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April 17, 2014, 04:53:11 AM |
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I can see that most of us like the idea of trading with a centralized exchange. We can have a number of trusted 'treasurers' who keep money in trust. These treasurers must have their real name and keep a public key registered to their name in a registry. In exchange side-chain, the treasurer can create a kind of handle to fiat currency she is entrusted with. Technically this is like minting alt-coin money but the mining side is not about maintaining the side-block-chain it is just proving the treasurer controls a special public key. When a user wants to exchange his fiat for some bitcoin he can go to a treasurer and leave his fiat with her. The treasurer creates handles to the user's money in the side-block-chain and pays these handles to the user's alt-coin address. The fiat is not to be invested or used. This treasurer however is now legally bound to pay who so ever has control over these handles. So we need two contracts one for the treasurers and one for the users.
With the correct implementation trades from bitcoin to handles will be atomic operations. The sole purpose of side-chain would be to trade bitcoin but as a side-effect you have what looks like fiat on a block chain.
Now, the treasurers must be trusted members of the community. They also must be trustworthy. They would have an awesome ability to abuse the system. Legal contracts must be written and ready to be enforced to keep this abuse from happening.
The side chain must be maintained by miners block finders. The block finders would get a fee paid by the users in bitcoin. There would be no creation of bitcoins. Although there would be no technical reason it couldn't charge fees in fiat handles, we would like miners to be international.
Cashing out fiat is done by proving control of the handles to the fiat. This might be a problem if the fiat was created by several treasurers around the country. The idea is the treasurer that issues the handle is responsible for that particular handle.
I already see problems. AML laws, might stop this thing dead. I know, I need to check that out. We have a lot of people involved here: we have treasurers, miners, lawyers and probably notaries too. All of these people will take a fee. Treasurers can create handles to more money than they have to game the system. Their names will be registered with real legal papers.
Does anyone have any ideas or criticisms to contribute. By the way, I am not asking for investment money here.
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