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January 01, 2015, 11:15:07 AM |
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I know I'm not the first to suggest using a Ripple-style system as a de-centralized currency exchange. My own focus in developing Amiko Pay has always been to have a fast, scalable, low-trust, privacy-friendly payment system, and honestly, that's already so ambitious that the idea of making a multi-currency system has had a low priority for me. Also, the features of crypto-currencies like Bitcoin are necessary to make Amiko Pay low-trust in a way that can not be achieved with fiat currencies.
Still, the idea that Amiko Pay can be used for multiple currencies and for decentralized currency exchange continued singing around in me, especially since other Ripple-style systems also managed to do this. A couple of weeks ago, I realized it's actually quite simple to achieve, by using colored coins.
The idea is that people can form Amiko networks for different colored coins, and for non-colored coins. People who wish to exchange one for the other simply participate as gateways between two of such networks. An exchange can take place across both networks as a single Amiko transaction, which is either fully committed or fully rolled back, so it's equally low-trust as normal Amiko transactions.
Of course, people still need to trust the issuer of the colored coins, but that trust can not be avoided with fiat currencies. The good thing is that the colored coin issuer has nothing to do with managing transactions or providing exchange rate / trading information, so it has significantly less power than e.g. a MtGox-style Bitcoin exchange. In fact, different people don't need to trust the same issuer, as long as there are enough people in the network willing to provide 1:1 exchange between colored coins of different issuers. For reasonably reliable issuers, this should not be a problem.
This might have some legal implications though. Here in the Netherlands, like in some other countries, Bitcoin is not considered to be money, so AML/KYC laws do not apply. The implication is that it's perfectly fine for individuals to deploy Bitcoin-only Amiko Pay. However, I can imagine that colored coins which represent fiat currencies are in fact considered to be money. To be on the safe side, I don't think I'll deploy Amiko Pay + Colored Coins myself: I think it's better for me to continue to be available for Amiko Pay development. I'll leave the legal fight to others.
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