Bitcoin Forum

I'm bringing up this old topic again because I think, while we're all hip and cyber-savvy here, a surprisingly large number of normal folks still don't put much stock in that blasted inter-net and won't really take an intangible currency seriously. This may be reasonable or not, but either way I think it would improve our perceived legitimacy and lower the barriers to entry if we had some physical tokens to hand out. I'm sure my friends would be more interested in bitcoins if I could hand them one.

There have been some really clever technical solutions as far as sending bitcoin "checks" or scratch-off cards worth a certain amount, with a private key or part of a private key included. I think this is a good idea for what it does, but I don't think it's suitable for cash, which would have to put up with too much abuse. You'd need a note that was secure in the hands of potentially hundreds of people of varying levels of cleverness and malice.

Instead, I'm interested in paper money that works the old-fashioned way: on the honor system. Bitcoin Warehouse X would issue a receipt saying, "This note is redeemable by the bearer on demand for ONE BITCOIN (or whatever amount)" on the obverse, perhaps with redemption instructions on the reverse. A public address could also be printed on the note, and the holder could check that indeed there were ten bitcoins stored at that address.

"Honor system" isn't quite the right term: Distributor X could agree to audits and such to ensure that it had enough reserves. You'd need to trust that they wouldn't renege on their obligations, but that sort of trust can be justly earned. You'd need to trust that they would remain solvent, but for a single-purpose warehouse that didn't try to branch out into market speculation and such, insolvency wouldn't be very likely.

Now for other questions:

How would the issuing agent turn a profit (or at least recoup its costs)? Off the top of my head, options include

• a mint fee, wherein first-issue notes are sold with a surcharge to cover the cost of production, plus some. (Could be prohibitively expensive with small denominations.)
• a deposit fee, wherein all notes (new or old) are sold at a small amount above face value. (Not bad, but it may take a while to recover the costs.)
• a redemption fee, wherein notes are redeemed at a small amount below face value. (May hinder general acceptance of the notes.)
• a fractional reserve system, wherein the issuer only keeps enough bitcoins on hand to honor, say, 90% of notes issued, in anticipation of never being called on more than that at one go. (Not very dangerous in itself, but could set a dangerous precedent: once you're at only 90% reserve, dropping to 89% reserve doesn't sound so bad...)
• an expiration date: notes must be redeemed within, say, five years of issue, or be forfeit. (Sort of defeats the idea of cash.)

I'm sure no one will admit here to preferring the last two options (though a limited fractional reserve pegged to the expected rate of accidental note destruction might actually work out). But what about the first three or some combination thereof? Someone has to pay for the production, and it sure won't be the issuer. Under this view, a mint fee is the most "honest" in that it reflects the actual cost of business, and would be appropriate for (say) a volunteer effort to create physical bitcoins for the good of the community. But for a for-profit agent, transaction fees would probably make the most sense since deposit and redemption are the actual services being provided.

Another, no less important question: What would you like physical bitcoins to look like? There's no need for them to literally be paper notes, though that's probably the least expensive possibility: imprinted vinyl or ceramic "coins" would be possible too, or plastic cards, or really just about anything that can be made hard to counterfeit. Since one aim is to improve the perceived "normality" of bitcoin, coins and bills might be most appropriate, but I'd love to hear more ideas.

In case you haven't guessed, I ask because I'm interested in producing these if I find out there's a demand. I'm looking for any sort of input on what would increase the chance of general adoption, because I really can't afford to spend a ton of money on printing with no expectation of recovering the costs. In addition to design and implementation advice, it would be great to hear advice about the business model as well.

For physical exchanges, just use gold.

Sure, your coffee will be 0.04 grams, please.

No way can I break a gram, I'm sick of people coming in here with their large bills!

SunAvatar,

I am very very very interested in what you're putting forward.

I've been thinking about this concept --- of a Bitcoin backed paper currency --- almost since I first learned about Bitcoin!

While on vacation in Spain last month, my family can attest to the fact that I subjected them to all my brainstorming on it... and even forced them to give me feedback on my ideas.

A simple paper currency, backed by real Bitcoin....  Imagine how easy to sell some to friends.   Imagine how easy for small merchants and shops to accept them... and redeam them.

Counterfeiting is the main concern, I would imagine. 

I feel strongly that --- in the spirit of Bitcoin --- only the minting fee would be something I would support.

Also, I would not be involved nor support any such system unless it guaranteed 100% Reserve.... and agreed to independent surprise audits at any time.

It should be run by a trusted not-for-profit, such as The Bitcoin Foundation.... which we are in the process of forming. 

I'm very interested in what you know about minting paper currency... and what sort of system could be used to prevent counterfeiting.

One idea I had was a system based on the "group coupon" concept of validation.... where anyone could call a specific telephone number to VERIFY the authenticity of that "coupon".   However, I haven't figured out how that could be used on a paper currency which could be used over and over repeatedly.   Also, the added cost of operating a call center to verify authenticity....  Who pays for that?

Anyway, tell me what you know about minting paper currency.

In case I miss it, please cc via email too:  bruce@onlyonetv.com

If bitcoin take off, gold won't worth that much as it will be less nessary as currency.

Moreover, it's not so difficult to mint coins with very little gold on it.  A thin layer of gold on some other material will do.

PS.  Oh, and I forgot to mention that silver exists too, for small change.

