My apologies if this is in the wrong sub-forum or if shameless self promotion is not allowed, but I figured out a viable scheme for
physical Bitcoins which is (almost) entirely resistant to counterfeiting and I wanted to share with the community. It's a long piece but it basically extends hash functions and traditional attack analysis to physical coins.
The problem with current “physical” Bitcoins systems is that their production cost scales at O(1+v*m*n) (upfront + btc value x materials x n) while the attack cost is only O(1+m*n). Storing the physical one-way hash of the individual coins on Namecoin would make such coins “counterfeit-proof” in that the attack cost scales at some multiple of the production cost. This is a major breakthrough for both Bitcoin as well as currencies more generally.
