HW capsule 2. Authentication Pad (optional) 3. Payee device The HW capsule is comprised of: 1. HW Shell 2. Internal Electronics (data storage, processor) 3. Payment Ports 4. Human-Machine Interface (HMI) 5. Battery Pocket, standard battery, or recharge port. 6. Ownership Security features (optional). The HW operation relies on the integrity of the shell, and the trust it generates. Such trust may be based on physical examination, as the case is with the hybrid coin, or it may be based on a sophisticated test of integrity and validity conducted by the authentication pad, on which the HW wallet is laid (or which is fitted into the HW). The connection between the HW and the payee device may be physical or through any short range electromagnetic communication (e.g. NFC, Bluetooth, WiFi). Alternatively, it may be carried out through screen picture (QR or barcode). The HW will erase the paid digital coin from its memory to prevent any possibility of double payment. The money is kept in permanent (e.g. flash) memory so it retains its value even if the battery is removed. The HW may include any of the tamper resistance measures mentioned in US Patent 10,445,730 Or others. However, by erasing the money bits that are paid out, any physical compromise of the HW will not enable double payment. The shell is fitted with a human machine facilitation (Human Machine Interface) where the owner of the wallet may both read the digital content of the wallet, as well as any relevant information, and at the same time, the owner can tell the wallet to pay any amount available in its memory, and otherwise communicate with the HW. The wallet optionally can be fitted with ownership security features designed to ensure that the wallet will only be used as a payment source by its rightful owner.

[32] Payment Dynamics (OWHW): We consider a payer holding a OW-HW and a payee holding a payment accepting device, geared for digital money. The two parties agreed on a sum Y to be paid from the payer to the payee. They decide to exercise the payment off-line. The payer will pull out the HW and present it to the payee. If the sums are sufficiently small, then the payee, upon cursory physical examination of the wallet will agree to consider payment from it, as bona fide. The payer will show on the HMI screen that the wallet contains money in the amount X > Y, and so it may serve as a bona fide source of payment. In other modes the payer does not have to expose the value of Y. The payee will check to see if they got the expected amount Y once it has been transferred to them. If the HW is fitted with anti-theft ownership security features, then the rightful owner will activate these features, to activate the HW. If the HW holder fails to satisfy the ownership security features, then the HW does not dispense money. Next the payee will use the HMI interface to set up the payment action. The payee device will be set up to receive the money and OK to the payer that the payee device is set, then the payer will click the pay button on the HMI, and the wallet will dispense the indicated sums through the chosen communication channel to the payee device. The payee will find out from their device that the money has been paid, report this to the payer, and the payer will so indicate on the HMI, and in response the electronics inside the HW will erase the bits corresponding to the paid amount. Alternatively, the money bits can be erased as soon as they are communicated outside the HW. In the event that the sums involved are large or otherwise the payee is not comfortable accepting the risk of physical examination of the wallet as described, then the payment will require a technology based authenticity test. Upon its satisfactory execution the transaction will be carried out. In the case where the wallet is fitted with ownership validation means, then they would have to be activated and allow the wallet owner to operate. This nominal payment dynamics may be extended to automatic payment.

[33] It is especially important for the HW to erase paid money bits (payload). This will de-motivate anyone from cracking the HW and double spending the money in it. In most protocols the paying HW will wait for the recipient device to OK the reception of the money, but such may be skipped, for certain versions of the protocol. A recipient device may fail to OK receipt of money, or the transferred money bits will be taken in by a device that is not a wallet. In that case the device may register the sent over bits but will be unable to process them and verify that those bits constitute a valid digital coin according to the protocol of the mint of that coin. In BitMint, for example, the digital coin has a well-defined structure and a distinction between meta data and payload data, and every wallet software will recognize a BitMint coin for what it is. However, a bit recipient which is not a wallet will not be able to recognize the coin for what it is, and hence will not be able to OK the payment to the payer HW. The payer HW will nonetheless erase the paid bits to absolutely prevent double spending.

[34] Automatic Payment The OW HW may be fitted to dispense money automatically. A payment management software will dictate successive amounts Yi, Y2,

. to be paid per controlling events. Such events may be a simple passage of a time interval, like in paying for parking or for time measured services, or they may be specified events that the payee is undergoing, or the environment is undergoing. The idea here is that the payments are carried out fast over an established channel. In some application payment may be effected through just erasing of money bits without passing them out to anyone. In a nominal mode payer and payee will cooperate in a dialogue as discussed above, for any passage of money. In the automatic mode the dialogue will be established once, and then the money will flow as the events dictate.

[35] Payment Channel: The actual payment dynamics will depend on the channel chosen to effect the coin delivery. Hardware connection may be accomplished to standard USB and micro USB ports, or through specialized ports. It may be accomplished through direct touching or through connectivity pads on payer and the payee device, or it can be done via a connecting cord. The passage of the digital coin may follow any common relevant protocol. Same for the Bluetooth, the NFC and the camera readout. The industry developed standard communication protocols for each mode.

[36] Construction (OWHW): We discuss construction of the OW HW elements: 1. The HW capsule 2. Authentication Pad (optional) 3. Payee device. The hard wallet will accommodate all common means for passing bits, so all money handling computing devices can serve payees in this context.

[37] The HW Capsule: The HW capsule is comprised of: 1. HW Shell 2. Internal Electronics (data storage, processor) 3. Payment Ports 4. Human-Machine Interface (HMI) 5. Battery Pocket, standard battery. 6. Ownership features (optional).

[38] The Hard Wallet Shell: The Hard Wallet Shell is the trust generating element in the hard wallet. Simple versions, use the Hybrid Coin technology (US Patent 9,471,906), extending its use from a coin of fixed denomination to a wallet from which money can be paid in any amount up to the contents of the wallet. The idea being that any attempt to crack the shell will be noticed by the payee. In other words, the assumption is that it would be too difficult, too costly for a fraudster to either crack the wallet, or otherwise tamper with the content. The next level is the technology identified in US Patent 10,445,730, where any optional combination of light, pressure and internal composition of a gas, will erase the data upon tampering, and no payment can be made. The higher up mode is based on the rock of randomness technology identified in US Patent 10,467,522 and in US Patent Application 16578341. This technology is further innovated to establish high level of security and integrity ( and hence trust) for the wallet.

