I'm guessing this would probably be a cryptocurrency, but it might not need to be a
cryptocurrency itself, strictly speaking.
The idea is: a new currency which is backed by bitcoin.
Much in the same way that the US Dollar used to be backed by gold (at the rate of $35 an ounce until 1971), our new currency would be backed by bitcoin at some fixed exchange rate.
I'm not sure if this would be an "Alternate cryptocurrency", but even if it is, this topic is intended to discuss how this currency would *relate to* Bitcoin. So, it does belong in this forum.
Alternate cryptocurrency
Note that discussion of how these currencies *relate to* Bitcoin may fit in other categories.
Now, why would you use this new currency instead of bitcoin? Well, much like the reason you would use dollars instead of gold: Faster, cheaper transactions.
The new currency would need the following properties:
1) Instant transactions: as fast as Visa/MasterCard/PayPal/etc.
2) Cheaper transactions: microtransactions should be free always; or at least more often than they would be if transacted in "real" bitcoin. (Note: today this can be done with off-chain transactions e.g. Coinbase's implementation; is there any way to do this with a new decentralized currency or protocol instead?)
3) Be 100% guaranteed to be backed by a fixed amount of bitcoin, similar to as if $35 guaranteed you one ounce of gold. 35 (for example) of this new currency would guarantee you one Bitcoin. This should be cryptographically guaranteed in a decentralized manner, so no authority could change or prevent this convertibility property of the new currency.
It doesn't need to be 35 - that was just an arbitrary number when it came to dollars and gold. We can make them correspond 1 to 1. Or even 1000 to 1, or whatever. But it would be a fixed rate, so we always know (in terms of Bitcoin) how much the new currency is worth.
What do you think?