1. Buy virgin blocks of bitcoin from a miner and transfer all of them to a green address
2. Create casascius style physical bitcoins. They just need to be very hard to counterfeit.
3. Develop customized hardware/software that separates your green bitcoin from "tainted" bitcoin
4. Declare the value of your green bitcoin much higher than the bitcoin market.
Could I ask for a little more explanation?
Why would they need green addresses?
If you want a local Bitcoin economy, you want to keep your island of Bitcoin separate from the rest of the network.
Would they accept only BTC coming from the green address to circulate? What happens when someone brings in BTC from somewhere else?
Outside Bitcoin would be like trying to spend any foreign currency within your borders.
Why should they artificially increase the value of bitcoin from their green address?
Because it would deter someone from spending it outside your "green zone."
Would that be an "isolated" blockchain? Could they drop the existing blockchain altogether and fork a new one, starting with a genesis block containing only the original bitcoins in the green address?
No. It would be the same block chain every one else uses. It would still have a globally based resistance from attack.
How would that be different from starting another alternative cryptocurrency?
Your country would be to weak to create a strong enough network to resist other great powers. Besides, all other cryptocurrencies are inferior to Bitcoin.
I am really intrigued by these thoughts, and I've seen you mention them in another thread too. Have you written more about it anywhere else?
I don't even remember all the stuff I write. I've almost responded to my own postings.