Rock of Randomness Shell Technology [39] One constructs the shell according to the technology identified in US Patent 10,467,522, namely as a randomness guided 3D printed combination of conductivity- variant elements. At one flat location on the shell (from the outside) a plate is fitted with t ports. Each port is the end of a highly conductive well-insulated wire that is fitted inside the shell layer and ends at a random location inside that shell, where the wire is exposed (no insulation on the end point of the wire). The wires may either be fitted as part of the 3D printing of the‘rock’ or threaded in after the rock is 3D printed. The wire connects between a port on the surface of the shell, and a randomized location in the shell, where the wire terminates. So fitted one could randomly pick p < t ports and attach them to one pole of a battery, then combine other ports, one, or up to all the remaining q= t-p ports and attach the picked ports to the other pole of a battery, and thereby measure the effective resistance between these specified two groups of wire terminal points spread throughout the shell of the HW. The shell is identified with a unique ID affixed to it by the manufacturer. An authentication agent can compare the resistance reading from the shell to a reading of the same as registered in a ledger prepared by the manufacturer of the shell. If the two readings data agree, then there is a high likelihood that the measured shell is the shell that was manufactured and documented as to per its various conductivity readings from various combinations of ports. To increase the likelihood for a bona fide, non counterfeit shell, one would pick another combination of p' ports and a respective combination of q' where q’ is comprised of one port up to q’ = t- p' ports, and compare again the actual reading of the shell to the recorded matching reading issued by the manufacturer. The manufacturer publishes the ledger while the Internet is on and working. The HW and any other computing devices, like the authenticators, all download the master file, the ledger published by the manufacturer, and this copy of the ledger they use it to confirm HW (shell) identity in periods without a functioning Internet. To exercise this test one in one mode, uses an authentication device (authentication pad). This pad operates as described in US patent 10,467,522. Namely it has a computing means to communicate via WiFi with the manufacturer and query the manufacturer as to particular conductivity reading of a particular shell. It also stores a copy of the manufacturer database (ledger) which features assorted conductivity readings of each of the shells manufactured by the manufacturer. Owing to this pre-stored database, the pad can compare the reading done over a given shell to the readings stored in tis memory and if they check out, to issue a statement of authentication.

[40] HW Internal Electronics: Inside the shell there is (i) a permanent bit storage device, e.g. flash memory, and (ii) a processor. The memory holds the money bits, and auxiliary data. The processor has read/write access to the memory element, and it has access to the ports of payments through which the money bits flow to the recipient. The processor also is communicating with the HMI interface to (a) report to the wallet operator, and (b) accept payment instructions and other instructions from them. If Ownership security elements are installed, the processor connects to them too, and will only operates if the security check if positive. The money flow may be fitted to be any method by which bits are transferred. For example, but without limitation: 1. USB, or any other standard physical port. 2. Bluetooth 3. NFC 4. Camera read through the HMI.

[41] Payment Ports: The payment ports may be set as any means by which bits may be communicated. In particular, without limitation: 1. USB or similar physical connection. 2. Bluetooth 3. NFC 4. Camera- Readable Bit-Wise graphics (through the HMI screen) These established communications can be installed and practiced through their common protocols.

[42] Human-Machine Interface: The Human Machine interface (HMI) element will be following the common practice of smart phones, where the screen is used both as mode of data entry and mode of data display. Used for the wallet operator to give payment instructions or other instructions and used for the wallet to report the amount of money available at any moment in the wallet, as well inform the operator on any related aspects. In particular, if the money in the wallet is tethered and the request for payment does not satisfy the term of payments. The wallet will keep track of its activity. How much money was paid when, and if known, to whom. Using the BitMint money protocol, the HW will retain the capsule of the coin, namely the coin metadata (while the payload, the actual money bits are erased once paid). [43] Authentication Pad (optional): The authentication pad applies for shells based on the 'rock of randomness' technology. These shells will have a tablet displaying an array of contact points (conductivity measuring ports), where each port is the end of an insulated conductivity wire, which terminates somewhere inside the 'rock material' of the shell. The tablets with the n contact points is fitted over the authentication pad which is fitted with a matching array of electrical terminal points. The tablet on the shell also includes an ID terminal, identifying electronically the identity of the particular shell. The tablet on the pad has a matching reader terminal to read the ID of the shell. There are there types of authentication pads: 1. online authentication pad 2. off-line authentication pad 3. on-and-offline authentication pad. The online pad has an online link to the HW manufacturer database. Based on the pad reading the shell ID, it queries that manufacturer database to receive a conductivity reading based on some chosen combination of p conductivity port ( out of the array of t) to be assigned to one electrical pole, and the combination of the remaining q (where q comprises 1 port up to q = t - p ports) conductivity points (ports), grouped into the opposite pole. The authentication pad will then measure the conductivity of the shell with the same pole (electrode) grouping. If the result is a match then the shell is declared authentic. The pad will have an authenticity indicator to light up to communicate this conclusion. This indicator can be in a form of a light— green for Ok, red for not-OK: fraud suspected. The off-line pad will have to be pre-loaded with the manufacturer database (ledger) where the full set of wallets that have a chance to be engaged at that location, is identified, each with its own ID and a series of conductivity measurements based on some particular grouping of the n conductivity ports. Reading the ID of the wallet submitted for authentication, the authentication pad will query the downloaded database for conductivity data for that ID, and again compare the stored results to actual measurement of the wallet submitted for authentication. The report, likewise, will be submitted via the authentication indicator. If the ID of the submitted wallet is not found in the downloaded database, the pad will indicate: "cannot authenticate the submitted wallet" . The on and off line pad, will operate online if online connectivity is available, and will resort to off line mode otherwise.