The currency we're talking about has nothing to do with gold or silver.  It's backed only by 100% real Bitcoin.  I think paper would be the best material to make it out of --- to keep the minting overhead down.

There is no way you can prevent the counterfeiting of a physical stuff.  Unless it is based on a rare physical element.


Also, what do you mean exactly by "backing"?  Who would guarantee that your paper can be turned into bitcoins?  Banks?  States?

I have nothing against a private corporation guarantiing such a backing, based on its reputation.  But it would be fiat money.  I might use some but I'd prefer use a precious metal based money.

I'm maybe 3 days into learning about bitcoin and tbh don't even 100% understand it yet, but I can guarantee you that if I could buy physical currency I'd be handing it out by the dollar just for the novelty of it. I think it would be an awesome way to get people interested.

I totally agree!   

And I know several shop owners and small businesses that would begin accepting it immediately --- just on my word that I would redeem it for them.

Now....  I guess I need to research "minting" (printing) your own paper currency.

If I find a printing method that I'm convinced would work, I'll begin doing this tomorrow. 

And yes, it would be backed 100% in Bitcoin reserves, based on my personal reputation ...and the reputation that The Bitcoin Foundation not-for-profit would build.

It's not even a stretch.  No one knew Jed the day he launched MtGox.com

By the way...  Any thoughts on this item?

http://www.chrismartenson.com/forum/defendant-convicted-minting-his-own-currency/55031

Another case for using paper, I should think.

This story is just outrageous.   This guy has nothing to do in jail.

And yet I'm sure some rapists or murderers will go out of jail before he does.

hmmm...

what about this:

a little coin-shaped USB thumbdrive-type gadget, with just enough storage for a couple of blocks and an implementation of SHA-256?  and a tiny CPU of course.

you carry it around loaded with whatever - say, 100 BTC - on a part of your blockchain that has been reserved, or 'frozen', from participating in normal transactions.  but those blocks are known to be frozen across the network.  you give it to somebody, they plug it into their phone (or netbook or iPad) to verify that those frozen block(s) have adequate BTC for the transaction being contemplated.

then, once they've verified it against the blockchain residing on their device, you plug it into *your* device, authorize the transfer of X-number of BTC (which changes your frozen blockchain for later upload), they plug it back into their device and the transfer is completed.  their blockchain updates, removing the freeze from that quantity of BTC known to the network as having been frozen.  for somebody with whom you've established trust, the first step (them plugging it in to verify) could easily be eliminated.

cash!  ...and p2p off the internet.

Well yeah, or a smartcard.  That would be nice, but AFAIK, noone has ever compiled bitcoind for such a device.

BSD runs on *anything* - or so they're fond of saying...  :D

Those things are all coming.   

On Saturday, in fact.   

Basically, the Bitcoin for Android wallet app.  That will be (effectively) the same thing.

It will work off the network as well as on the network. 

But this proposal is all about the hyper - Low Tech.... paper money.

How can I find the best private company that can print me some of my own paper currency (or "credit receipts", technically)...?

What company prints those other private paper currencies, like BerkShares and Detroit Bucks, etc...?

straight paper can be counterfeited - in fact, so can gay paper.  :P

Bitcoin cannot be counterfeited.  and just about everybody on earth has a phone - soon, everybody will.  and integrating a tiny, purpose-based printer into a phone isn't terribly difficult.  they already exist.

all it has to print out is QR code.  there. that's your paper money:  little squares of print-on-demand QR code.

I don't think this would work with physical.  I mean you can do it and it might last for a century but in the end it will fail.  It failed with the gold and the goldsmiths.  Suppose there is a 100,000 bills backed by 100,000 there is no real way to verify the bitcoin and who owns them, thus you would be taking the banks word that the bitcoin backs the currency.  Sooner or later someone is going to cheat and the bitcoins won't be there.  Just ask FDR in 1933 or Nixon in 197X.  There is the moral hazzard no one is responsible, so what happens is the paper currency crashes.

But this is no problem, why not just trade real bitcoins in the future you could push a button and beam someone a bitcoin and it would not get your hands dirty.  bitcoin is far better than physical.  Assuming the whole system does not come down.

I personally think this is the best way forward. If we can create a cheap throwaway physical client, that would solve the "real-world bitcoin" problem in a way that should satisfy purists.

a physical coin is needed as a stepping stone or bridge to bring regular folks over to bitcoin.
a silver coin is the best possible way of doing this that has no dollar amount marked on it and should look exactly like the bit coin logo .
being 99.9 % fine silver of a certain weight could be exchanged at the market rate against any currency including bit coin and could not be counterfeit.
They would be valuable in there own right and a useful tool in marketing & advertizing to friends.
not necessarily designed to be spent in stores for coffee and the like, but definitely exchangeable and liquid enough to change into cash at any coin shop or pawn dealer..
i know that i for one would spend my electronic bit coin to buy them for investment purposes and as a second option of storing  my accumulated digital value.
silver minted coins always command a higher price than the spot or melt value and thats how the mint makes its profit. putting labor into raw silver and making a finished product.
we already have enough paper to trade, so use that to turn attention to bitcoin it,s quite simple.
instead of stamping www.bear-river-dollar.com right across it in red ink ,you stamp the bit coin website.
every time you spend cash you tell people about it.
when the bitcoin community has accumulated enough silver between them, we will be in a position to issue our own bitcoin plastic instead of mastercards and visas, as mastercard and visa will be wanting to rent your technology and not you renting theirs at point of sale.
only discovered bitcoin this week and putting links down here  www.bear-river-dollar.com

We don't need to bring "regular folks" to the network.  Screw them.

