The purpose of this post is to release a business strategy / organization to public domain such that no one can patent it in the future.  If this idea has already been conceived and/or patented, please consider the good to the world of releasing it.  Most certainly all the bits and pieces for this already exist on this forum.  This is simply my digestion of it all.  Please do feel free to take credit for being the 1st to think of any of this.

This proposal is to re-purpose a cheap copy of Bitcoin, MOON coin for example, to act as a Certificate Authority for forming trusted client/host connections.

****************************************************************************

Node A wants to talk to Node B, privately.  Since they can’t see each other, how does Node A even know it is really talking to “the” Node B?

Task:  Emulate a Certificate Authority in a distributed network.

Step I -- Determine identity -- that Node B is who it says it is.

Suppose that Node A and Node B are already established members of a larger network of computers.  They have other nodes with which they have securely transferred public keys.  Let’s say Node A has secured communications with Nodes D,E,F,G,H … X,Y,Z.  And Node B is also a trusted member, and can securely communicate individually with Nodes D thru Z ... even if only by a few degrees of separation. 

Node A can randomly pick 4 other nodes D,E,F,G and assemble a data packet where it encrypts a random number with D’s pubKey … say 149.  Then Node A can encrypt another random number with E’s pubKey … say 832 … and so on for Node F and Node G.  Finally, Node A can pack all that together, add another random number (141) and encrypt the whole packet with Node B’s pubKey and then broadcast the packet to Node B.

In order to accomplish this, Node A does need access to a reliable copy of a DataBase file that contains everyone’s Node address (ex: E,F,G) and a corresponding pubKey.  It would be important that Node A knows that the DB file was not tampered with … what better way to do that than to secure the information within an existing coin network … say MOON coin … since they are cheap.

On to Node B

Once Node B receives the packet, it decrypts the packet as only it can with its private key.  It sees 141, but all the rest of the packet it sees as a blob of encrypted gooe.  To prove to that it can read the 141, it posts a MOON coin transaction for 141 MOON (or whatever is least amount -- must also account for fees).  Node A can block explore MOON coin transactions to see if the right MOON address posted the correct amount.

Step 2 -- Prove you are who you say you are … and that other people trust you

Now, Node B must also prove that it is a trusted member of the network.  Never is the information broadcast about who the other four nodes are.   The packet must now get broadcast through the network securely.  So, B, if it is a trusted member of the network, must have a secure connection with several other nodes already … Say X is one of them.  Node B will use a key pair it already has established with X to encrypt the packet … and X won’t pay any attention to such a packet unless it comes from an established trusted source.

Node X

Once Node X receives the packet, it first decrypts the whole thing with the private key that it uses specifically to communicate with B.  Then it tries to decrypt the interior sections of the packet with its private key that goes with its posted pubKey.  Nothing works, so Node X knows that packet was not intended for it, so it forwards it off to its trusted connections.  (of course there needs to be code to limit how many times this happens).   Say, Node D is one of X’s buds.   Node X encrypts the whole packet with a ‘semi-private’ pubKey it only shares with D and forwards it along.

Node D

Once Node D receives the packet, it first decrypts the whole thing with the private key that it uses specifically with X.  Then it finds that it can also decrypt the number 149 (from above).  So then, Node D posts a transaction for 149 MOON coins.

Process repeats until all intended nodes get a look at the packet from a trusted source and post MOON coin transactions (between 2 MOON accounts that each node controls incidentally).

Node A

After it checks that all 5 transactions have posted to the MOON blockchain, it knows that it is indeed talking to Node B, and that Node B is a trusted member of the Network.  Node B could perform a similar check on Node A and then they can negotiate the swapping of keys as needed through their common trusted connections, and form a new, private, and trusted connection between nodes A and B.


Vulnerabilities anyone?

...besides 51% attack on the MOON blockchain

Could this be a revenue model for alt-coins … to double as Certificate Authorities for distributed networks?