[44] OW-HW Security: OW-HW security may be viewed from (i) the payee standpoint, and (ii) from the HW owner standpoint. The payee is only interested in the question of whether the money paid to it is bona fide. This assessment will be made by the payee based mainly on the sum paid and on the hardware security grade. Small daily amounts are a good risk to be taken from low level HW since the effort to forge such a wallet is greater than the transacted value. For higher sums, a higher degree of HW integrity will be required. The rock technology is considered sufficiently secure to guarantee the bona fide status of even millions of dollars HW paid. The security considerations of the HW owner are different. Since HW payment needs to be paid while exposing the wallet, the owner stands the risk of being robbed. The security answer to this risk is combined ownership verification features. We distinguish between (i) biometric security, (ii) PIN security, and (iii) ledger security. Biometric security is any biological signature of the owner. E.g. finger prints, facial recognition, iris, palm, etc. There can be a few of them in either "OR" or in "AND" mode. The PIN security is based on entering a secret PIN. The PIN can be a fixed string of bits, or it can be dynamic. For example, it can be time dependent: every day it changes, and the owner needs to memorize the new PIN every day, based on applying a secret app on his phone or computer. Ledger security is based on the HW ledger identifying not only the conductivity readings (in the Rock technology) but also the owner of the HW. The payee will then ask the HW holder to identify himself per the indication on the ledger. Any combination of these features is acceptable. The selected security features will be built into the shell of the HW. In the BitMint format the HW may keep the coin 'capsule' for any paid digital coin. The capsule is the full meta data of the coin, in fact, all the data of the coin except the payload. This way the HW keeps a full record of its payments over time, but keeps no copy of money that was paid once, denying a shell breaker the opportunity to profit from double payment, and hence deny him the incentive to crack the HW shell in the first place. Biometric data of the owner may be entered once when the owner first receives the hardwallet. That data is then kept inside the HW and cannot be changed, to enhance security.

[45] Two Ways Hard Wallet (TW-HW): This terminal status of OW-HW is a fundamental issue - when the HW is empty, payment stops. The two-way mode is designed to resolve it. A two-way HW is built much as a OW-HW is built only that it allows for re-loading. This re-loading will be allowed only if the incoming money will enjoy the same security projected on outflowing money. This equivalence of security can be achieved by limiting the source of the incoming money to be an equally secure HW wallet. In other words, if the rock technology is good enough to convince a stray payee that the money that is coming out of a HW is bona fide then it is also good enough for a HW to accept such money coming directly from a similar HW unit. All that is needed is for the payee HW ( the reloaded unit) to make sure that the source of the inflowing money bits is no other than a similarly secure HW. To achieve this confidence by the payee HW, it would be necessary for the payee HW to ascertain the HW status of the payer. This can be done either (i) directly, or (ii) indirectly— using an authentication pad.

[46] Direct HW2HW Authentication: The two involved HW will be physically connected via an array of s electronic ports n < s of these ports will be the rock conductivity ports, and the remaining m = s-n will be used to transfer money and data. In one design out of many, the connection will be facilitated via a connection pad fitted on the back of each TW-HW. The two HW will be placed back to back. The following will happen: 1. The payer HW will send the payee HW (i) the ID of the payer HW, and the amount of money it wishes to pay. This information can also be passed via Bluetooth or other means. 2. The payee HW will consult its built-in, previously loaded (or real time loaded, if the network is operational) ledger of ID data, and pull out of it, conductivity data with respect to the identified payer ID. The payee HW will pull first one recorded resistance, (conductivity) measurement, R(p,q), where R is the measurement per a particular selection of p conductivity ports and q conductivity ports, where p+q < n the full range of conductivity ports. The TW HW will have the built in circuitry to conduct a live measurement of the conductivity reading per the identified p and q ports off the payer HW. If the readings do not match— the dialogue is terminated. If the readings match then the payee HW is developing confidence that the device attached to it, ready to make a payment, is indeed the HW it claims to be. The payee HW then signals to the payer HW: 'exercise payment!'. 3. The payer HW will then send the money bits and any related information per the particular protocols. These bits and information will flow through the m ports on the pad. 4. For the payer's HW, this payment is no different than payment to any payee device. But for the payee HW, this incoming money is now added to the sums previously stored in the payee HW, only that a record is kept of the ID source of that money (along with timing, and perhaps location information - of GPS data is available). The just added money is now imbued with full trust because the payer HW was duly authenticated. That means these money bits can be paid out with the same reliance and confidence as the pre-stored moneys. Optionally the data regarding the chain of holding HW devices may be kept. Note that for this direct mode to work the HW will have to house the HW resistance readings ledger. Also note that the authentication protocol may call for two or more different resistance readings with different combinations of p and q ports.

[47] TW-HW Security: Security for TE-HW follows the logic and the features, of the OW option. In addition, the TW version has a verification and authentication pad to allow a 2nd HW to verify and authenticate a payer hardwallet, (1st HW), and also allow a third HW to verify and authenticate the 2^nd hardwallet, and so on. If an intermediate security pad is used it will also be rock-of-randomness protected. So, each hard wallet will trust the other HW through trusting the authentication pad.

[48] Hard Tethered Wallet (HTW): Both the one-way and the two-ways modes for hard wallet operate in the basic mode on untethered money. Namely the owner of the money in the wallet can pay to anyone, anytime, for any reason, like any money owner. This technology can also be used to handle tethered money, namely money that can be paid only subject to pre-set restrictions. The payment restrictions (the money tethering) will be inscribed in the wallet to ensure that any payment is carried out in compliance of the pre set restrictions. (The money will not be eventually redeemed if the tethering terms have not been complied with). Nominally tethered digital money is controlled through its redemption process, where the redeemer will only redeem a submitted digital coin, if it satisfies the tethering terms. However, the hard wallet is designed to work in conditions where the network and hence the redeemer are not accessible, and therefore the enforcement of the tethering is left to the hard wallet. That means that the payer HW will dispense of the money only if the payee HW has supplied proof or indication that it is wallet eligible to receive the tethered money. This will require an additional dialogue between the payer and the payee HW.

Loyalty Money: Merchants could choose the HW technology to dispense their store loyalty money. The HW can be given anonymously, and it can be given to customers to auto-pay. The HW may be latched to a payment pad on a 'wall' where the money will be quickly paid without any need for online authentication which may slow things down. This "pay into the wall" idea can be used for after hours purchases from a side wall exposed to the public. Payment will allow a cell door to open and for the merchandise to be picked up. Crowd Movement Payments: The HW may be used by a flow of people going into a train station or alike. They will attach the HW to a payment pad on a wall and pay cash like in great speed.

