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Author Topic: Bitbonds: Bitcoin IOUs  (Read 1261 times)
ffe
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April 21, 2011, 07:11:27 AM
 #1

Say you mention bitcoin to a friend and you two wanted to close a transaction in the real world using bitcoins. Say he wants to buy tickets to a ballgame from you using bitcoin. Downloading the client is easy but getting enough bitcoins to pay for anything is hard. Very frustrating.

An idea. Create a parallel system of IOUs denominated in bitcoin and run in the same distributed p2p way that bitcoin is run. Let’s call it bitbond.

•   Bitbond would be a separate protocol and not impact the bitcoin protocol or block chain.
•   Bitbond could have its own client or be an add on to the bitcoin client.
•   Bitbond is aware of the bitcoin system and therefore can track payments on an IOU.

So, a bitbond transaction is an IOU between two bitcoin keys, A and B. It is an obligation by key A to pay, on a certain schedule, key B a certain amount of bitcoin. This IOU is signed by key A and published across the bitbond clients. The bitbond “system” could monitor transactions on the bitcoin system for timely payment(s) from A to B.

A can default of course. It would be stupid of B to accept the IOU unless the principals were friends and the owner of B had reason to trust the owner of A. Using the bitbond client, IOUs can be exchanged within a group of friends that trust each other with the client handling the IOUs cancelling out when (A owes B) and (B owes C) and (C owes A). Also, as members of the group earned real bitcoins and slowly paid off IOUs using the bitcoin system the bitbond client would take care of tracking that.

Finally, with the information the bitbond system has, third parties could form an opinion about the trustworthiness of the owner of key A. A rating system could develop and maybe even a “bond market” that could move bitcoin to where it’s needed. With a good rating the owner of key A could borrow from a larger circle of bitcoin owners.

So, back to the friend that wants to buy your tickets. With a common client for both bitcoin and bitbond, he could quickly send you a bitcoin IOU and pay it off a month later when he finally figures out how to get his hands on his own bitcoins. A much more satisfying experience.

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April 21, 2011, 07:58:41 AM
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Sounds a lot like Ripple.

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April 21, 2011, 09:18:14 AM
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Indeed it sounds much like Ripple.

And a bond doesn't have to be decentralised, as it is issued by a specific person anyway.  So it does make sense to have it handled by a specific server.

However, a standard protocol for issuing bonds could be usefull.
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April 21, 2011, 02:53:39 PM
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I looked up Ripple and I agree. Ripple is what I had in mind. I still think a Ripple-like system that can "see" bitcoin transactions and adjust the value of the IOU's as people paid them off with bitcoin would be great. Plus it would be a boost to bitcoin.

Since it doesn't affect the bitcoin chain, maybe a Ripple implementation should add the ability to denominate IOUs in bitcoin, between bitcoin keys, and read the bitcoin block chain to see the payback transactions.

It wasn't clear to me if Ripple was p2p or needed a central server.
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