A Peer-To-Peer Bond Auction System Using Confidence Chains

[bluemeanie1]

https://docs.google.com/document/d/1BcFv1UYPK3AOLrcL0ujiIzhr-c7fcs8mY9pASIlI8hM/edit?usp=sharing

ABSTRACT

Bond auctions are an elementary component of most modern capitalistic economies. In this paper we will describe a peer-to-peer bond auction system meaning that the system 1) has no central point of failure 2) auction events are determined by a unique combination of chronology and democratic consensus that is typical to Confidence Chains based applications[1]. The system is modeled on the common Dutch Auction format[3]. Support for two bond types are described: Zero Coupon and Fixed Rate Bonds. A fully usable system would require feature basis described in [2]. This basic system provides the necessary basis to construct other useful and attractive features such as interest bearing savings accounts, personal lines of credit, community fundraising (eg. Kickstarter), and other advanced applications.

[prophetx]

interesting, following

[bluemeanie1]

interesting, following

thanks!  If you have any questions please post them here, I'll be glad to answer them.

The system is very flexible and I don't go into great detail as to all the different ways the system can be used.  It's important to realize that the bonds look and feel like a Bitcoin, they can be transferred freely, they are valued with exchange rates, etc.  Remittances are transferred directly to the owners address(in this system many different asset types can be associated with a given address).

My hopes are this brings us one step closer to bringing all the functions of finance to the entire public.

There are more papers forthcoming.

[bluemeanie1]

A good example of additional function would be a LOAN system.

Simply Issue a Bond(either Zero Coupon or Fixed Rate depending on the desired payment framework of the loan), whose total total debt obligation is X.  Then sell the Bond for X-I.  I is then the Interest, and X-I is the Principal of the loan.

Note also that you now have the notion of credit worthiness.  A loan is valued by it's risk, or the perceived ability for the debtor to pay back the loan.  Thus there are also all sorts of possibilities to design credit rating systems based on practically anything.  Running credit operations is profitable if done right.  You could even securitize these loans and build a basis for something like a mutual fund.  ie. The Bitcoin Development Mutual Fund.

The last section of the paper alludes to really a whole new vista for personal finance.  Currently loans are highly regulated(in the US and Europe).  For instance Prosper.com was torpedoed by the authorities.  You have to wonder: why?  America was built on alternative finance.  http://en.wikipedia.org/wiki/Early_American_currency , but with this tool you could for instance issue mortgages on the system, and you can own a piece of your neighbors mortgage, even use it as a kind of tender(as explained in the paper) for local commerce.