Bitcoin Forum

Is it possible to do government-backed currency mirroring on blockchain, so that it will at some point be possible to trade with USD on blockchain?

There is something like that called USDT(US Dollar Tether) but I don't think it's on the blockchain.
'Mirroring USD on Blockchain" could translate to government giving off control of USD to a decentralized system.. I strongly doubt the government would like the idea.

If a government-backed coin comes out at some point it will be as useless as fiat. There will be no limited supply and you'll always need to be increasing your stock pile just to keep up with inflation. Also they could just return payments. Is that even considered a blockchain at that point!?

Yes, it might not happen that way. The government may adopt some features of the blockchain technology and come up with heir own digital currency but it will never be decentralized as the government may not like to lose any controls. This is actually one of the many factors why some governments can be wary of Bitcoin as anything can happen with this cryptocurrency...it can extremely surge one day and then suffer a great downturn the next day and remember that governments love to do many interventions from time to time.

Absolutely it's possible and it's called DLT or private blockchains. Some countries have already created their own cryptocurrencies, but they will never have the security Bitcoin has.

We have to distinguish different use cases a blockchain technology is adequate for:

The whole crypto currency technology is based on a consensus protocol (all the nodes do agree on a ledger). Obviously, it can lead to both public and private chains to keep track of transactions.

Traditional banks can use it as a core banking transaction processing system instead of their current saving/retrieval infrastructure which is highly vulnerable to single point of failure and forgery threats, (there exists a lot of projects in different stages with this application in mind) and there will be no need to publish a new currency (just use the same unit of price, conveniently). In this scenario, privately owned, 'somewhat' trusted nodes, reach to the consensus state very easily and in a cheap and fast way.

For the public chains, the consensus protocol needs to be costly to participate (otherwise what stops hackers to issue malicious statements about what is legit or not?) and so you have to be prepared for a reward system to redeem the costs and even more. This is how we end to genesis, 'creating' and publishing a new money (BTC, ETH, XMR, ... ). Eliminating genesis, (when you want a government backed currency, you should forget about genesis, shouldn't you?) forces us to increase the transaction fees, which is not in favor of the people who decide about the transaction processing infrastructure of choice, ultimately.

But, as guys have mentioned earlier, we have success stories for one or two pegged currencies running on the top of public blockchains and do not publish a new coin by genesis mechanism and stick to the fiat currencies, these are 'pegged' currencies (pegged to USD , EUR, ... ).

For instance, Teher is doing well right now,  take a look at their white paper here: https://tether.to/wp-content/uploads/2016/06/TetherWhitePaper.pdf