Bitcoin backed paper money (idea)

[Hyena]

In the ancient times there was this concept of currency backed by gold. I believe I'm referring to this:
http://en.wikipedia.org/wiki/Gold_standard

The problem with this system is the fact that regular audit is needed to verify that the supposed gold really exists.

With the help of Bitcoin, a much better version of such paper money is possible.

The money issuer stores bitcoins and prints paper money so that each note has:
1. a bitcoin address that holds the bitcoins backing the particular note
2. an expiration date

Bitcoin address is needed so that everyone can see that the issuer really has the coins backing its paper. Expiration date is needed so that destroyed notes could be recovered by the issuer. Users would have to renew their paper notes before they expire.

Every year the issuer proves that it still has the bitcoins it says it has. This can be done by using the associated private keys to sign messages. Every note can then be verified by anyone online to see if it is still backed by the issuer.

Any takers?

[byt411]

But why back it with fiat, and not gold? Fiat is worthless and ever-inflating, and that Brock Pierce thing already made a realcoin that is backed by US dollars.

[Hyena]

But why back it with fiat, and not gold? Fiat is worthless and ever-inflating, and that Brock Pierce thing already made a realcoin that is backed by US dollars.

I know there's some coin backed by dollar.

I am not saying that bitcoin should be backed by gold. I am saying that dollar should be backed by bitcoin (to make it sound simple for you).

[byt411]

But why back it with fiat, and not gold? Fiat is worthless and ever-inflating, and that Brock Pierce thing already made a realcoin that is backed by US dollars.

I know there's some coin backed by dollar.

I am not saying that bitcoin should be backed by gold. I am saying that dollar should be backed by bitcoin (to make it sound simple for you).

Oh okay, sorry, I misunderstood.
Well, why make fiat backed by Bitcoin when we can use Bitcoin easily, quickly and instantly?

[Hyena]

But why back it with fiat, and not gold? Fiat is worthless and ever-inflating, and that Brock Pierce thing already made a realcoin that is backed by US dollars.

I know there's some coin backed by dollar.

I am not saying that bitcoin should be backed by gold. I am saying that dollar should be backed by bitcoin (to make it sound simple for you).

Oh okay, sorry, I misunderstood.
Well, why make fiat backed by Bitcoin when we can use Bitcoin easily, quickly and instantly?

That's a good question. I'd ask it myself too

I think it would solve the anonymity problem that naturally comes with the direct use of Bitcoin itself. Also, it might be easier to use cash sometimes than grabbing for a smartphone and relying on the Internet.

[byt411]

But why back it with fiat, and not gold? Fiat is worthless and ever-inflating, and that Brock Pierce thing already made a realcoin that is backed by US dollars.

I know there's some coin backed by dollar.

I am not saying that bitcoin should be backed by gold. I am saying that dollar should be backed by bitcoin (to make it sound simple for you).

Oh okay, sorry, I misunderstood.
Well, why make fiat backed by Bitcoin when we can use Bitcoin easily, quickly and instantly?

That's a good question. I'd ask it myself too

I think it would solve the anonymity problem that naturally comes with the direct use of Bitcoin itself. Also, it might be easier to use cash sometimes than grabbing for a smartphone and relying on the Internet.

I think it would be a lot easier if we implement a sharedcoin/darksend function properly. You can't just toss physical bitcoins over the globe instantly.
Grabbing a smartphone, scanning a code, hitting "pay" is a lot easier than getting out a wallet, fiddle with bits of paper, watch a cashier check its validity and count it and then issue change.

[Ektra]

A bitcoin reserve currency? I've pondered this issue myself - your version could work. I like the annual refresh thing to combat counterfeiting and fraud. It seems likely that if bitcoin goes on to become fully mainstream that this is something a bank might do to stay relevant. But IMO if bitcoin is to become mainstream, it'll be because people like having direct control over their money. So ideas like this will be helpful for more anonymous off-chain transactions, but if it goes too far you just end up with the same crap we have in today's system.

[Yakamoto]

But why back it with fiat, and not gold? Fiat is worthless and ever-inflating, and that Brock Pierce thing already made a realcoin that is backed by US dollars.

I know there's some coin backed by dollar.

I am not saying that bitcoin should be backed by gold. I am saying that dollar should be backed by bitcoin (to make it sound simple for you).

There's a coin coming out called Realcoin, it's pegged to the USD at a 1:1 ratio, and promoted by Brock Peirce or whatever his name was.

He's turning it into a crypto mastercard, just getting banks to use it and having other businesses be able to accept it. It takes away from the cryptocurrency idea entirely. In all honesty, it seems like the worst idea that I've seen in a long time, and I've seen BAD ideas. I'll ask anyone who uses it, "Why don't I just use my credit card?". It's the same thing, according to his protocol. Just it's a "crypto"! Woooow! So cool!

"Now I can be a pro at cryptocurrencies!" - Most people who will use it.

[scribbles]

This seems like a solution looking for a problem.
Why would we want a layer on top of bitcoin that has most of the same issues as the current system when we could just use bitcoin directly?