Bitcoin can be a perfectly valid currency without being accepted by the average Joe.   As long as we have efficient market exchanges, we don't need everyone to even know about bitcoins.

Bitcoin is not a religion nor a political movement.  We don't have to care if people don't like it.

I agree you don't need regular folks for a valid or successful network...regular folk need bitcoin !

An efficient market exchange will only be successful if it is useful, and the more people involved wanting to exchange the more useful it becomes to those people,and therefore the stronger the value..
   After all, market exchanges are all about speculation, betting on the rise or fall in those values and competing against other markets.
like it or not governments will get involved,labeling you a terrorist movement, tax evaders and criminals then you've become a political movement.

 If regular Joe is not educated you will care if bitcoin is portrayed in this way, an evil anarchist religion,  against his county and the so called freedom that he works hard for by paying taxes that fund the wars that are against his religion.

 So i believe we should care if people don,t like it .

 If we are to screw anyone, it should be the current system and those who control it ! 

Yes.  Exactly.  We care VERY much that Bitcoin become accepted, understood, and used... by the average Joe.   ....AS FAST AS POSSIBLE.

In the end, its common usage by everyone may be the only thing that saves it... from big governments and the big banks that own them.

http://www.documentsecurity.com/sp_documents.php

Here's what I'm thinking..... for a paper currency...
Printed on it could be.... what?
Besides a Bitcoin denomination --- like BTC 1, BTC 5, BTC 10, BTC 20, BTC 100.
A verifiable public key & owner.... so that anyone could verify that this key was still owned by this owner.... as long as this paper was in circulation ...?

To help prevent counterfeiting, there could be a predetermined expiration date... by which time it must be redeemed...?  At that time, old bills could be replaced with the
newest bills, with improved anti-counterfeiting features.

Obviously, real Bitcoin is superior to anything paper...  However ...

Paper Bitcoin is just a stepping stone for ordinary people to play with, handle, look at, and even shop with... on a small scale.  

Features I had considered printing on notes, besides denomination:

• a unique public key that can be verified to hold the amount on the note;
• enough contractual language to make the note a binding promise;
• a line/box on the reverse to actually write in an address you would like the note paid to, like depositing a check.

For a moment I got really fancy and considered having postage pre-paid so you could just drop the whole shebang in the mail, but I don't really think sending cash naked via USPS is a great idea, and I don't want to encourage it.

An expiration date was one of my suggestions earlier. It would be good for security, as you said, and the issuer could forego a minting/printing fee in hopes of turning a profit on unredeemed notes. But first of all it would be easy to pass off expired or nearly-expired notes to someone who wasn't looking too closely, and secondly I just don't like the smell of it. Stockpiling cash should be a feasible method of saving money.

What to do about small denominations (like less than one bitcoin)? There's no theoretical barrier to having a 0.05-bitcoin paper note, but it seems unusual. The terrible part is that hard tokens will cost more to produce, but it's the smaller denominations they'd be wanted for. No one will pay 0.55 for a 0.05 coin. Maybe cash could be sold in fixed bundles that include some number of "coins", and enough paper notes to offset the cost?

I still like the idea of using invisible ink notes. The issuer would have a public key and private key on every note. The public key would be visible but the private key would be invisible. You'd have to void the note to reveal the private key.

I'd prefer that the notes have expiration dates. It would help to prevent counterfeiting.

I'd trust the issuer most if it was a non-profit mutual bank or something similar.

Bruce, what you describe, with bills of credit expiring after a set date are very, very similar to an old concept known as "real bills" or "real bills of exchange", scroogle that ... and
http://en.wikipedia.org/wiki/Real_bills_doctrine
They were common when the gold standard was widespread and met there end around the same time the Federal Reserve system of banks was established. They worked well for many years before the centralised, mildly inflationary disease took over the minds of the intellectuals.

This may help in your thinking for the details of how your bills would work ... it may have all been done before already for you.

Isn't minting a physical currency what got liberty gold or whatever in trouble in the first place?


I'm inclined to agree, but with some caveats. Obviously, the more people using BTC the better - but I don't think that should come at the expense of jumping through hoops doing things like printing notes just to make them more comfortable with it (particularly if, like my assumption above, it opens the system up to action by governments).

The fractional reserve idea, the central-issuer idea, isn't that what people interested in BTC are trying to move away from?

Because of Bitcoin's technology, you can expect greater transparency from a bitcoin note issuer than you can from an issuer of notes that represent anything else. There's no block chain for gold.

moa, I followed your link and read, but I don't see the connection to what we're talking about. The real bill doctrine seems to be that, if a note is in principle payable on demand, then its issuer can issue as many notes as it wants as long as those notes are balanced by assets accrued.

An example would be if Big Bank Inc. promised to redeem its notes in bitcoin, and perhaps even kept some bitcoins on hand for redemption purposes, but also disbursed loans in note form without holding enough bitcoins to cover them. The bank would then book the loan itself as an asset. In case of a run, the bank would either call in accounts early, liquidate assets, or borrow against its accounts receivable.