[49] Hard Phone Wallet (HPW): The hard wallet may be combined with a smart phone to construct a unit that is both a smart phone and a hard wallet. This will spare users the need to hold and take along two items. The Hard Phone Wallet (HPW) will function as both a phone and a wallet. The rich phone interface will serve the wallet for all transactions. The integrity of the physical unit will generate the necessary trust to spur back and forth payments. An HPW may be constructed using the Hybrid coin shell technology, for small amounts of money. But it can be constructed with 'rock' technology to turn the phone into full fledged secure banks. The HPW may be built in (i) the inclusive mode and in (ii) the latched mode. In the former case the secure shell will engulf everything except the display and communication screen. In the latter case the wallet will be the shell-secured unit, latched permanently or not, to the phone back to back. The wallet and the phone will be communicating with each other through a communication pad fitted with communication ports. That way the screen of the phone can be used to communicate with the wallet. The HPW will have its own authentication pad built in, as described in the TW-HW, so that one HPW can securely pay to another HPW, and a full ecology of payment can be practiced, all the while without the benefit of a communication network. Embedded Mode: the HW may be embedded in a smart phone, with direct connection only to the phone in which it is embedded. When a payee wishes to authenticate the HW inside the phone, the payee will query the HW manufacturer for a previously unused measurement parameters of the embedded HW. Because such parameters were not used before, then the phone owner could not know the expected resistance measurement and could not defraud the payee. If the smart phone will report the right measurement, then the payee will gain confidence in the payment. This will work only when there exists connectivity to query previously unused measurement parameters.

[50] Summary of the HW Invention: This invention describes a "hard digital wallet" (HDW or“hard wallet”, HW)) in the form of a specially constructed material box to effect transactions of digital money, or money equivalent, without reliance on a communication network, wherein the money or money equivalent digits are dispensed from the HDW, and are being trusted by the payee, following a material construction test ("MCT") to ascertain that the HDW was prepared by a trusted mint, and wherein the payee measures the HDW, verifies the measurement through a public database, published by the mint. We claim a system as above where the HDW is constructed from a randomized aggregation of conductivity-variant elements, wherein n insulated wires terminate inside the HDW in randomized locations, such that the effective resistance, R(p,q), measured by uniting p wires as one electrical pole, and uniting q wires as the opposite electrical pole, where p + q < n, depends on the randomized construction of the HDW and the locations in it of the p+q wire terminals, such that a measurement of R(p,q) that agrees with a pre-published measurement of the same measurement conditions, projects confidence that the measured HDW is the one referenced by the mint, and where such confidence can be amplified by repeating the measurement with a different set of p' ¹ p wires and q' f q wires, as many times as desired, each time comparing the measured result to the ledger of resistance values published by the mint. The system as described above wherein the payee is a similar HDW, and the money transferred to it from the paying HDW, may be further paid to a third HDW based on the same HDW validation test.

[51] Viral Loyalty Cash: State currency spreads virally on account of its universal trust. Alas, today's mega corporations command deep public trust which they can leverage to upgrade their brand of currency to a pseudo -generic coin and thereby dominate the wallets of the buying public. New payment methodologies combined with the previously described off-line payment option amount to an effective upgrade of loyalty money to promote merchant’ s business. Introduction: The idea of a pseudo generic loyalty currency emerges from the long familiar concept of loyalty money— forms of valuation recognized by a particular store as valid cash equivalent, under some prescribed terms, for purchases in this store. Known as "points", "credits", "coupons" or "air miles" these carriers of value amount to a private currency. Now the idea is to let these private currencies shed off their 'privacy' gown and rise to become pseudo-generic. We describe herein the objective state of the Viral Loyalty Cash (VLC) from the point of view of the merchant, the store, that mints and distributes the VLC. That is the state where the public comprised of prospective customers holds its liquid assets as that store loyalty money— at a ratio commensurate with the public buying capacity from that store. The larger the store, the larger the desired proportion claimed by that store loyalty currency within the wallet of the relevant public. VLC Principles: The principles of the VLC strategy are (i) using a superior payment and currency technology to draw the buying public to keeping in their wallet store loyalty money such that whenever the need arises to purchase anything the store can provide— that store will be the default choice. And to (ii) use modem payment and currency technology to establish a productive relationship between the store and the members of the public, to induce the public to buy from the store and benefit from such purchases. Drawing the public to hold store loyalty money in their wallet is effected through minting store money that is functionally very close to generic (state) cash. The minting store will have only a slight advantage in disposing of that money. This is in diametric contrast to the prevailing strategy over loyalty money— to make as "cash- unlike" as possible, burden it with a heap of rules, use restrictions, give it, and take it, in almost a whimsical fashion. The VLC strategy calls for loyalty money to be as cash like as possible, be allowed to be used everywhere cash is used, and be convertible to fiat currency (state cash) with a carefully managed exchange fee. Once the store loyalty money becomes a recognized means of exchange of value, then the store can push its store money to distribution centers, which in turn will distribute the loyalty currency around as desired. These distribution centers are enterprising existing customers who will be lured to accept loyalty currency for purpose of distribution to their sphere of acquaintances. The cumulating of such spheres of acquaintances will facilitate the viral mechanism of distribution for the loyalty money. The use of VLC in Hard Wallets, to ensure payment continuity, will further enhance its popularity. We call for reversal of the trend. Instead of piling on particular restrictions, let the loyalty money be regarded first as 'good as cash' for every purchase within the minting store, and second as redeemable for cash with a certain conversion penalty— giving the loyalty money the standing of regular cash bill.

[52] Definitions: Viral Loyalty Cash (VLC) A digital entity (string of bits) that carries both value and identity, and is tethered to rules of trade and terms of redemption, and that is regarded (with some minimal restrictions) to be cash-equivalent for all purchases made in the store the mints the VLC. The VLC is cash-reversible against a specified exchange fee. The VLC is assumed to be formatted according to the BitMint framework for digital currency, but other digital money frameworks are possible too. VLC coins: VLC coins are denominated units of VLC. Assumed to be in the BitMint format, namely can be divided to sub coins that sum up to the value of the VLC coin, and where any sub coin qualifies as a VLC coin. The VLC Store: The VLC store, or the "store" or "merchant', or a network of stores that mints, hands-out, delivers, and distributes the VLC, supervises its trade, and eventually redeems it. Existing Customer: An Existing customer is a customer of the VLC store, for whom the store has phone number, email address, and/or any other means for reaching out. LatchPack: A pack of two VLC coins, one the "carrier" and the other latched to it, the "latch". The holder of the coin can de-latch, disengage the coins. One objective is to distinguish between the use terms of these two coins. The carrier may be used by the recipient, and the latch by anyone other than the recipient: VLC traders: Traders — people usually, but also organizations— who accept, store, and pay with VLC coins. Cash Redemption Agent: A contracted agent, authorized to redeem VLC under the specified terms of redemption Insurance Credit Dollars (ICD) Digital coin paid by an insurance company to be qualified per specified terms for premium, co-pay or deductible— as the case may be. Coalition of VLC: A group of stores binding together to issue a single digital loyalty coin that is honored by all members of the group. Loyalty Bank: A bank serving a group of merchants uniting for the purpose of offering the public a loyalty coin honored by all group members.