 If not MOON, then it should be easy to recycle some cheap copy of Bitcoin for the task of maintaining this list - design it not to save every transaction, just a running list of the latest transactions ... nodes could frequently update their pubKeys and post them as transaction labels in the blockchain.

Interested

isn't it awesome that there are so many possibilities with crypto-currencies, that there aren't enough people who "get it" to go around.

Yes, XRP and VEN ... but then I haven't seen either of them available on any of the sites that i would need them on.  So, i'm just wondering what's up? Why hasn't this void been filled on some of these sites?  Is there some way to tweak the XRP or VEN model to make that solution (a safe harbour coin for day-traders) more accessible to the masses?

exchanges.

The purpose of this post is to release a business strategy / organization to public domain such that no one can patent it in the future.  If this idea has already been conceived and/or patented, please consider the good to the world of releasing it.  Most certainly all the bits and pieces for this already exist on this forum.  This is simply my digestion of it all.  Please do feel free to take credit for being the 1st to think of any of this.

This proposal is to create a digital token who's value can be backed by classical investment options (ex. physical gold) without central ownership of the digital currency itself, and using existing legal structures, technologies, and business partnership arrangements.  Good for anyone to employ a lawyer for legal approval before attempting this business model however.

The need for this type of coin is seen when, for example, Bitcoin falls drastically in daily trading.  Nearly all other coins fall with BTC.  This leaves traders on sites with no fiat currency option at an extreme disadvantage.  They must withdraw from one account, deposit to another site, and then wait for that deposit to show up.  As we all know, on a busy day, the time involved for all of that to happen costs traders money.

A successfully implemented "asset-backed" virtual currency that is not centrally managed would solve this problem for traders.  The purpose of this coin is to be a tool for short term traders and not as an investment in the backing assets -- there would, as yet, be no legal obligation that owners of the tokens would have on the backing assets.


Ingredients:

1. An asset managing partner corporation --- "Manager LLC"
2. An asset holding limited partnership company ---"Asset Partners LP"
3. Investors
4. Digital currency "only" exchange ... this process should work even on a distributed 'un-owned' exchange.
5. Commercial accounts and trading relationships on exchanges that are currently linked for trade in fiat currency.
6. Trade-bots to handle balancing accounts between exchanges
7. A target "asset-backed-token" which is designed to behave like cash when trading against bitcoins; but that is also freely spent 'off' exchange like any other digital currency.


Setup:

The investors buy shares of "Asset Partners LP".  The money is used to form an investment fund which can derive its value from any investment like stocks, bonds, metals, futures, fiat currencies, or derivatives.  The money must also be used to buy up a controlling share of a digital currency -- or use a pre-mined coin.  ****This is the one step many will disagree with most.  If anyone has ideas on how to avoid this, please do share.****

The investors have legal claim to the assets purchased with their money just the same as in any other limited partnership.  There would be a prospectus in place to guide what percentage various assets shall be held.  For example, the prospectus could read: Asset Partners LP shall maintain a value in copper futures which is between 80 and 90 percent of the total value of all assets.

"Manager LLC" shall have no stake in the "Asset Partners LP"; but shall be authorized to manage the assets for a fee and keep all assets within the ranges specified in the prospectus.  This includes management of the corresponding target "asset-backed-token"(ABT).  The tokens will be multi-encrypted such that no single party is authorized or capable of releasing coins outside the guidelines set in the prospectus.

A trade-bot, managed by "Manager LLC", will act as a market maker for the "asset-backed-token"(ABT)/BTC trade pair on any exchange where there is no fiat currency option.

Another trade-bot, managed by "Manager LLC", will counteract exposure to the daily volatility of USD/BTC by executing mirroring trades on a trading site that supports fiat exchange.  Essentially, the trade-bots are providing instant pass through to fiat, while traders simply carry out an ABT/BTC trade on-site.

To support daily volume, large cash and BTC balances must be maintained on the trading sites that support fiat.  As well, large balances of ABT and BTC shall be maintained on the non-fiat exchange.