This system works, sort of, but becomes unstable when the note/reserve ratio grows too high. The danger is simply that assets can be lost, particularly assets that are only accrued and not yet received. In the above example, some debtors will default and their loans will be written off, reducing the bank's assets while leaving its liabilities untouched. Charging interest on loans provides some protection against this, but given enough time the bank is quite likely to have a long run of bad luck and become insolvent.

Anyway, that's not the sort of thing I was planning. I'm interested in a 100% reserve kept safe by multiple offsite backups and strong encryption---the most mucking about I'd allow for is a sort of very short-term bond system wherein the bank might issue notes payable at the end of the month, and secure the bitcoins before then, in the interest of fixing very short-term liquidity problems. As long as this was stated up front on the notes I don't think it would be a serious problem.

As for expiration dates, you people are far more accepting of the idea than I would have guessed. Of course they'd have to be both prominently written and easy to predict---perhaps notes could be released in batches that expire at the end of a calendar year, with "VOID AFTER DECEMBER 2013" written in large print on the reverse. The revenue from unredeemed notes would easily make up the printing costs--if we assume each note costs 0.1 BTC to print, a single unredeemed 50 BTC note would cover the cost of 500 notes printed. Given the amount of cash destroyed in every year, not to mention the number of people who can't manage to mail in a $100 rebate form, issuing cash could be very profitable indeed.

I'm comfortable with expiration dates as long as I don't have to even contact the issuer to redeem the note. That's why I like having a private key hidden on each note and I'd have to void the note to read it.

I think you will discover the difference between commodities and currency.  BTC could crash at any time.  Silver will always be silver.  I think the 1 oz round is the official currency of the silver currency.   From that 1 oz you can convert to BTC at any time.  So you could make a 1 oz round with the bitcoin symbol, but instead of calling it 1 BTC, or 40 BTC, you call it 1 troy ounce.  Thus, there are no links and you could still trade the silver as silver.  However, you could make your own symbol if you like.

What's the point of putting 40 BTC on it?  Who will accept the coin and give you 40 BTC if 40 BTC is worth more?  Who will use the coin if it is worth more than 40 BTC? 

I say don't put 40 BTC on it, put 1 Troy Oz on it.  Silver should be its own currency in itself, with troy oz being the unit of exchange.   There never would have been the great depression if everyone used physical silver instead of using silver backed notes.  So you have 2 currencies, not competing currencies, operating at the same time.

To get paper currency from bitcoin, very simple method i believe is to have a software, which prints your SENDER address & amount in paper & give it to RECEIVER.
For acknowledgement, the receiver gives a print out with his received address & amount.
That software must be able to run on a very small device like cellphone.
The printer is debit/credit card receipt printer or even smaller one.

Another way , a software for cellphone which send the sender address & amount to any other(Receiver) cellphone number through SMS.

I somehow don't expect that a bitcoin-backed paper currency (even if 100% backed) will ever succeed.

However, I'll give it a go.  Let's start with one-time paper currency.  i.e. it is issued by some "bank" and, at it's first use, the paper is destroyed and the value it represents is received by the seller of goods.

First, we'll need some widespread smart-phone software which can recognise those two-dimensional barcodes (what are they called - QR codes, right?).  Next we'll need some double-layered paper, with the top layer being transparent.  Now, you send some bitcoins to a bitcoin address.  The private key, as a QR code, is printed on the lower layer of paper.  The address, also a QR code  (but a special one), is printed on the upper layer, directly on top of the lower QR code, but here's the cute bit: you're actually seeing a mix of both QR codes together.  So what you need, is that both QR codes, seen together, represent the public bitcoin address, but you can't tell which part of the pattern belongs to the which QR code.  You scan this with your smartphone, your smartphone checks out the bitcoin block explorer and verifies the value at that address.  You accept the paper as payment, tear off the top layer, scan in the private key and immediately transfer the bitcoins to your address.

Of course, as long as people are willing to trust that the issuing bank has either deleted all the private keys in these paper notes, or will not sneakily transfer the bitcoins out, then there's no actual need to tear off the top layer, and so, the note can be re-used.

Any good?

I had thought of notes that one could peel to reveal a private key and while also voiding the bill, kind of like those stickers on PlayStation 2's. But they require glue which one can defeat with heat. Now, if the note was designed such that one would have to tear it to redeem it, that would be the best way to go.

If the serial number on the paper is a public key then any client can verify that real bitcoins back up the paper. The key would have to own exactly the stated amount on the paper.

Any holder of paper can go back to the issuing institution and "transfer" the value to a new piece of paper with a new key on it. The holder can verify that the transaction went through on the real bitcoin side. This action would render any "duplicate" pieces of paper useless because if they now check their keys there is no value behind them. It would take a real juggling act for the issuing institution to keep any fraud from showing.

It wouldn't take too many people regularly checking their paper bitcoin to ensure the issuing institution is backing the paper with 100% real bitcoin.

This thread makes me realize how hard it is to understand that something is impossible.

To understand that something is possible, basically all you need is to imagine how it can be done.

But to understand that something is impossible, you need some deep understanding of the whole thing you are considering, and basically what you need is some kind of a mathematical proof.


That why I predict we'll always have people trying to design some physical instance of a bitcoin.

whatever you do Paper metal or digital your in for a bumpy ride as this is what all will be up against.