[53] VLC Operation: VLC operation is comprised of (i) priming, (ii) spreading, (iii) closing. A store (merchant) planning to operate the VLC procedure will first go through priming— the process of pushing VLC coins to its existing customers. It will then engage in spreading the VLC coins to traders who are not its customers, and in that mode operate until for any reason the store decides to terminate the operation and then it initiates the VLC closing procedure. Priming: Priming is the operation in which the VLC store pushes VLC coins into the hands of its existing customers. There are several ways for doing so: 1. Initiated giveaway 2. Discount Conversion 3. Special Offers A store can simply use email accounts, or phone numbers to send a digital coin to its customers. In discount conversion the store effects discounts not through collecting less money from its customer, but rather through collecting the full pre-discount amount, and in parallel giving to the customer the discount amount in form of digital coin. Special offers are all sort of combination cases where if the customer behaves in a certain way he is rewarded with a certain amount of VLC coins. Spreading: In spreading the Stores works in two modes: 1. direct promotion 2. viral expansion. In direct promotion the store advertises in various means in order to lure more people to sign up as registered existing customers, offering VLC coins as inducement. In viral expansion the stores relate to its existing customers as focal points for viral distribution based on the contact list of each customer.

[54] Viral Expansion: Viral expansion works by pushing a coin package to an existing customer, then motivating the customer to push parts or whole of the package to a contact of his or her, so that this contact ends up as a customer of the store. In order to motivate the existing customer to find new customers the store will use one or few of the following methods: 1. Reward for success 2. Coin sharing 3. Cash Redemption 4. Coalition. When an existing customer passes on a VLC coin to a contact of his, and that contact uses the given coin with the store (becomes a customer), then the store notes (by the identity of the coin) that the existing customer has done what the store wished him to do, and for that the customer is rewarded, likely with a new loyalty coin for the customer’s use with the store. In addition, the store can pass to the existing customer a coin of some denominated value V and limit the redemption of the coin to other than the existing customer. The existing customer, unable to use this coin by himself, is motivated to find someone to pass the coin to, and the store would encourage the existing customer to 'sell' this coin for a price U < V. By so doing the existing customer will gain U and the recipient who uses the coin will benefit in the amount V-U. Such revenue sharing may be carried out together with reward for success. The store will fine-tune its incentives depending on the response of its existing customers. Normally loyalty money in its various forms shares one attributes. It redeems only against merchandise, not against cash. The idea here is to reverse this strong trend and allow cash redemption. A VLC coin of value V will be redeemable against a cash value W < V. The difference (r = V-W) will be regarded as the redemption fee. The value of W (and r) will have to be well managed to balance between competing aims: (i) insure that the value captured in the coin is taken as purchase power for the minting store, and (ii) motivate the public to stuff their wallets with these loyalty coins. The normal case for loyalty money today is W=0, no cash redemption. The other extreme: W=V will motivate holders of these loyalty coins to convert them all to raw cash and escape the limitation of the loyalty currency. The lifetime of the average loyalty coin will be close to zero. This will cancel any advantage gained by the VLC enterprise. The store would opt then to practice an optimal cash redemption strategy. The minting store could reach agreement with complementary businesses to jointly honor the store loyalty coins and adjust a fair accounting in the background. Reward for success: 1. A priori reward 2. reward-per-proof. The store may use the LatchPack comprised of a carrier loyalty coin to be used by its existing customer, and a latched coin to be used by other than that customer. The first coin will be an a- priori reward for the expecting action to be taken by the customer— passing the latched coin to a new customer. Otherwise, or in addition, the store will monitor the use of the coins, and when the latch coin is used by a qualified buyer, the store makes a record of it and pays the existing customer with more loyalty coins. The payment can be proportional to the amount spent by the other customer, and also reflect the number of people that use the loyalty money distributed by a particular customer. We recall that the loyalty money in BitMint form allows the holder to divide the coin at any desired resolution, so the customer can enlist a large number of new customers to be given the coin, or a part thereof. Since the more customers are registered with the store, the better for the store— the store will encourage customers to cut their loyalty coin to as many recipients as possible— and will compensate these customers accordingly. Reward per proof can also be fine-tuned. The store may indicate to the customer that mature adults are more desired new customers than young adults, females more than males, and any other grouping. The reward will reflect such store preference. The reward may grow with accomplishment. The newer customers a customer brings the greater his reward per customer— to keep the supply of new customers growing coin sharing: The loyalty coin forwarded by the store to the existing customer as a means to recruit a new customer will normally go to the new customer as full gain of the denominated value of coin, V. However, the store may opt to reward its existing customer for facilitating this acquisition of the new customer, and do so by sanctioning him or her selling the loyalty coin for a price U < V thereby reduced the benefit to the new customer from V to V-U. Such sale can be carried out, of course, without the store knowing about it, but it can be extended into a loyalty exchange market place, which may be assisted, even operated by the store. The store may advertise to the public that some of its existing customers have been given loyalty cash, which is limited for use by a new customer, so the existing customers cannot use these coins. They are therefore interested in selling them. The price will be determined by the marketplace, by supply and demand, by the balance between the people wishing to buy such coins and the people willing to sell them. The balance will apply individually to each type or class of loyalty coins. Of course, if all loyalty coins are good as cash regardless of what is purchased then there is only one class of coins. But if the store chooses to impose some measure of limitations, and dictate particular terms of use, like what must be purchased, and during what window of time, then there is more than a universal type of loyalty coin, and each type has its own market. The price may be set much like for the regular stock market, and changes will be real time based on supply and demand. Cash redemption: Cash redemption may be the most powerful means to achieve the goal of spreading loyalty cash into the wallets of the public. The general idea is to keep a very carefully engineered gap between the use of the loyalty coin for purchase within the minting store and generic cash. If the gap is too small then there will be no advantage for the store. If the gap is too large then the loyalty coin will not spread much. The exact value W for which a loyalty coin of value V is redeemed is an object of careful management, incorporating many factors. We discuss a few options: 1. Designated Cash Redemption Centers 2. Life Time Dependent