Operation:

Trading will follow normal stock market schedule.  At open, "Manager LLC" will asses the value of "Asset Partners LP" portfolio, the current bid and offer prices on the order book, and that day's market outlook.  A price point will be set for the open and pegged to USD at an amount such that the entire balance of the ABT could be purchased with the assets held by "Asset Partners LP".

Traders can trade freely within the bounds set by the market maker bot.  If the bot does process an order to sell ABT for BTC, it would simultaneously sell BTC for USD on the other exchange.  Similarly, if the bot processes an order to buy ABT for BTC, it would simultaneously buy BTC for USD on the other exchange.

At market close, the BTC balances will be equalized between the exchanges.  If there are net sales of ABT, and a surplus of BTC, then the extra BTC will be used to buy more hard assets.  Then the price point of ABT can be adjusted upwards since there is more value backing it.  If there are net purchases of ABT, and a shortage of BTC, then assets will be sold to replenish the BTC levels.  ABT/BTC price would be adjusted downwards since there would be less backing assets.


Analysis:

How is this good for everyone involved?

traders - have a quick flight to cash option in an all digital currency world.

investors - as trust builds in the target ABT, its value will grow and allow for the purchase of larger and larger asset reserves, which the investors ultimately own.

exchanges - increased volume and trading fees

manager - management fees


Risks:

poor fund management/performance - clearly if copper futures fall drastically, and 80% of the funds were invested in copper futures, no one would be happy.  A good manager, an established fund strategy, and diversity of investment are all important.

any threat to the assets - legal or otherwise (disagreement among investors)  Good protocols for decision making and outlines of exactly when funds can be withdrawn must be drafted clearly from the beginning.  The pool of investors should be large enough that the system does not depend on any single entity.

complete failure of digital currency eco-system - investors would likely abandon their obligation to back ABT.  Realistically however, this is no different than being a retail investor in a typical stock.  If the company goes bust, common shareholders get left out.  As legal status of digital currencies becomes established, there could possibly be a way to legally link ownership of the ABT to the assets held by the limited partnership.

I will see you there, sir.

snVjNHQcPA6qTdN7mYHpJBQkSsxD1

what really matters in crypto-currency world is who benefits from 1. Adoption 2. Economic Growth 3. Productivity Increases.

Ever since the Federal Reserve and their "price stability" directive, all fiat currency value increases from Economic growth and Productivity increases have been soaked up by governments (via issuance of new currency).

So, this is why I don't like ripple ... Like the Federal Reserve are with fiat currencies, the Ripple managers are set up to benefit from 1. Adoption of XRP 2. Economic Growth in XRP usage and 3. Productivity increases (which tend to deflate prices relative to an un-managed currency).

The beauty of Bitcoin and other decentralized, limited supply crypto-currencies, is that the holders and participants of economies built up around these currencies are the primary benefactors of 1. 2. and 3. mentioned above.

Besides, there will be natural price stabilizing forces in the crypto currency world such that xrp is not needed.  When the value of currencies rise too high, there will be high demand for Alternate crypto-currencies (ltc, ftc, nmc, cnc, trc, etc.)  When value of crypto currencies wanes, the less popular/functional alts will die off.   We don't need a centralized market maker trying to provide price stability ... that will come as the crypto-economy matures.

I want to build a trading site, and I've thought a little about the best way to store clients' crypto-funds.  What if you provided your clients with an encrypted private key to their onsite wallet?  Then even if your site goes down, they can recover their funds with their own wallet.dat file plus their PW to unlock it.  The only funds that would not exist in their own wallet would be what you have in escrow on your site for open orders in queue.

wow, this is awesome

Did y'all notice that Austin has more people who have joined the meetup than for other US cities?  Maybe others are using a different venue to organize, but I'm still impressed with my town.  Austinites are with it!

