As you get deeper into WingCash, you’ll see that each cash note has two connected profiles: the issuer and the holder. What is the difference?
The issuer (or provider; we use the terms interchangeably) of a cash note is the entity that created the note. The issuer of a note is immutable (never changes). For open loop notes, the issuer is a financial institution like a bank or credit union; the entity must be licensed by the local government to transmit national currency. For closed loop notes (like gift, loyalty, rewards, or promotional cash), the issuer is a business.
The holder of a cash note is the person or business who currently has the right to spend it. The holder of a note changes when people spend it. Every holder’s cash is normally shown in their wallet.
The initial holder of a cash note is the issuer. A transfer moves the note to a different holder when the holder accepts the note. The note returns to the issuer upon redemption.
Since open loop issuers can create their own cash notes, how can WingCash be sure that all open loop notes have the financial backing to be deposited into a bank account or converted to physical cash? This is where a special state of cash notes comes into play. When the issuer and the holder are the same entity, the note is in the issuer’s vault rather than their wallet. Sometimes we call a note in this state inactive. Notes in the vault do not need financial backing, while notes outside the vault (the amount circulating) need it.
Thus open loop issuers can only safely move notes out of their vault when they receive money to back the notes. They can have an arbitrary number of cash notes in their vault because notes in the vault are not presentable for redemption, but the amount outside the vault must match the amount they can deposit to another account.
Closed loop issuers can issue cash without financial backing, but they must be prepared to redeem whatever they issue. For each $5 promotional cash note they provide for free, they must be willing to accept it and provide goods or services in return. When merchants redeem cash notes, those cash notes go to their vault rather than their wallet.
This distinction between issuers and holders was certainly not obvious to me at first and I hope this discussion clarifies it.