I was reading someone else's post about "gambling" on a payment network for medical marijuana in Colorado, and that got me thinking about building a Bitcoin "debit" card system, which would allow users to pay merchants using a magnetic-stripe card and a PIN.
As for the technical back-end of payment processing, I envision one wallet being used to pass payments between various addresses within the same wallet. The wallet would be stored in a non-web accessible directory, and the wallet encryption passphrase could be randomized after every transaction.
The merchant interface would simply take the Bitcoin address encoded on the card, the PIN provided by the user, and verify that the address given has enough funds to perform the transfer. It would then transfer the bitcoins from the address given to the merchant's address. All users (merchants and debit card holders) would be able to access their account online to view balances and send money.
Thoughts? Is someone doing this already? The idea could definitely be co-opted by Bitpay; I just think it would be cool because it is based on infrastructure that already exists for merchants (magnetic swipe readers) and debit card holders (magnetic swipe cards).
Seems like a better idea would be to open a merchant who will actually accept that card.
