Topic: How to use fiat currencies for Bitcoin offline transactions? - page 2. (Read 7093 times)

I would not accept it if there is no way to redeem the BTCs from their associated banknote and if such possibility exists, then we need to have a mean to test if a banknote still holds its BTC value.

If it were not possible it would be a problem, because in 5 to 10 years that banknote could be worn out to the point that you cannot circulate it anymore.

Or the government could make all the (now) new 100 USD bills no more legal tender from january 1st 2040... and we would lose all our associated BTCs.

spiccioli

A centralized, color coin use-case would make this technique all the more valuable. In theory you could tie a color coin to a bank note and trading this note would be the equivalent of transferring whatever value is embedded in the bill, entirely offline. When one party wants to redeem that value (e.g. contract, property, asset) they bring the bill to the issuer.

Not sure how legal it is to modify legal tender and/or give it more than face value, but let's consider it a thought experiment for now.

Yes, it would be a little like "coloured notes" using the terminology of the coloured bitcoins concept ... assuming I'm understanding it correctly.

In another weird twist it would then be possible for an ATM operator (trusted bitbanknote issuer) to receive regular notes and issue bitbanknotes. An unknowing observer would see someone putting cash notes into a machine and getting probably less cash notes back out in the same transaction ... ! Or vice versa ?! ... and who could know the difference except the operator of the machine and the specific user.

Hi Stephen Gornick, thanks for your comments. I'll get back to this.

Why not?   Because, the bitcoins cannot be spent electronically.    They then lose some their value.  At a minimum, these coins lose fungability.

Now what I could see happening is an "issuer" making these fiat into "colored notes" [Edit: in the same vein as how a bitcoin output can be dual-purposed to represent a share of an equity].  Each note can be redeemed for bitcoins, on demand.

So simply needed is some way to verify the XBT value of the note, using the note's serial number.  

This still requires that you trust the issuer, but if the issuer is honest there is little the government can do to confiscate funds from either the issuer or from the bearer except at the exchange points.

I posted more thoughts about the btcusr idea (which I named BitBanknotes, so it can be referred) in my blog:

http://bitslog.wordpress.com/2013/10/09/a-disturbing-idea-bitbanknotes/

We're creating the future. It has no importance if this will be used today, but in five years.
The same happens to the Firmcoin, their time will come.

Yes, my spell checker did not have the word "unspendable" and "corrected" it to "undependable".
I corrected the post, because it was confusing without the correct word.
Thanks.

One this we must standardize from time 0 is that a USD banknote with value N must be bound to a tx output of N/100 BTC.

So for example, a 1 USD bill must be bound to 0.01 BTC (1 centiBTC, now roughly equivalent to 1.3 USD)

We should reject any BTC-bill that does not follow this convention. Using this convention we can use the denomination of banknotes as centiBTC easily.

We also should build an iPhone/Android App that scans the serial numbers of banknotes (and the denomination) and responds YES if the BTC-banknote is valid and NO if it's not (unbound or invalid denomination).

Regarding the mixing of fiat/BTC values, from the economic point of view, a BTC-banknote is a BTC bill with an insurance in USD and at the same time a USD bill with an insurance in BTC. Something never seen before...

We need another cryto-currency which have almost the same inflation as USD. They print money, we mine money. Then we can do it

Yes,  was aware of that problem. The problem is that Bitcoin value tend to rise, so any denomination one choses for the note, sooner or later, it will provide lower security than expected. Nevertheless, governments won't allow counterfeit notes to exists for much time, or would they?

If Bitcoin banknotes become common, then I really don't know what the heck governments will do...

One issue I see is, with bitcoins (10 BTC) transfered to a bank note ($100), now it would worth more ($1550).

Let's say it would cost $80 to print one copy of $100 perfect counterfeit note. Now, people are not likely to spend $80 to print a $100 note, but they will surely spend $80 to print something that is worth $1550.

So, may be we can not store higher values unless we do something  (encryption / hash) to bank note serial number, through scrypt.