“Attempts to undermine the legitimate currency of this country are simply a unique form of domestic terrorism,” U.S. Attorney Tompkins said in announcing the verdict. “While these forms of anti-government activities do not involve violence, they are every bit as insidious and represent a clear and present danger to the economic stability of this country,” she added. “We are determined to meet these threats through infiltration, disruption, and dismantling of organizations which seek to challenge the legitimacy of our democratic form of government.”

 The way to make anything possible is to have 100% backing of the people. !

Is there really an invisible ink that lasts forever (or for years at least) and absolutely cannot be revealed by any method that doesn't render it permanently visible? If so, I suppose that works. The issuer wouldn't even need to retain his own ability to access deposits, if he was willing to let some bitcoins be potentially lost forever. If not, then the idea doesn't work, no matter how cool it would be.

I'm wary of any attempt to make notes self-redeeming, because it is basically DRM---you are giving out the keys to the vault in an obscured form, so that people can only use them in the way you would like. We all know how well this has worked for software and movies. I'm smart enough to know I'm not the smartest man on the planet---and whatever scheme I come up with for hiding private keys, one of those smarter men will find a way to reveal them without voiding the note. If he's smart enough to keep his mouth shut, he could do this for years before anyone even notices there's a problem. It would be negligent of me as a guardian of deposits to leave them vulnerable like that.

Anyway, here's a proposal: If I attend the upcoming conference, I can design and print some notes for use there. No expensive high-security mechanisms, unless someone else wants to foot the bill---copy-proof paper and my personal signature will suffice. I'll keep the design secret until the conference itself, and require redemption within a week or two, so there's no opportunity to counterfeit. The idea will be to use them at the conference itself and cash in before leaving, with a short grace period in case you forget. I'll eat the cost of printing---consider it market research.

@SunAvatar, I like you....   You have an uncommon amount of common sense. 

I've been told, just today, of the details of another project that I've been asked to keep quiet for now.     But I can tell you....  Lots of exciting projects are popping up like weeds!   Great new products, apps, and services are coming out of the woodwork!

Also...   I contacted the number one security paper manufacturing company in the US this morning.   The guy already knew all about Bitcoin... and is very enthusiastic about helping us with this project!   

He is Fedex-ing samples to me which I'll have by tomorrow morning. 

After TIT (thinking it through) more...   I believe that such a paper currency would PRIMARILY be used as a novel way to introduce new people to Bitcoin. 

Sort of like handing out business cards that have inherent value.

I'll keep you all informed here in this thread... and on the new weekly "The Bitcoin Show" on http://OnlyOneTV.com

But I'm beginning to think that we might have (at LEAST one) "working version" of the Paper Bitcoin in time for the Bitcoin Conference & World Expo in NYC. 

So this would be a bitcoin "check" or giftcard that anyone could clear.  Great for a one time usage scenario.  I promote bitcoin by handing out bitcoin "checks" with 5BTC on them.  And once redeemed they would be valueless and useless.

In theory you could pass on the "check" without actually redeeming it, but this would be dangerous as you wouldn't know if anyone up stream had copied the private key on the check.  Nor is there a guarantee that the check issuer did not retain a copy of the private key.

This is not the same as a physical bitcoin backed currency.

Ooh,  I just thought of something.  Public key hardened checks.  I write you a check and sign the amount over to your public key.  The bank only clears the check if you can sign a deposit slip with the corresponding private key.  Maybe too much work for a system not generally regarded as broken.

Plastic casino chip like tokens would work well too, and could use RFID tags inbedded into the plastic to hold the public key.  And even the private key could be micro-etched onto a thin piece of metal imbedded into the plastic, so that the holder of the plastic token could tear it apart to get at the private key.

The only risk is that the issuer might assign a certain amount of bitcoins to more than one bill.

I'm confident that a concerted engineering effort will yield a secure, redeemable bitcoin note whether or not it employs invisible ink.

It's not DRM because the holder of the note because beyond what would be a simple process of redeeming the note, the users would have the bitcoins in electronic form with which to do whatever they want.

That's why the issuer would recall the notes on a scheduled basis and issue new ones with different technology. Cheaters wouldn't be able to keep up.

Paper currency has its vulnerabilities, but it has its benefits too. Some might find that the latter outweighs the former.

A strip of mylar would probably due. Makes me think of fortune cookies.

Or like those scratch and win Instant Lotto cards or some mobile recharge cars ... underneath is the address that contains the denomination of BTC printed on the front. While the scratch is intact it is tradeable.

Yes, it is not clear from the Wiki how Real Bills would be related to this ... here is a better link. There was a big controversy in academic economic circles about it .... credit money, like BTC, lends itself naturally to true real bills of exchange.
http://www.thedailybell.com/1237/Real-Bills-Revisited.html

A single-piece plastic token containing a private key inside.... good idea! They'd still have to be hard to counterfeit, so that you'd know the token really was issued by a trustworthy source (else you might be unpleasantly surprised when you try to break the token open and redeem it).

Another low-cost idea: those security mailers that are used to send out debit card PINs and the like. Put a private address inside, or a QR code for a transaction. Making this simple enough for an average user might require some additions to the client software, but the average user would probably be satisfied bringing the note to a local bank or computer-savvy friend.

No high technology is needed to encode the private key---a simple text printout is good enough.

I point out that I'm still nervous about these ideas. Speaking for myself as a potential guarantor, if I'm going to be held responsible for other peoples' bitcoins, I want to be in control of how they leave my possession. If I issue self-redeeming notes I will have to disclaim responsibility for missing deposits.