Thanks everyone!!!! ... I didn't realize that other chains of Bitcoin were already starting to have success until I joined this discussion and saw there were so many other cryptos already.  Then I researched it and found Litecoin in the nick of time ... it doubled last night into this morning!!! Yaayyyyy

Wow, if you haven't tried it yet, BTC-e.com is a sweet site for trading BTC and LTC (litecoin).  It's a great hedge on BTC drops.  Whenever there is a selloff on mtgox BTC/USD ... you actually have time to react and sell any LTC you've accumulated for BTC.  Then, you just buy back some LTC when ever things settle back to normal.  Sometimes when BTC surges, then you can get a good deal on LTC to do it all again.   I'm just dabbling, but I earned 11 BTC trading like this last week.




"The only tweak I'd love to see would be a massive increase in block generation rate. I want lower difficulty, more blocks (like one ever 30 seconds or per min), the linking of transaction fees to both 'size of tx' and 'difficulty' along with an proportional decrease in the block reward. IMO this has to happen soon and really should be the focus of the devs (or at the very least the foundation) for the simple fact that if we can't service potential transactions we're placing a very real barrier to adoption. I'd love to see 10 confirmations take only 5 mins - lets really focus on exploiting the tech available instead of just saying "it's already way faster than a wire transfer' - because what we really need is for a vendor to be able to take a payment a point of sale - wait 30 seconds and know that it's paid."

I agree completely...

Have you looked at Litecoin yet?

I'm still fairly new to the message board here, but I've been a proud owner of a few Bitcoins for a while.   Please let me know if y'all have an Austin meetup.  I would love to meet more local enthusiasts.

I do have a tiny little side business where I buy and sell gold.  Whenever I get nice items in, I offer them for sale in exchange for Bitcoin.  If you do have something at SXSW, I would love to put a plug in for my little operation also.

Thanks,

James

hmmm, ok, I have some research to do now on:

 Multibit, BitcoinJ, Electrum,

...I want to put together a crackpot team of economists, freedom lovers, and programmers to do a mega awesome crypto-currency ... not that bitcoin isn't already, but this market is wide open for others and it is the wild wild west of our day ... and of world changing significance.

yes, I especially like your competition in everything quote ... and that's what I despise about fiat currency the most also ... the forced monopoly.

There will be many crypto-currencies 5 years from now and certainly the ones that work best will have the widest adoption.  A currency which maintains some stability day to day will win over one that fluctuates so wildly.  Even in my own personal experience selling bitcoin to an individual who was trying to actually use them (he wouldn't say what for) ... but his request to me was to offer the coins to him at a fixed rate.  The daily fluctuations in price messed up his business model when prices would change before he could complete the whole cycle of a deal.

Managed stability is a good idea ... only problem with the FED system is that it's managed robbery ... lol, as we mentioned before.  So, I would love to work with some folks to design a more useable type of crypto-currency.  We could just start with a wish list.  Some items on my wish list are:

-clients that don't need to download the whole freaking block chain ;-)

-price stability (so I can put an item for sale on a web page and not have to adjust the price every other day).

-built in reputation features ... it could still be anonymous, but it would be nice to see that an address has done some deals and has some positive feedback

-built in escrow features

-backed by something else of value -- Bitcoin blazed the trail and it's not back by anything other than good marketing and perception.  Bitcoin does have value now, and so it could be used to back a new virtual currency.

What about you guys?  Surely Bitcoin has some features you would like to tweak, no?

ohhhh,  ahhhhh, 69 is my favorite number ... but my sell order is in for 95

this is long, but I would love to know what you economics types think about my layman's explanation for why we need some features of the Federal Reserve System included with crypto-currency:

http://mrmoneyhustler.blogspot.com/2013/02/a-tale-of-two-currencies.html

when you think about how much they've stolen, yes ... pretty d@mn genius

alas, we are on the brink of providing the benefit without the theft

Greetings everyone,

...little confession here, I think I may be a Keynesian ... but I have thick skin so you can beat me up.  While I despise them, I see the genius of the Federal Reserve system.  I also believe that the federal reserve system is like a dinosaur now as we stand on the brink of a crypto-currency era.