Thanks, Sergio. I'm happy to see positive responses.

I had theories like, bitcointalk was taken down as a result of my post to avoid possible implications.

Sergio:

is there any way to redeem the note for BTC in your scheme? ... (also do you mean an "unspendable output Tx" or an "undependable output Tx"?)

In related news, the new U$100 C-note has lots of gold (colouring) apparently

http://www.marketwatch.com/story/new-100-bill-costs-60-more-to-produce-2013-10-08


Using only new notes for BTC linking would greatly reduce counterfeit risk ...

This is an awesome idea! Problem is, I don't think there is enough proximity between bitcoin users to justify the need.
But maybe I am wrong.

POLL

I would like people to vote if they would accept such a BTC banknote (if the supporting banknote has enough security features, such as the US dollar).

Make history: If we believe in BTC Banknotes, then it will come true today.

The core idea, that a difficult to counterfeit banknote can be used for off-line Bitcoins transaction is EXCELENT. I emphasize, IMHO it's completely fantastic.

The problem lies in the details: a banknote does not have something to hide a private key, and so prevent double-spend.

I propose a simpler solution: Using an unspendable Tx output that holds the banknote country and serial number, some BTC are associated forever with a certain banknote. (the data is described in the public script).

Every one agrees that the bill's value is now X BTC. That's it. The only party that can reliable try to cheat making a perfect counterfeit bill is a government. If governments create counterfeit bills, then they'll be terribly exposed to loss of credibility. Therefore nobody will create a perfect counterfeit bill.
To check that a bill has value, you carry a portable database of BTC-to-Bill binding outputs. Everyone agrees that to be valid, a bill binding transaction must be one day old, so everyone can carry the small database and sync it once a day. (This is the same system the Firmcoin.com uses)


We would be actually using the government low-cost of manufacturing facilities to create difficult to counterfeit banknotes for Bitcoin. For example, a 100 USD banknote costs 10 cents to manufacture in a batch of a billion bills.

From the economic point of view, the bill's value is the maximum between the fiat previous value and the BTC value, so it's seems that some value has been created from thin air, because you could just create money by accepting the fiat value, and then selling the bill by the other BTC denomination (or vice versa). By using a very low-valued bill, for example a 1 USD bill for 1 BTC, the problem is mitigated. Nevertheless I doubt the governments put the same security features in a 1 USD bill than in a 100 USD bill.

Finally, for the system to work, everyone must agree that those BTC bills really hold the BTC value.  But you can count on me:  I would agree! Why not?

Now imagine people using ALL USD bills as BTC banknotes!
Since the creation of Bitcoin, I never heard a more disturbing idea for governments than that!

So let's define a standard for the creation of dollar BTCs and make it a reality!!

Thanks btcusr: one never stops getting surprised by crazy ideas...that come true... I will post about this in my blog...

Best regards,
Sergio.

Three comments:

1. For the less- technically minded, could the original OP please post an explanation for his proposed scheme in non-technical language. As I understand it, an off-chain transaction involves transferring the private key rather than the BTC. How does this scheme achieve that?

2. Step 5 seems to involve an on-chain transaction. So how is this off-chain?

3.  How does this scheme take advantage of the distinctive feature of a bank note which is that it is unique and difficult to forge?

I get the feeling that there may be a very clever idea lurking here, but I am having trouble grasping it....

1. Bitcoin was Paid to 2-of-2 address
2. You have both 2-of-2 keys
3. One usual key + another key was generated from fiat serial number
4. Check block chain for balance
5. To transact, give $$ note to a person, transfer btc to new 2-of-2 Bitcoin address

Or,

With new 'pay-to-fiat-hash' transactions, these amount can be marked as un-spendable through block chain.

And, through a reverse trxn, 'pay-from-fiat-hash' btc can be paid back to a regular Bitcoin address.

I'm not clear with the complete details, can anyone understand the potential uses?

Balance in my previous post may be misleading.. I mean, only BTC balance.

But, the note is worth, fiat + btc.