CannibalCoin: A Method for Destroying Fiat Currency

[CryptoPhilanthropist]

This is a brainstorming idea, based on my failed attempts to get my friends and family excited about cryptocurrencies. The primary issue that seems to freak them out is the idea of the global money supply being inflated by the issuance of BTC or any other new currency.

If we are serious about making a dent in fiat currencies, we have to find a way to convince the masses that cryptocurrencies' value comes from SOMEWHERE. I have an idea for how to go about that, but I don't know if it's feasible given the existing technologies.

My hypothetical currency is called "CannibalCoin." Instead of trying to generate new value, CannibalCoin EATS the "intrinsic value" that people believe is somehow trapped inside their fiat money. It is the online equivalent of creating a private coin and making someone burn a dollar in front of you in order to get it.

How can we accomplish this using existing methods? The problem is that there needs to be some way of recording the existence and destruction of the USD in the CannibalCoin block chain. The challenge is finding a decentralized method for documenting that someone has irreversibly enrolled fiat currency into the system.

A bank could simply accept a deposit and certify that it was destroying the cash. But I am curious if anybody here can think of a way to accomplish the same thing without banks getting involved.

[Chancellor]

Instead of trying to generate new value, CannibalCoin EATS the "intrinsic value" that people believe is somehow trapped inside their fiat money. It is the online equivalent of creating a private coin and making someone burn a dollar in front of you in order to get it.

The problem is as follows: almost every cryptocurrency relies on the fact that the total amount of currency in circulation is limited. If your CannibalCoin is "mined" by destroying for example dollar notes, it becomes inflational, and hence, another fiat currency. No matter how many dollars you burn, FED can print as many new ones, as it wants .

[CryptoPhilanthropist]

The dollar-burning mechanism is totally independent of whether or not there are a fixed number of coins. I could see three potential implementations of a CannibalCoin-style cryptocurrency:

(1) Inflationary version: Allow an infinite number of CannibalCoins to be minted, as long as each new one is purchased for a fixed-percentage of a USD. This would stabilize prices near the dollar. It wouldn't make the coin a good source of storing value, but it could make it a more practical medium of exchange by reducing price volatility.

(2) Deflationary version: You mint a finite number of CannibalCoins, but allow people to acquire those finite coins by destroying a dollar. This is actually a method of locking in the intrinsic value of the dollar against future inflation by the Fed.

(3) Upgrading BTC: If there are features that people want out of BTC but are not getting, such as a different proof-of-work method or the incorporation of proof-of-stake algorithms, a CannibalCoin could be set up that would only be sent to people who took their existing BTC and publicly destroyed them by sending them to this address, which is the public-key hash of zero: 1111111111111111111114oLvT2  Nobody has the private key, so those BTC are destroyed forever, allowing CannibalCoin to adopt new cryptocurrency features without inflating the overall cryptocurrency market.

[Whoisthelorax]

You will probably want to find a different method of consuming the USD because that is illegal.

Specifically, this is a violation of Title 18, Section 333 of the United States Code, which says that “whoever mutilates, cuts, disfigures, perforates, unites or cements together, or does any other thing to any bank bill, draft, note, or other evidence of debt issued by any national banking association, Federal Reserve Bank, or Federal Reserve System, with intent to render such item(s) unfit to be reissued, shall be fined not more than $100 or imprisoned not more than six months, or both.”  The law is enforced by the Secret Service.

http://www.nbcnews.com/id/7148966/#.UronCfRDvXg

[CryptoPhilanthropist]

The "burning" analogy was just that: an analogy. This would involve zero physical destruction of currency. There is no law against locking digital currency into a lockbox that is is not cryptographically feasible to break.

[odolvlobo]

Destroying fiat money is pointless. The Fed can (and does) create dollars faster than anyone could possibly destroy them.

[Sheldor333]

Your main problem is that it depends on something. Also Feds and any other country can at any time print more money. If you make public how much has been destroyed they will even know how much to print. 

[CryptoPhilanthropist]

The deflationary version would not implicate any of those problems.

So do you guys have any good ideas for how to lock up the payments? Would a trustee have to be setup, who would oversee an escrow account?

[ihatepasswords]

Theres an altcoin called friecoin that destroys itself a little if no one uses it called friecoin. i dont see the point of pegging a coin to fiat though as it would give the fed control of the currencies value, though it would be closer to a digital 'cash' if you did.

[CryptoPhilanthropist]

Think of it like an intermediate step for the 99% of the world that doesn't "get" BTC yet. A "dollar" cryptocurrency would be easier for them to understand. Once they had more familiarity and comfort with cryptocurrencies, they would hopefully be interested in acquiring BTC.

[Zebedee23]

atleast altcoins are finite, not like banana republic fiat like us$$ printed by the fed willy nilly to no limit!!!!

[infinitybo]

Cannibalcoin is almost perfect however @ihatepasswords Friecoin looks funny

[shorena]

Think of it like an intermediate step for the 99% of the world that doesn't "get" BTC yet. A "dollar" cryptocurrency would be easier for them to understand. Once they had more familiarity and comfort with cryptocurrencies, they would hopefully be interested in acquiring BTC.

The main problem most ppl I talk to have with Bitcoin is that you cant buy "anything normal" with it. The great thing about USD or EUR or AUD or whatever is that "everyone" uses it.
Why is that? Well its because the state makes it a form of exchange that has be accepted. Noone does this for BTC. BTC only has value because all of us using it agree that is has.
Fiat money has value because a state says it has a value and people agree that this state is trustworthy to a certain degree.

So your solution to tie a cryptocurrency to fiatmoney is not helping at all, what helps BTC the most is more ways to spend it, more shops to accept it, more services to get with it. The more you can do with BTC the higher its value.