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Author Topic: Bitcoin Cash and instant clearing.  (Read 1560 times)
Sjalq
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May 13, 2011, 10:25:19 AM
 #1

Two issues raised against Bitcoin is that it takes too long to have transaction confirmed and that it does not have the qualities of cash.

Before we had fiat paper money we had state sponsored gold backed money . Before we had state sponsored gold backed money we had private bank sponsored gold backed money and physical gold. Contrary to popular belief privately issued notes did behave themselves a step above state issued notes. The main motivation being that if you could not honor claims against your institution in gold, you simple went out of business.

So in the proud tradition of wildcat banking I propose the following solution to the cash problem and the transaction speed problems.

Private institutions can be set up to issue bitcoin based paper money. The paper is printed by the same companies that print government tender, making it prohibitively expensive to forge believable copies of these notes in the long run. Security features on the notes can include a barcode that can be scanned/entered to confirm that the note has not yet been redeemed for the underlying bitcoins at the backing institution. This is however simply for individual peace of mind. The real guarantee will be that contractors of the company will be authorized to issue and later redeem the notes and subsequently destroy them. If any note that was redeemed at a specific agent is found to still be in circulation, the company can investigate and possibly revoke the contract for redemption and issuing that the agent holds.

For jurisdictions where "cash" trading may hold legal consequences subcontractors would be free to devise a workable alternative for cash trading (IE base metal medallions)

The same institution can then also offer other issuance and redemption services similar to present day banks. IE immediately cleared electronic bitcoin transfers to any party, whether they are presently a client with that institution or not. They would clear the transaction on their system and would act as a buffer between the clients and the bitcoin confirmation times. They could also set up temporary accounts for receivers of money that can be accessed via security questions discussed between the sender and the receiver. Their incentives to maintain the integrity of the Bitcoin economy is that clients may claim payment directly to bitcoin addresses. If they can not deliver they will fall into ill repute and lose market share.

Furthermore insurance companies can be set up to guarantee redemption in bitcoin. If an ensured institution wishes to offer this as an additional comfort to clients they would need to submit to proper auditing and scrutiny of an insurer, further increasing their reliability.

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agricocb
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May 13, 2011, 10:59:32 AM
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Take a look at OpenTransactions (https://github.com/FellowTraveler/Open-Transactions).  It's a platform that FellowTraveller is developing to enable easily setting up private banking, which can be conveniently backed and cleared by BTC.  If someone wanted to then issue paper money that was redeemable for their private bank, that would be up to them (it's risky, since paper money is really hard to make unforgeable; you basically have to be big enough to absorb the losses when people eventually do forge it.)  But FT's solution gives you instant clearing, as well as double blinding, so it's truly anonymous (as compared to Bitcoin, which is only as anonymous as you are able to obscure the connection between your addresses and your identity.)

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Meni Rosenfeld
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May 13, 2011, 11:47:48 AM
 #3

For most transactions it is enough to see that it propagated in the network (takes a few seconds) to be safe, you don't need confirmation in a block.

For physical bitcoins, we already have Bitbills.

Phone app based bitcoin payments will probably be even more convenient than notes going forward.

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molecular
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May 22, 2011, 09:12:17 PM
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Private institutions can be set up to issue bitcoin based paper money. The paper is printed by the same companies that print government tender, making it prohibitively expensive to forge believable copies of these notes in the long run. Security features on the notes can include a barcode that can be scanned/entered to confirm that the note has not yet been redeemed for the underlying bitcoins at the backing institution.

I like the idea.

The barcode security-feature you talk about could actually be the address owning the amount of bitcoin this note is being backed up with.

That way, users can always verify the backing is actually present (to avoid possiblity of fractional reserve banking).

Good idea?

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davout
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May 22, 2011, 09:40:24 PM
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Private institutions can be set up to issue bitcoin based paper money. The paper is printed by the same companies that print government tender, making it prohibitively expensive to forge believable copies of these notes in the long run. Security features on the notes can include a barcode that can be scanned/entered to confirm that the note has not yet been redeemed for the underlying bitcoins at the backing institution.

I like the idea.

The barcode security-feature you talk about could actually be the address owning the amount of bitcoin this note is being backed up with.

That way, users can always verify the backing is actually present (to avoid possiblity of fractional reserve banking).

Good idea?

Issue two notes with same barcode. boom! fractional reserve banking.

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May 27, 2011, 11:58:58 PM
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Private institutions can be set up to issue bitcoin based paper money. The paper is printed by the same companies that print government tender, making it prohibitively expensive to forge believable copies of these notes in the long run. Security features on the notes can include a barcode that can be scanned/entered to confirm that the note has not yet been redeemed for the underlying bitcoins at the backing institution.

I like the idea.

The barcode security-feature you talk about could actually be the address owning the amount of bitcoin this note is being backed up with.

That way, users can always verify the backing is actually present (to avoid possiblity of fractional reserve banking).

Good idea?

Issue two notes with same barcode. boom! fractional reserve banking.

Issue two notes with same barcode. One gets redeemed, the owner of the other note verifies wether the amount is still on the address (and finds out it isn't because the other guy redeemed his note) => boom, your bank is fail.

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May 28, 2011, 12:03:33 AM
 #7

The barcode security-feature you talk about could actually be the address owning the amount of bitcoin this note is being backed up with.

Just write it on a napkin.
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May 28, 2011, 12:20:33 AM
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hm, interesting thought from bitbill thread:

http://forum.bitcoin.org/index.php?topic=7724.msg147231#msg147231

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Sjalq
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May 28, 2011, 02:19:54 PM
 #9


Issue two notes with same barcode. One gets redeemed, the owner of the other note verifies wether the amount is still on the address (and finds out it isn't because the other guy redeemed his note) => boom, your bank is fail.


Notes are only redeemable at the agents. You can only get BTC to a BTC account when you "cash" the note. The note is then no longer valid. You could also ensure against this kind of thing from the central "bank" and simply revoke agents who issue in an unreliable fashion

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