Redemption 3. Redemption history rates A rich variety of combinations of these three methods provides room for optimization. The store could insist on capturing communication details for every redeemer, to make it a target for future campaigns to render him or her into a customer. . [55] Designated Cash Redemption centers: The store may contract assorted merchants to be cash-redemption qualified. Namely they would be able to redeem a store loyalty coin of value V for a price W close to V. This privilege will not be given to others. Such privilege will make these merchants agreeable to be paid their own bills with the store loyalty cash— since they can readily redeem this money. What is more, if the redemption fee r=V-W is smaller or competitive with the price charged by the alternative methods of payment, mainly card networks, and modern wallets, then these merchants will encourage their customers to pay with store loyalty money. The more merchants that sign up to be qualified cash redeemers, the more attractive the loyalty coin to its holders. They can use it in a generic way. So, although ordinary folks will not be able to exercise cash redemption, at least not in the favorable rates reserved for signed up merchants, the fact that the coins are acceptable widely makes them a welcome dweller in the public's wallets. Life Time Dependent Redemption: A loyalty coin may be cash redeemable at a rate W(t) where t is the time that lapsed since its minting. In the regular implementation this will be a situation where W(t') < W(t") for f < t". This is designed to keep the loyalty coin in the wallet for longer, since it will gain in value as time lapses. And in that time the holder of the coin might see an opportunity to use the coin to purchase something from the minting store at full denominated value. The store could try various pattern for the W(t) function in order to optimize its benefit. Redemption History Rates: The store could account for the redemption volume of particular redeemer. And assign a redemption value accordingly: W(q), where q is the measure of redeemed coins since some reference time point. In the basic way we will have W(q') < W(q") for q' > q". The idea being to discourage coin holders from redeeming them into cash. A customer who redeemed a lot will be motivated to pass the coin to someone else who could redeem the same coin for better terms. Coalition: The difference between a nominal loyalty coin and regular cash is the range of acceptability. The latter— everywhere, and the former only by the minting store. By expanding the acceptability of the loyalty coin, this distinction will shrink, and the loyalty coins will be increasingly more acceptable in the public wallets. This leads to the strategy of coalition— bringing several stores (merchants) together to honor the same loyalty coin. Coalition can be achieved in the case where the loyalty coin is issued against cash received. It is problematic when issued as an inducement or as a reward without the store being paid by the customer the denominated value of the coin. We discern then between: 1. Cash-Collected Loyalty Coins 2. Store Liability Loyalty Coins. The first is the case where the store collected the denominated value of the loyalty coin from the recipient of the loyalty coin, and the latter is when such exchange did not take place. A store liability coin does not lend itself to coalition because the store issuing such coin will have to shell out its denominated value to the loyalty bank, which may end up being paid to another store. Cash collected coin will give the minting store the cash collected from the customer, which it can then give out to the loyalty bank. If that money ends up being paid to another store, it is equivalent to the minting store giving the customer real cash instead of the loyalty coin, no harm done. It is true that the minting store supports the recipient store, but presumably this will work in reverse too. A healthy coalition is comprised of stores which all contribute fairly to the market of coalition coins, namely each in proportion to its market volume, or based on a similar metric. The idea of a coalition is that it benefits all the participating stores because it drives consumers to shop within the group. Use can be tethered in many ways. It is possible to restrict the users (redeemers) of coalition coins, as well as the applicable merchandise, and also time of use. A coalition will be especially useful for groups comprised of small businesses. Because the businesses are small they do not command the level of trust commanded by big business. The public will be very leery about holding substantial amounts of money in the form of a loyalty coin of a small unreliable store. However, if this store is part of a group, served by a reputable bank, then the way the coalition works, the responsible party is the bank, and as long as the loyalty bank commands trust, the coalition can be comprised of low trust businesses. In fact, even a group of one member, can run such a coalition mode operation, simply in order to use the loyalty bank to project trust on the people who would consider holding that store's loyalty money in their wallet. Cash Collected Loyalty Coins: A Cash collected loyalty coin is the case where the value of the loyalty coin was collected from the recipient of the loyalty coin. This happens when the store announced a discount on a given product or service. The discount is for a value V. Therefore, the price of the merchandise will be changed from X to X-V. Ordinarily the store would collect X-V against the merchandise. But in the loyalty coin paradigm the store collects the full amount X and issues a loyalty coin valued V to the buyer. In that case the store collected the dollar value of the loyalty coin and will not lose any money even if the loyalty coin is redeemed against cash. Now we consider a group of n stores: Si, S2,.... S_n. In the first case each store issues its own loyalty money: Li, L2,.... L_n, and the n loyalty coins operate in parallel, competing for room in the public wallets. The multiplicity of these coins is quite confusing to the public that has to manage this complexity. We now consider the case where this group decides to join forces and issue one group coin Lo that would be honored by each store in the group. To do so they agree on a "Loyalty Bank". Each store will send to this bank the digital image of the digital coin it issued to its customer, and the money it collected from the recipient of the loyalty coin. The recipient will be notified that the loyalty coin he received is valid in every store that is a member of the group of n stores. Let us consider customer Alice buying from store Si an item priced X, at a discount price of X-V. (i=l,2,...n). In one case Alice pays X and receives a loyalty coin Li=V, which is good for purchase at store Li. But in another case Alice receives loyalty coin Lo = V, which is valid for purchase at any other store within the group. Alice, at some later point wishes to make a purchase at store L_j (i ¹ j). She submits the loyalty coin to the store L_j and asks for it to be regarded as cash in the amount V. Store L_j will send the digital loyalty coin to the loyalty bank. The loyalty bank will check that the digital coin is valid. That is, it was properly issued (by store Li) and was not used (claimed) before. If all checks out, the loyalty bank OK's the submitted loyalty coin, Lo, and passes to store L_j the cash in the amount V, which store Li deposited with the bank beforehand. Once store L_j receives the money from the bank, it releases the merchandise to Alice. In summary we have here a loyalty coin that was issued by store Li and was redeemed by store L_j. Neither store lost in the deal because the loyalty coin was originally issued against collected cash. The same procedure will apply if Alice passed the loyalty coin to Bob, and Bob to Carla and so on. (recalls that using the BitMint paradigm every trader can split the loyalty coin anyway they wish).

