Bitcoin Forum

I'm researching mechanisms that would let you "transmute" one cryptocurrency into another, so that bringing (say) one "XTC" into circulation involves taking one BTC out of circulation, and perhaps vice versa.

This "transmute" operation would differ from a normal currency trade, in which both exchanged coins remain spendable.  Ideally, I'd envision a consensus that new alt-coins will only be taken seriously if seeded by such an operation from an existing respected coin, like BTC.

Potential advantages of such an operation:

1. Removes the incentive to create pure pump-and-dump alt-coins by slightly tweaking the Bitcoin protocol, marketing your coin to drive up the price, and selling your initial hoard.
2. Prevents dilution of bitcoins by these variations.  Right now each new alt-coin dilutes the cryptocurrency pool, as some BTC owners feel obliged to hedge themselves by shifting some of their stake into the latest CoinOfTheDay.
3. Opens the door to legitimately innovative alt-coins, say one that bakes in a fixed inflation rate, or that prevents the total float from shrinking by reallocating fractions of long-unspent coins to miners.  Right now these honest experiments can get lumped in with the pump-and-dumps.
4. Enables rolling out improvements to Bitcoin that require a new blockchain.  Fanciful example: a mining algorithm whose calculations help cancer research.  This could be rolled out as a "BTC v2", with users migrating gradually without diluting the BTC v1 pool.

There are a lot of details we could discuss about pros and cons and how to implement the transmute, but first, which related posts should I read?  Links appreciated!  Here are some I've found:

https://en.bitcoin.it/wiki/Contracts#Example_5:_Trading_across_chains (https://en.bitcoin.it/wiki/Contracts#Example_5:_Trading_across_chains)
https://en.bitcoin.it/wiki/Atomic_cross-chain_trading (https://en.bitcoin.it/wiki/Atomic_cross-chain_trading)
https://bitcointalk.org/index.php?topic=91843 (https://bitcointalk.org/index.php?topic=91843)
https://bitcointalk.org/index.php?topic=39777 (https://bitcointalk.org/index.php?topic=39777)

Thanks.

Neil

For anyone interested, I've posted some fleshed-out thoughts on the "transmute" operation in a fresh thread: https://bitcointalk.org/index.php?topic=256544 (https://bitcointalk.org/index.php?topic=256544)