A "real" Bitcoin

[casascius]

I assert that a smart card is a physical object that can securely store a bitcoin.

A smart card is an integrated circuit that, among other things, can store a private key and sign things with it without divulging the private key.  A smart card can also enforce pre-programmed constraints by itself.  Many smart cards can generate public/private key pairs on-chip, and encrypt/decrypt data streams in real time.

However, is there a way that you can verify the bitcoin wallet that you embed inside this smart card chip has NO OTHER COPIES?  Potentially, couldn't the manufacturer or distributor of these bitcoin smart cards keep a backup of the wallet at their company headquarters when they first create the bitcoin smart card?  I guess maybe you can't trust a pre-loaded bitcoin smart card, and instead can only trust bitcoin smartcards that you generate a new address inside it yourself which gets sent a bitcoin.

Bitcoin has the ability to encumber coins with multiple keys and specify that "all" of them are needed to spend the coins.  It's not visible in the user interface, but it exists in the protocol.  A viable "tangible" bitcoin would be backed by coins that are secured by at least two keys.  One of them would be put there by the manufacturer, the other would would be field-changeable by any user in possession of the card.  If the manufacturer of the card does not have ALL the keys encumbering the card, he cannot steal the coins.

This would also guard against copies.  The moment any user rekeyed that second key, all other copies would be void the moment the rekeying hit the block chain.

[em3rgentOrdr]

I assert that a smart card is a physical object that can securely store a bitcoin.

A smart card is an integrated circuit that, among other things, can store a private key and sign things with it without divulging the private key.  A smart card can also enforce pre-programmed constraints by itself.  Many smart cards can generate public/private key pairs on-chip, and encrypt/decrypt data streams in real time.

However, is there a way that you can verify the bitcoin wallet that you embed inside this smart card chip has NO OTHER COPIES?  Potentially, couldn't the manufacturer or distributor of these bitcoin smart cards keep a backup of the wallet at their company headquarters when they first create the bitcoin smart card?  I guess maybe you can't trust a pre-loaded bitcoin smart card, and instead can only trust bitcoin smartcards that you generate a new address inside it yourself which gets sent a bitcoin.

Bitcoin has the ability to encumber coins with multiple keys and specify that "all" of them are needed to spend the coins.  It's not visible in the user interface, but it exists in the protocol.  A viable "tangible" bitcoin would be backed by coins that are secured by at least two keys.  One of them would be put there by the manufacturer, the other would would be field-changeable by any user in possession of the card.  If the manufacturer of the card does not have ALL the keys encumbering the card, he cannot steal the coins.

This would also guard against copies.  The moment any user rekeyed that second key, all other copies would be void the moment the rekeying hit the block chain.

I like that idea of using multiple keys...

[TiagoTiago]

I can see a future where "paper" money will contain flexible electronics and display tecnology, a single note will be capable of holding any amount of bitcoins you transfer to it (it will be a physical standalone wallet), and will change it's appearance to reflect it's contents; you will be able to exchange notes without using any network, or even electricity, like how you exchange paper money nowadays,  but with a device (any one of the many types that will be avaible) you will have the ability to redistribute the Bitcoins between notes as well between notes and other wallet storage means. (An empty note would only have a very small value simply for the benefits it has for exchanging Bitcoings instantly and without needing any connection or energy once charged, they would be made in great numbers, so many that people will feel more confortable throwing away an empty one than people nowadays feel about leafs falling from trees)

[Local]

I can see a future where "paper" money will contain flexible electronics and display tecnology, a single note will be capable of holding any amount of bitcoins you transfer to it (it will be a physical standalone wallet), and will change it's appearance to reflect it's contents; you will be able to exchange notes without using any network, or even electricity, like how you exchange paper money nowadays,  but with a device (any one of the many types that will be avaible) you will have the ability to redistribute the Bitcoins between notes as well between notes and other wallet storage means. (An empty note would only have a very small value simply for the benefits it has for exchanging Bitcoings instantly and without needing any connection or energy once charged, they would be made in great numbers, so many that people will feel more confortable throwing away an empty one than people nowadays feel about leafs falling from trees)

If I have a wallet with bitcoins I can put that file on all my computers simultaneously. When I spend them they are gone from all computers. I can do the same with the suggested bills. If there is a way to put them on one then I can put them on many. The network is required for preventing double spending. You either have to trust the person you are trading with or you have to be on the network.

[kiba]

Just use your 5 BTC(price deflation + cheap phones!) smartphone of the near future as your wallet.

[barbarousrelic]

If and when BTC becomes more widely accepted, I'd consider starting a physical currency that is pegged to bitcoins.

Fractional reserve banking, in other words. I'm not criticizing though. It's inevitable, and it's harmless provided the level of backing behind the "pegging" is honestly disclosed.

It would not be fractional if each physical coin was backed by one digital coin.

[TiagoTiago]

The devices that redistribute Bitcoins between notes would be connected to the network. The notes don't got copies of your wallet, they are a wallet on their own, when transfering Bitcoins you're really transfering Bitcoins, not copying wallets.

[Local]

  ...you will be able to exchange notes without using any network...

This is why I thought you were talking about trading without being on the network. Of course if you are on the network your idea works fine.

[TiagoTiago]

Without the devices, the notes are offline wallets.