Which is why I mentioned an RFID chip as well, which could contain the address that the private key (keypair) hidden inside refers to.  So anyone with an RFID reader could check the address against a blockchain to see if the address still had the coins.

I'm trying to count how many people I know who carry around an RFID reader....  :)

These ideas are great...  Very creative...  And very technical....

I was looking for a much simpler idea though.   Like a simple handwritten IOU.    ....backed by Bitcoin.

Paper is fine.   With an expiration date, and small denominations...., so that it's not practical, nor profitable enough, to interest counterfeiters.

As I said, I don't see such a form of "currency" being used in commerce really.   I see it used at cocktail parties and brunches...  where, when the topic of Bitcoin comes up, a person can pull one out of his wallet..... and say, "Here... Let me pay for lunch.  This is a 20 Bitcoin note."

.....and the note itself would contain printed instructions on how to redeem it.... including the web site to go to to learn all the details about Bitcoin.

.....thus being a convenient way to gift a few Bitcoins to someone... at the same time as you are informing them about what Bitcoin is.

Like a simple Bitcoin "business card"... that happens to have real value built-in to it.

Each printed batch could expire after 1 year, or 3 years, or 5 years (which would make sense?)...   Prominently on the front it should say, "This certificate expires on January 1, 2014" ....explaining that it must be redeemed for real Bitcoins, or replaced with a new certificate, prior to that date.

They could come in only one  denomination:     1 Bitcoin

....or two denominations:     1 Bitcoin     and     10 Bitcoins

....or three denominations:     1 Bitcoin     and     10 Bitcoins     and     20 Bitcoins

They could be purchased for their face value, and redeemed at any time for their face value.

Once Bitcoin has become so mainstream... and everyone on Earth has a Bitcoin smartphone app or the equivalent...  the Paper Bitcoin will no longer be needed, and they can stop being issued.... They can all simply be redeemed as they come in... until there are no more.   It can end naturally, from attrition.

From what I understand, such paper certificates printed on custom-designed security paper could cost as little as 25 cents each to print (and up... depending on how many "layers of security you want to include in the printing process).

For that matter, if we spent $0.25 per item for the 1 Bitcoin denomination paper....   At the same ratio of cost/value...  we could spend $2.50 per item for the 10 Bitcoin denomination paper....  And $5.00 per item for the 20 Bitcoin paper...    if that makes sense to do.

I'll be doing something like that for the event I'm planning next week (See: http://bitcointalk.org/index.php?topic=6202.0)

I like the idea of physical Bitcoins, but I think paper isn't going to be very feasible. No matter what system you come up with to try to secure the keys, someone will find a way around it. It is like DRM in a sense: you're trying to stop "the bad guy" from copying information (the private key), while still letting "the good guy" access it. Difference is instead of "the bad guy" being someone who wants to copy music they paid for, it's someone who wants to copy a key before passing now-useless cash on to some poor sap.
Never underestimate the resources, smarts, and time crooks have to dedicate to their work, especially when it involves essentially stealing money (from the sucker they pass the bill to after copying it). There are a few of us and thousands of them who'd love to be able to give themselves free money.
That's not to say I don't think we should even consider some kind of physical/printed currency. I just don't think it'll be as simple to prevent fraud as some seem to think.

What I think would be more feasible and useful is using SD cards and USB sticks as coins and wallets. These days you can get 32GB of each for under $100. For use as coins you'd want not one large card but many small ones (even 1MB should be plenty) - probably everyone has a few laying around, and for such small sizes I'd imagine they'd cost only a few cents each.

For coins, you'd put a private key (or a few) on a card and hand it out. To redeem the coin you put it into your PC and copy the key into your client. SD cards are roughly the size of a coin and just about everyone has a reader for them (and if not they're cheap and have many uses) so this works nicely. MicroSD is a bit small (easily lost) but has some advantages like being usable in modern phones; keeping them in the plastic case they come in could help with the size issue.

For wallets, you'd put a few coins into a wallet file stored on a USB stick. You could hand those out too (like "bills", being physically larger than SD cards) or use them like a bank card - put the stick in, transfer a few coins.

Advantages of this are that you'd be using ordinary SD cards and USB sticks, that are too small in capacity to be of much other use, can be "refilled", and can hold other data besides just the coins. So you could include some notes or media with a payment. For example when paying your bills, just send in a card/stick containing the balance and a text file holding your account number. (Granted if you can pay bills in bitcoins, you'd probably do so over the Internet, but anyway...)

Obvious problems:
1) People can still easily copy the coins and then hand them out again.
2) A merchant can copy your entire wallet when you put the USB stick in to pay.
3) While small-capacity cards would presumably be cheap, nobody sells them anymore.
4) Being given an SD card or USB stick, you have no way to know if it even has any coins on it.

#3 I think is the big thing here. While you can walk into your favourite overpriced electronics store and buy a 32GB card for not much, you can't buy 32768 1MB cards at all. Nobody makes 1MB cards anymore.
What you'd have to do is start up a small business selling small cards/sticks for just this purpose. I imagine you could convince a manufacturer in Asia to make you a few thousand small ones for not too much, which could even be stamped with the Bitcoin logo. You earn back the cost by starting up an exchange; someone sends you some amount of money (plus a few cents to cover the cost of the card and postage), you send back a card with that amount on it.