[heartbit]

Was wondering if, could you achieve OPs "paper bitcoins" idea by simply printing a bitcoin paper wallet?

If I make a paper wallet and send 1BTC to it, the public address can be checked to ensure it still contains the 1BTC.

I can give it to Fred as kind of an "off-chain" transaction (say to pay for groceries)

Fred gives it to Sally - again "off-chain".

Sally decides to "deposit" it by breaking the wallet seal, and using the private key to send the 1BTC to her online eg coinbase account.

From blockchain perspective, I sent 1BTC to Sally.

Only flaw here is that, as the original issuer, I also know the private key. Nothing (technically, not morally) to stop me emptying the wallet immediately after I give it to Fred and he originally verifies it.

One advantage of the paper bitcoin is instant confirmation. But requiring trust in the original issuer to not empty the wallet probably makes this infeasible as a currency. Not going to propose a government-guaranteed, 'trusted' central printer of bitcoin currency in this forum! :-)

[odolvlobo]

Are you aware of Casascius coins (and others) or BitBills?

The biggest problems with the idea are:

1. It costs money to make the bills and maintain the reserve, so the issuer loses money.
2. The issuer has to be 100% trustworthy in order for the bills to be valued at face value.
3. Counterfeiting.

[theonewhowaskazu]

In order for this to work, there would HAVE to be fractional reserve. Why? Because printing bills like that costs money. Especially if you want to make them so good they can't be counterfeit.

[azguard]

In order for this to work, there would HAVE to be fractional reserve. Why? Because printing bills like that costs money. Especially if you want to make them so good they can't be counterfeit.

Love to see this happening but ass u said it cost money.

It will be like this Europe is printing it they want cut, if America printing they will want cut, Asia will same and so on.

Sometimes it will be better if we on forum try to create this.

Why? We design we own it. No i want to add this. Just plain and simple.

Dont you agree?

[BoxControl]

In order for this to work, there would HAVE to be fractional reserve. Why? Because printing bills like that costs money. Especially if you want to make them so good they can't be counterfeit.

What about taxes? Those could be used to offset the price difference.

[medUSA]

We don't need a fiat backed by crypto. Counterfeit would be a big problem and it will cost a lot to implement anti-counterfeiting measures on the new fiat. It is more efficient to use smart phone wallets.

[Kellyjazz]

One of the best things about bitcoin is it's anonymity and no government regulation. Although crime may breed, it's convenient to business

[azguard]

One of the best things about bitcoin is it's anonymity and no government regulation. Although crime may breed, it's convenient to business

Yes it can you can transfers found from point a to point b with transfers fee of ~0.0005 BTC.

So u can transfers millions laundered cash with btc around the word. This is quite nice and disturbing and funny in same time.

[Hyena]

Are you aware of Casascius coins (and others) or BitBills?

The biggest problems with the idea are:

1. It costs money to make the bills and maintain the reserve, so the issuer loses money.
2. The issuer has to be 100% trustworthy in order for the bills to be valued at face value.
3. Counterfeiting.

I don't know about BitBills but it's true that counterfeiting will be a problem. I figured that if we face the same problem with conventional paper money anyway and still use it then it must not be that big of a problem.

Casascius coins include private keys themselves which is kind of different from my perspective. I wouldn't include the private keys with the coins themselves but let some trusted entity hold them. Trying hard to play the devil's advocate on the matter but I must admit it is not easy

Even though paper money backed by bitcoins is superior to paper money backed by gold, it is still less functional than using bitcoins directly.

Maybe the possibilities of multi signature addresses/transactions would add something useful to the equation?

Or maybe the notion of decentralized paper money backed by individuals would spark some new ideas?

Using some standard note template, a person would print its own money. The note would be target specific, so that the receiver's address is taken immediately before printing and the note is funded right after printing. The third party of such a multi signature address/note would be some trusted entity.

Why such a construct would be required? Basically only in the situations where the receiver has no smartphone but wants to receive bitcoins. The receiver would have to still know their bitcoin receiving address or its firstbits. If bitcoin differentiates between the order of signatures in a multi signature address then the address could even specify the paying and receiving addresses. The trusted entity would not allow the reversal of the transaction before 30 days for example, allowing the receiver to safely access their credit. Just throwing things out there but seems that this solution will not find its real practical problem.

[mnmShadyBTC]

In order for this to work you would need to have some central authority (likely the government) that you can trust and that can make bills somewhat counterfeit proof.

IMO this would be good for 3rd world countries who do not have a strong enough economy that would allow it to have a stable currency and that doesn't have reliable internet access and cell phone access for all of it's citizens.

[dothebeats]

In order for this to work you would need to have some central authority (likely the government) that you can trust and that can make bills somewhat counterfeit proof.

IMO this would be good for 3rd world countries who do not have a strong enough economy that would allow it to have a stable currency and that doesn't have reliable internet access and cell phone access for all of it's citizens.

And by that idea, the decentralization of bitcoin is already compromised. However, in some cases this could be good to some third world countries as it will provide a stable currency that they can use for everyday use, just like what you've said.