[Quip]

Alternatively you could simply make the market for them, buying and selling them at a +.01 to -.01 spread. Then instead of having a backed currency you would have a pegged currency. The advantages of a pegged currency is that it would be possible to expand the money supply based on actual demand rather than target interest rates.

I also think a physical currency pegged to Bitcoin would be very interesting. The biggest trouble would be making the coins cheaply enough.

For making it an actual coin that's useful for transactions, you could embed an NFC chip into it. The tag chips cost about a dollar, I think, and can store small amounts of arbitrary data that can then be read by near field radio. It'd probably be possible to fit a keypair into it.

I think that NFC smartcards containing entire Bitcoin wallets would be far more practical than NFC "coins" containing 1 BTC each. You could even program NFC-enabled smartphones to emulate the smartcards.

[Dude65535]

A physical bitcoin that contained a usb drive with the bitcoin software and a wallet with a balance of 1 BTC would make a very good promotional item for bitcoin. That would be a lot easier than any system for secure transfer of bitcoins via a physical object.

[em3rgentOrdr]

A physical bitcoin that contained a usb drive with the bitcoin software and a wallet with a balance of 1 BTC would make a very good promotional item for bitcoin. That would be a lot easier than any system for secure transfer of bitcoins via a physical object.

Great idea...  You are a very smart person...  I wish I could have thought of such a simple idea.

[grondilu]

Hopefully someone will soon compile bitcoin on a smartcard. 

[ArsenShnurkov]

A physical bitcoin that contained a usb drive with the bitcoin software and a wallet with a balance of 1 BTC would make a very good promotional item for bitcoin.

I have a wallet with 1BTC-smartcards. I am giving one coin the to the other human.

How that other human will be able to check that smartcards actually contain coins?
If coins are already spent than such "physical coin" will be of zero value.

How other human can be sure, that you have not make a backup of the "physical coin" ?
(I imply, thath it is impossible to transfer money from "physical coin" to another wallet, because there is no direct internet access.)
If there is a backup - there is a risk of spending BTC from that backup.

[Dude65535]

Did you quote the wrong person? I was suggesting a promotional item that could be given away to increase interest in bitcoin. If the coins are still available they can move them to another bitcoin address if not the person receiving it is only out the time it took to check the balance.


A secure physical token for storing BTC would need to never divulge its private key and be able to produce a transaction when given a address to send the coins to. It would also need to have some indicator on it to show if it had produced such a transaction and was therefore worthless.

If the token could verify that it had access to a reliable copy of the block chain it could be reloadable.

For any of that to work people would need to trust the hardware and its manufacturer.

[casascius]

A secure physical token for storing BTC would need to never divulge its private key and be able to produce a transaction when given a address to send the coins to. It would also need to have some indicator on it to show if it had produced such a transaction and was therefore worthless.

If the token could verify that it had access to a reliable copy of the block chain it could be reloadable.

For any of that to work people would need to trust the hardware and its manufacturer.

Trust of hardware and manufacturer can be resolved by encumbering coins with two private keys instead of one, something the Bitcoin client already supports through its "scripting" engine.  One key hardcoded by the manufacturer, the second changeable by a power user.  Once the second private key is changed, the manufacturer can't repossess the coins, and this also guards against the manufacturer making multiple cards with the same private key.

The token itself doesn't necessarily need access to the block chain, as long as it can be stuck into a reader that can perform these functions and has access to the block chain.  (e.g. VeriFone Vx570 credit card reader with smart card option installed, and a custom C/C++ app that as of yet has not been written)

[TiagoTiago]

What if the physical thing was a token kinda like those PRNG some banks give their clients to perform webbanking operations, but instead of running a PRNG it got a wallet file and a wallet managing software, using NFC or some contact based or wireless protocol to interface with devices that can share their internet connection for changing the contents of the token?

[Dude65535]

The token itself doesn't necessarily need access to the block chain, as long as it can be stuck into a reader that can perform these functions and has access to the block chain.  (e.g. VeriFone Vx570 credit card reader with smart card option installed, and a custom C/C++ app that as of yet has not been written)

The main thing is the token needs some way to know for certain it isn't being lied to when it is told that it has the proper balance in its account. That way you can trust the indicator on the token to be an accurate sign of the value of the token.

[casascius]

The token itself doesn't necessarily need access to the block chain, as long as it can be stuck into a reader that can perform these functions and has access to the block chain.  (e.g. VeriFone Vx570 credit card reader with smart card option installed, and a custom C/C++ app that as of yet has not been written)

The main thing is the token needs some way to know for certain it isn't being lied to when it is told that it has the proper balance in its account. That way you can trust the indicator on the token to be an accurate sign of the value of the token.

The token does not need to know its balance. Why would it?

[Dude65535]

The token would have the only copy of the private key and not disclose it for any reason. If you wanted to remove the bitcoins you would send a receiving address to the token and it would return a transaction you could send to the network. At this point the token would assume that the balance was gone and change the built in indicator to show this. That way someone could not pass of the token as still having value.

For reloading you would have the token generate a new private key and send coins to its public address. Then once that was confirmed by the block chain you could go to a kiosk owned by the token manufacturer and reset the indicator to show that the balance was present.

This would allow you to be certain of the value of the token without any connection to the bitcoin network.