Now, if you already have these cards being manufactured for you, you can go on to add some security features. Say, reading the card destroys it, or the card comes encased in something similar to their plastic cases which must be destroyed to get at the card itself (so you know a card not in such a case is no longer valid). Those ideas kill reusability, but I'm not coming up with any ideas that don't. Ultimately they'd be more like checks than coins, and nothing stops someone from writing you a bum check either.

For "wallet" USB sticks, the most secure thing to do would just be to keep only a little in it at a time, so that anyone who copies it won't get much. Of course that isn't very convenient. What you might have is a stick that unfolds to expose a simple numeric display and keypad, where you type in a balance, then press OK, and it allows only that much to be taken out. One way to do this would be to make "change" - store several keys worth 0.5BTC, 1BTC, 5BTC, etc, and it passes on to the reader only enough keys to make that balance (rounding up if necessary), just like you'd give a cashier only enough coins to make the balance (but if you don't have any pennies maybe giving a nickel to cover the last 3 cents).
Having such intelligence in the stick itself would of course increase its cost, but you'd only need one - you wouldn't be handing these out to people like you would with coins; they'd function more like a bank card.
You could eliminate the need for a lot of complexity in the design by just having it emulate an ordinary removable disk, with one partition where you can store files like any ordinary disk, and one reserved for the coin keys. When you hit OK, the appropriate keys are readable from the raw partition (no filesystem) and removed from memory on read. Writing a program to handle this on a PC would be dead simple. The device could also be powered by the USB port itself, reducing a lot of physical complexity.


I think no matter what you do, it's going to be somewhere between difficult and impossible to make physical bitcoins that don't carry the risk that they've already been digitally spent (or if you use SD cards, that they don't actually contain coins at all). It boils down to being given an object which is said to have value, but which becomes worthless through an action that can be done without physical access to the object. You have to trust that they won't do that, because there's really not much you can do to prevent it. I also think the future of Bitcoin for in-person transactions is in smartphone apps, not distributable tokens. But if you could make tokens and smart USB sticks work, that'd be pretty damn cool. :P

Unless there was some security built into the paper system, I would never accept it, *except* if I was accepting it from the (trusted) issuer.  Even if my most excellent trusted friend tried to give me one, I wouldn't accept it because, even though he's acting in good faith, the note might have already been cashed in (or copied, whatever) by some nasty previous holder.  Also, I wouldn't accept a token that couldn't be automatically redeemed - otherwise the other party to my transaction could give me the token, I'd check the (visible) address to see that it was still valuable, but then the other party could redeem it, from a copy, after 10 minutes.  I'd want to secure the funds in my own wallet immediately - for me, that's what the transaction is: putting funds into my wallet.

The token must be visibly destroyed for redemption.  But you can always check that the coins haven't been spent by checking the visible address against the blockchain.  So any attacker only has time to cheat you from the moment you accept the token to the time you try to redeem it.  This time should be made as short as possible, therefore, automatically redeemable tokens, NOT requiring you to return them to the issuer.

Just for the record...

My concept would NOT involve Bitcoin keys at all.  It would simply involve a paper currency on high-security paper (or similar material) with lots of anti-counterfeiting security built-in --- very similar to the drivers license in your wallet.... or the vehicle registration in your glove box.... or the state ID card...  or the dollar bill in your wallet.

It would have a serial number, but no Bitcoin data.    It would be denominated in Bitcoin, and it would be backed 100% by Bitcoin.    But it would require NO computer or electronics at all.    It could be passed hand to hand...   and redeemed at any time for real Bitcoin....  by the issuer.

Obviously, this would only work with a "trusted issuer".

However, depending on who the issuer is....  I think I'd rather trust ONE single "trusted issuer"...  than trust every person who handles the paper.

With this simple system, there's no way of defrauding it ---- except through counterfeiting.   This drastically reduces the risk.   It also moves more of the risk over to the issuer.

With high security forms of printing, etching, etc., etc. in use today (just look closely at your passport), the risk of counterfeiting can be reduced to almost nothing.   Especially when combined with a reasonable expiration date..... and low denominations....   and the fact that most of this currency would remain within the Bitcoin-promoting community.   It won't be very widespread use.    The potential profit a counterfeiter could make would be so small that it wouldn't really be worth his time.   It would be like breaking in to your house to steal a donut and a glass of milk.

[ Alternatively, they could be made for single-use.... like Travelers Checks.   The purchaser could buy one, sign it on one line.   Then, when paying someone, he could sign it again on another line.   The unique code number could even be "called in" over the telephone to verify it's validity... and to verify that it has not been used before (much like a Groupon coupon).   You can print as many copies of a Groupon coupon as you want, but the unique code on it can only be used ONCE.   After it has been used, it is void from then on, and it's payable only to the first claimant.    With such a system, the code numbers on the "coupon" must be kept secret (like a password), and they can only be used for one transaction, and with this method... there's now the added overhead of a "call center" infrastructure... needed to give verifications. ]

I still think the best way is the simplest.    A paper "receipt" for 1 Bitcoin or 10 Bitcoins or 20 Bitcoins.....  simply backed for its face value by the trusted issuer....  and that's it.

I guess the problem is...   After being burned by so many central banks throughout history...  Do we trust ANYONE with that control?

As for the hidden private key forms of a currency, I think there are several in development already...  So I have no doubt that that concept will be readily available soon.