[56] Functional Design of Coalition Loyalty Currency: In a nominal BitMint design the mint and the redemption centers are one and the same. In the coalition arrangement the participating stores are minting the coins and the loyalty bank is handling the coin redemption decisions. The BitMint coalition coin carries the coalition project id, and the id of the store that mints the coin. Thereby there is no risk that two different stores will mint identical coins. Each store will use the normal BitMint mechanism to ensure that it does not mint two identical coins. A store might keep a copy of its minted coin for security and accounting, but it is not necessary. All the accounting and the management of the money is carried out in the loyalty bank. The group could also keep all minting and redemption functions within the loyalty bank. In that case every time a store wishes to issue a group loyalty coin, it will indicate the sum and terms to the loyalty bank, which in turn will send the coin to it, properly minted. The loyalty bank will then redeem the coin when it comes to it. Type of Coalition: Any collection of stores may join into a coalition. Some options: 1. Neighborhood Promotion 2. Shopping Center Promotion 3. Joint holding company ownership 4. Vertical and Horizontal Association 5. Meeting another coalition challenge 6. B2B coalitions. A suburban area wishes to promote its businesses which are in competition with a near by metropolitan area. The area will then initiate a coalition among the stores in the area and push the "area cash" valid throughout the neighborhood, but not outside. Some tax payment money can be used to prime the operation. Shopping centers are dying under the assault of online commerce. A mall-wide in-store limited purchase will attract shopping to the dying mall. Several unrelated businesses owned by the same holding company may join together in a coalition, and in that case it matters not if every store contributes fairly to the whole. Coalition makes sense if the customer's need is helped by associated merchants. A typical package offer of assorted products and services will quality for a coalition solution. E.g. flight-ground transportation- hotel accommodation, and entertainment package . It is a case of different vendors but related consumer experience. If a business environment is threatened by a rising aggressive coalition then the left out business will have an incentive to unite into a counter coalition to stay alive. The coalition advantage is also applicable to business. A collection of suppliers may approach a business with an offer for the business to commit to purchase form this group of suppliers for a given period of time, and in return to enjoy a specified discount over list price. The discount will be given as coalition loyalty currency redeemable at any of the group stores. Coalition Cash Redemption: Coalition cash redemption takes place through the loyalty bank. The redeemer may approach the minting store, demanding redemption against cash. The minting store will evaluate the redemption fee (V-W) and send the coin with its evaluation to the loyalty bank. The bank, in turn, will check if the coin is good to be redeemed (genuinely minted and not yet redeemed), and if it checks out, it will pass the redemption rate W to the minting store. The minting store will then pass W to the redeemer. Alternatively, the loyalty bank may be the one evaluating the value of W. Small Business Solutions: Small businesses do not command the trust for the average consumer to take their loyalty cash as cash equivalent. To resolve this issue the small business could mint cash equivalent loyalty money under the auspices, and the guarantee of a larger business, a bank, or a similar financial institution. The coin will bear the cryptographically secure certificate of the trust agent to gain the customer's trust. The trust giver agent will not take risk. In order to guarantee any loyalty coin, it will need to get the denominated amount in cash from the client small business. If the coin returns to the business, it sends it up to the agent and gets back the deposited cash. If the coin is claimed by another business, the request goes to the trust providing agent, that checks the coin if it is bona fide, and then pays it off from the money deposited by the served business.

[57] Insurance Credit Currency: Insurance companies wish their customers to behave in ways that would reduce the likelihood of a claim pay off. To that end an insurer could mint an Insurance Credit Currency that would be payable to insurance customers who behave in a favorable way. On one hand this minted currency would be equivalent to common premium discounts given for favorable behavior. But on the other hand— a currency is transactable. Insured customers would be able to freely trade these insurance "money". This trade will serve an extra incentive for the community of the insured to earn such credit coins— then sell them to other insured who do not behave so well. The insurer will benefit from the extra movement to behave favorably, while it will not lose by honoring insurance money submitted for redemption by misbehaving customers because for the insurer what matters is the margin between the lower claim pay off to the sum total of the insured, and the sum total of redeemed credit coins. The insurance credit coins may be payable as premium, or as deductible or as co-pay. The terms are flexible. They may be set to be redeemable only next year— to ensure that customer stays with the same insurer. Dispensing insurance pay off through HW will allow customers to purchase what they need in times of disaster when there is not Internet. Using the tethered money BitMint technology the paid ICD coin may be tethered to terms that specify that this money can be used only for next year premium— not the current year. This will increase the number of forgetful customers, but more importantly, will motivate the customers to stick with the current insurer. If they switch they lose. The power of tethered money may be extended to cross-insurance; the ICD coin given for taking step for insurance type a, will be redeemable only if applied to insurance type b. E.g. home insurance crossing to car insurance. This will motivate the customer to add the other insurance to the same insurance portfolio. The more profound impact of BitMint ICD coins is that they are transactable. Customers can pass them around— either as gifts, or for cash (selling them). There are numerous cases where a customer gets reimbursed for his or her insurance cost, so they have no incentive to take step s because the incentive ICD coin is credited to the agency who reimburses them. But in the form of a transactable ICD coin, the insured can pass the coin to others (and may be get paid for them). Unlike premium discount, a deductible coin is a stochastic matter. If no claim is made— no deductible is invoked, and the discount is not materialized. In that case the insurer does not suffer, and the insured does not gain. In fact, the client who took the risk mitigating step is less likely to invoke the deductible because the taken step decreases the chance for making a claim. This is a net gain for the insurer. The stochastic nature of the invocation of the deductible may also serve as a motivation for the step taking customer to pass the BitMint deductible coin to someone else— who did not take this risk mitigating step. The motivation is double: (i) taking the step reduced the risk for having to make a claim and having to use the deductible, (ii) passing a deducible worth V to someone who will use it may be done against a sale price of U < V, since the buyer will gain (V-U) > 0 in the deal. By allowing such transfer the insurer might lose V relative to the case where the buyer has to pay the full deductible. But the need to pay off the buyer would have risen anyway, while the risk mitigating step might have prevented the seller from having to claim a pay off. The value of the BitMint ICD coin V was computed by the insurer to be worth the pay against the mitigated risk, so overall the insurer gains from the deal of alluring the seller to take the risk mitigating step and be paid the V valued ICD coin for it. Summary of the VLC innovation: Presenting a method involving computer servers, personal computing devices, hard digital wallets, and smart phones with payment applications wherein secure digital money is used by a merchant extending a discount by returning a portion of the purchase price in the form of a digital coin, thereby turning the purchaser into the first recipient of the digital coin, which the first recipient can redeem in whole, or in successive parts, at the merchant's store according to preset terms of redemption; the first recipient can also split the digital coin, and any splittable portion thereto is transferrable through any bit-wise communication method to a personal computing device used by a second recipient; wherein the second recipient can similarly split the coin given to them to arbitrary parts, and pass each split to a third recipient, and so on, to a forth recipient and further recursively, all these splitting and passing is carried out between the various recipients without intervention or exposure to the merchant minting the coin, and where each split of the original coin is redeemable according to preset terms of redemption associated with the redeemed split. This method is used by further involving a coalition of n merchants, and a loyalty bank, wherein the denominated value, X, of the digital coin passed to the first recipient, is paid by the discounting merchant to the loyalty bank, and also the digital image of the digital coin is passed to the loyalty bank, and where any coalition merchant will accept the digital coin, or any split thereto, then submit the split submitted for redemption to the loyalty bank, where the loyalty bank will verify that the submitted split is (i) a properly minted coin of a coalition member, and (ii) was not previously redeemed, and upon so verifying, the loyalty bank will credit the submitting merchant for the amount of the redeemed split, and the submitting merchant will accept the redeemed split as cash for which to effect the transaction which was paid for by the redeemed split. The above method is also used wherein the digital coin denominated by value V is comprised of a split of value W and a balance of U=V-W, and where the first recipient of the digital coin can only redeem up to the amount W, while the balance, U, is redeemable by others than the first recipient.