Every economy needs two types of money: one to store value, and the other for daily trade.  Clearly for today's world we use fiat currency for daily trade and a host of assets to store value: gold, real estate, bitcoin, etc.   

Bitcoin is designed to store value and/or appreciate value.  Some have mentioned above how the rate of manifestation of Bitcoins is growing so much slower than the adoption and demand for Bitcoin, and is the situation that is leading to Bitcoin's rapid appreciation in value.  That appreciation affects human behavior and so we hoard Bitcoin rather than trade freely with it.   This is not a weakness of Bitcoin, simply the way it is designed.  It's purpose now, whether we all like it or not, is "value storage" not "trade facilitator".

Agree or disagree, but there is a huge opportunity in the crypto-currency world right at this moment.  We need a cryto-currency that is designed for daily trade.  It can be just as fair and open and free and anonymous as Bitcoin, but it does need to incorporate some of the, I dare say, "Keynesian" design attributes of our common fiat currencies.  With crypto-currency, we have the ability to take the art out of the FED chairman's job and solve the problems of currency/price management with computer code.

We need a cryto-currency that people won't tend to hoard.  It needs to hold it's value day to day, but generally decrease in value over the long term in a similar way as fiat currency.  The job of the FED can be accomplished with an open formula for all to see so that it is fair and people know what they are getting.  Money supply can be controlled in real time in response to several factors like "money velocity", "adoption rate", and whatever other economic factors that must be accounted for to keep prices relatively stable, yet slowly inflating.

Adding to the money supply is easy, but there is a need for a mechanism to pull down the money supply when economic conditions dictate.  So, we would need a reserve bank of sorts to store a valuable asset (like Bitcoin) and then sell off that asset when needed as a means of pulling the trading crypto-currency out of circulation when needed.

Does anyone have other ideas for actively managing the money supply of our new crypto-currency world?  Could we manage money supply in a decentralized way?  Could we make every client their own little central bank?

I'm setting up a site to offer gold and silver in exchange for Bitcoin.  I understand the trust issues, and so this is mostly intended for anyone in the Austin, TX area so that I can deliver the items in person at the time of Bitcoin exchange.

In the future, I plan to provide a vendor rating system and to offer less expensive items so that trust can be built on my trading sites.  For now, this is what I have:

http://goldandsilver4sale.blogspot.com

Greetings all,

Does it seem like most items for sale in Bitcoin are rather expensive for what you get?  Wouldn't it be nice if there were items you could buy online for Bitcoin, have them shipped to you, and know that you can immediately sell them for a good price once you have the item locally?  Also, wouldn't it be nice if the variety of items available for purchase in Bitcoin matched the variety available on a site like eBay?

I've been watching Bitcoin stuff for about a year now.  I'm currently setting up websites to accept Bitcoin for payment for everything I own.

I'm creating a trading site that will offer value to both buyer and seller as well as a local market for Bitcoin in Austin, TX.  I'm envisioning a sort of Craigslist crossed with MtGox, and designed specifically for buying physical items with Bitcoin.  Rather than funding an account with dollars, participants would fund their accounts by providing quality "stuff" they don't want anymore.  I'm personally selling quality items, like gold and silver jewelry at the spot price.   I am creating a site where quality items are being offered, and if you have items that you'd be willing to offer for sale at bargain prices, please contact me.

At some point, I will need help developing the site.  I'm currently adding forms to make it easy for people to add new items for sale, but eventually I want to implement rating systems for vendors and customers and many other features.  Another great feature I would like to add is a sort of pass through service.  I will provide a forum to allow vendors regularly search the web for the best price on certain items, make them available for sale in Bitcoin, take payment in Bitcoin, buy the item through normal channels, and finally have it shipped to their Bitcoin customer.   The value add lies in having someone always shopping for their customers to get them the best prices.

Let's work together to make value flow in and through the bitcoin community!

-j