I'd like to see the "paper currency" that operates independently of the Bitcoin network, yet is backed 100% by Bitcoin.... become available as an option too.   Not everyone in the world has a computer.   And even among those that do, not everyone understands the first thing about a "private key" or a "block chain"... much less how to verify the ownership of specific Bitcoins based on that data.   I don't even know how to do that.    I'm looking for an alternative that would also work for the common man on the street, who may not even have a computer or a smartphone....  But he may wanna "buy some Bitcoins" because he heard that the price is going up!    .....or whatever.

In the end everyone is used to spend money with plastic cards. Implementing Bitcoin on top of a smartcard should be possible. Just put the key pair on it and implement a signing action. You'd have to trust the card reader to display the correct amount they will take from the card ... but hey ... you do this today and all the time.

Limited edition high quality printings may well continue to have numismatic value even after the BTC represented are redeemed.

Just think of first edition superman comics .... first ever anything that does not die out only gains in value, enhanced by rarity over time. It's all money in the end.

True...
Very interesting.
Well, the samples should be arriving here via FedEx within about 4 hours....
I'll let you know....

PS - "The Bitcoin Show" is now available on OnlyOneTV.com | global television network http://goo.gl/wBdBi

The technology of the  bit coin system is in place already ! To be secure against counterfeiting,and inflation by the fed,it cant be taxed and you don't have to tust anyone that you do not know because it must be genuine to be in the system..  To make bit coins in to something physical to be spent in any shop is the same as taking your bitcoins out of the  secure system and converting them into cash or converting them onto your credit card.
that system is already in place !

The only problem with that side of the system in the outside world is that it is controlled by the banksters and not the bit coin community ( the people )

The the only useful purpose  physical bit coin could have, would be to  introduce others and get them to use it.   Use it directly with other bitcoin users going around the banksters controlled system that we have.

if a local store owner accepts it a payment he will not need to use the visa /matercard reader to take payment, therefore avoiding the outrages charges of the banks,....  is this not the point of bit coin ?

 Having a fair and just system .. money for the people controlled by the people .?

what bruce was saying about keeping it simple.... , like writing a simple i owe you works , but a fancy printed iou used as an advertizing tool for bit coin could be much better.

They should be considered to have no value once outside the system, the only value they should have in them is what you personaly attach to it when you hand it over.
For example:

  here is a token or note that i owe you a certain value... introduce the person to this new system.
     Once they are on the system you keep your promise and pay in any currency you like on any system they choose.. hopefully bitcoin and become another member of the community.

when the people accept bit coin as payment, control of the system by banksters will start to weaken and slip while the bitcoin community grows stronger and develops their own  technology to create there own bit coin readers at point of sale.

It,s all about who has control, the many or the few !.

I think that whatever physical systems of bitcoin that are developed, they should all bear this in mind.
 as whoever controls the system control's you.

those in control would love to see us all paying with bitcoin if they still have control of the charges you will incur every time you use your card or phone to buy anything. They are probably pushing for this also.. what a great one world currency !

You think it - you build it - you maintain it - they sell it - you lose !


     

Bitcoins are already physical in the sense that wallet.dat is vulnerable to loss or theft.

The moment Bitcoin gets physical, it will become vulnerable. Any physical form needs some one to create & it is HARDWARE.
Satoshi Nakamoto, now Gavin working on SOFTWARE. Since software, he create & then everyone copies it.
Hardware or physical has to be created every single piece. Then some one will have to create & that some one WILL CONTROL.
So far, the trust worthy person in bitcoin is Gavin & he can't create any physical form of bitcoin ALONE.
If he adds friends/trust people with himself to create physical, there is NO guarantee that friends/trust people will be always trusty.
If they take control from Gavin then bitcoin will be ruled by some one, like bank, not by people.

Anything wrong in my post?
suddenly everyone silent.

Nothing wrong with the post, I just don't see much to respond to in it. There will be some vulnerabilities with paper notes, just like there are with, say, checks---but most people decide that the convenience makes up for the risk.

Is anyone planning on buying or selling wares for bitcoins at the conference in August? If so, I have some ideas for a sort of "clearing house" that would make this easier.

So Bruce, did you ever get those samples? Were they samples of bitcoin notes or only of the paper they might be printed on?

They sent me samples of security paper.

I am still thinking of printing paper bitcoin.....   But simply......    Public and Private Key Pairs.... on paper.....   for offline Bitcoin dry storage.

 ;D
http://db.tt/ECzsKds

problem with any central bank issuing paper bitcoins is the trust that the bank is actually securely deleting/forgetting the private keys when they issue you currency.  For this to work there would have to be trust, beyond that it's easy for anyone to print a private key on a piece of paper.  In fact, I gave a friend of mine a bitcoin on paper exactly this way (here (https://i.imgur.com/UdQ5a.png))...

Not sure why this thread was necroed btw...

Will

+1
Just print a private key as a "redeem code" and use the public key as the address where to send the coins. Simple and easy yet elegant.
Would be perfect if dialogs (generate/print private key and redeem) were added to the official client.
See also https://bitcointalk.org/index.php?topic=35905.0 (https://bitcointalk.org/index.php?topic=35905.0)
Once there is a bounty site we can create/join such a proposal. Hopefully we can convince the devs to add this.

I plan on starting a digital voucher system backed by bitcoins
suitable for both online and offline usage in the very near future.