[58] The same method is also used wherein the digital coin, or any split thereto, denominated by the value X, can be converted to cash in the amount X' < X according to preset terms of conversion. The method above is also used wherein the cash conversion of the loyalty digital coin is limited to the minting merchant.

[59] The same method is also used wherein the cash conversion will be carried out by any designated bank or merchant, where the converting merchant or bank will pass the conversion-submitted digital coin to the minting merchant, or to the loyalty bank, where the submitted digital coin will be validated as a coin that was actually minted as indicated on the coin, and that this coin or split was not previously redeemed, nor cash-converted, and in that case the minting merchant or the loyalty bank will pass the cash equivalent to the converting merchant, which will pass the cash to the coin holder who submitted the coin for cash conversion. The first method is also used wherein the digital coin is divided to splits such that each split is assigned a window of time when it can be redeemed or cash converted, and where outside that window the split cannot be redeemed nor cash converted.

Claims

What is claimed is:

1. A method involving computer servers, personal computing devices, hard digital wallets, and smart phones with payment applications wherein secure digital money is used by a merchant extending a discount by returning a portion of the purchase price in the form of a digital coin, thereby turning the purchaser into the first recipient of the digital coin, which the first recipient can redeem in whole, or in successive parts, at the merchant's store according to preset terms of redemption;

the first recipient can also split the digital coin, and any splittable portion thereto is transferrable through any bit-wise communication method to a personal computing device used by a second recipient;

wherein the second recipient can similarly split the coin given to them to arbitrary parts, and pass each split to a third recipient, and so on, to a forth recipient and further recursively, all these splitting and passing is carried out between the various recipients without intervention or exposure to the merchant minting the coin,

and where each split of the original coin is redeemable according to preset terms of redemption associated with the redeemed split.

2. The method of claim 1 involving a coalition of n merchants, and a loyalty bank, wherein the denominated value, X, of the digital coin passed to the first recipient, is paid by the discounting merchant to the loyalty bank, and also the digital image of the digital coin is passed to the loyalty bank,

and where any coalition merchant will accept the digital coin, or any split thereto, then submit the split submitted for redemption to the loyalty bank, where the loyalty bank will verify that the submitted split is (i) a properly minted coin of a coalition member, and (ii) was not previously redeemed, and upon so verifying, the loyalty bank will credit the submitting merchant for the amount of the redeemed split, and the submitting merchant will accept the redeemed split as cash for which to effect the transaction which was paid for by the redeemed split.

3. The method of claim 1 wherein the digital coin denominated by value V is comprised of a split of value W and a balance of U=V-W, and where the first recipient of the digital coin can only redeem up to the amount W, while the balance, U, is redeemable by others than the first recipient.

4. The method of claim 1 wherein the digital coin, or any split thereto, denominated by the value X, can be converted to cash in the amount X' < X according to preset terms of conversion.

5. The method of claim 4 wherein the cash conversion of the loyalty digital coin is limited to the minting merchant.

6. The method of claim 4 wherein the cash conversion will be carried out by any designated bank or merchant, where the converting merchant or bank will pass the conversion-submitted digital coin to the minting merchant, or to the loyalty bank, where the submitted digital coin will be validated as a coin that was actually minted as indicated on the coin, and that this coin or split was not previously redeemed, nor cash-converted, and in that case the minting merchant or the loyalty bank will pass the cash equivalent to the converting merchant, which will pass the cash to the coin holder who submitted the coin for cash conversion.

7. The method of claim 1 where the digital coin is divided to splits such that each split is assigned a window of time when it can be redeemed or cash converted, and where outside that window the split cannot be redeemed nor cash converted.

8. A "hard digital wallet" (HDW) in the form of a specially constructed material box to effect transactions of digital money, or money equivalent, without reliance on a communication network, wherein the money or money equivalent digits are dispensed from the HDW, and are being trusted by the payee, following a material construction test ("MCT") to ascertain that the HDW was prepared by a trusted mint, and wherein the payee measures the HDW, verifies the measurement through a public database, published by the mint.

9. A system as in claim 8 where the HDW is constructed from a randomized aggregation of conductivity-variant elements, wherein n insulated wires terminate inside the HDW in randomized locations, such that the effective resistance, R(p,q), measured by uniting p wires as one electrical pole, and uniting q wires as the opposite electrical pole, where p + q < n, depends on the randomized construction of the HDW and the locations in it of the p+q wire terminals, such that a measurement of R(p,q) that agrees with a pre-published measurement of the same measurement conditions, projects confidence that the measured HDW is the one referenced by the mint, and where such confidence can be amplified by repeating the measurement with a different set of p' ¹ p wires and q' ¹ q wires, as many times as desired, each time comparing the measured result to the ledger of resistance values published by the mint.

10. A system as in claim 8 wherein the payee is a similar HDW, and the money transferred to it from the paying HDW, may be further paid to a third HDW based on the same HDW validation test.

11. The method of claim 1 wherein recipients of the digital coins use the system in claim 8 to hold and transact said coins, and thereby enabling these recipients to purchase from the merchant even during periods when the trading network is inoperative.