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Topic: Physical bitcoins, take 4 - page 4. (Read 10877 times)

sr. member
Activity: 336
Merit: 252
April 19, 2011, 11:48:50 PM
#6
Sure, your coffee will be 0.04 grams, please.

If bitcoin take off, gold won't worth that much as it will be less nessary as currency.

Moreover, it's not so difficult to mint coins with very little gold on it.  A thin layer of gold on some other material will do.

PS.  Oh, and I forgot to mention that silver exists too, for small change.

The currency we're talking about has nothing to do with gold or silver.  It's backed only by 100% real Bitcoin.  I think paper would be the best material to make it out of --- to keep the minting overhead down.
legendary
Activity: 1288
Merit: 1080
April 19, 2011, 11:41:53 PM
#5
Sure, your coffee will be 0.04 grams, please.

If bitcoin take off, gold won't worth that much as it will be less nessary as currency.

Moreover, it's not so difficult to mint coins with very little gold on it.  A thin layer of gold on some other material will do.

PS.  Oh, and I forgot to mention that silver exists too, for small change.
sr. member
Activity: 336
Merit: 252
April 19, 2011, 11:26:33 PM
#4
SunAvatar,

I am very very very interested in what you're putting forward.

I've been thinking about this concept --- of a Bitcoin backed paper currency --- almost since I first learned about Bitcoin!

While on vacation in Spain last month, my family can attest to the fact that I subjected them to all my brainstorming on it... and even forced them to give me feedback on my ideas.

A simple paper currency, backed by real Bitcoin....  Imagine how easy to sell some to friends.   Imagine how easy for small merchants and shops to accept them... and redeam them.

Counterfeiting is the main concern, I would imagine. 

I feel strongly that --- in the spirit of Bitcoin --- only the minting fee would be something I would support.

Also, I would not be involved nor support any such system unless it guaranteed 100% Reserve.... and agreed to independent surprise audits at any time.

It should be run by a trusted not-for-profit, such as The Bitcoin Foundation.... which we are in the process of forming. 

I'm very interested in what you know about minting paper currency... and what sort of system could be used to prevent counterfeiting.

One idea I had was a system based on the "group coupon" concept of validation.... where anyone could call a specific telephone number to VERIFY the authenticity of that "coupon".   However, I haven't figured out how that could be used on a paper currency which could be used over and over repeatedly.   Also, the added cost of operating a call center to verify authenticity....  Who pays for that?

Anyway, tell me what you know about minting paper currency.

In case I miss it, please cc via email too:  [email protected]


full member
Activity: 140
Merit: 101
April 19, 2011, 10:58:19 PM
#3
Sure, your coffee will be 0.04 grams, please.

No way can I break a gram, I'm sick of people coming in here with their large bills!
legendary
Activity: 1288
Merit: 1080
April 19, 2011, 10:38:46 PM
#2
For physical exchanges, just use gold.
full member
Activity: 140
Merit: 101
April 19, 2011, 10:23:01 PM
#1
I'm bringing up this old topic again because I think, while we're all hip and cyber-savvy here, a surprisingly large number of normal folks still don't put much stock in that blasted inter-net and won't really take an intangible currency seriously. This may be reasonable or not, but either way I think it would improve our perceived legitimacy and lower the barriers to entry if we had some physical tokens to hand out. I'm sure my friends would be more interested in bitcoins if I could hand them one.

There have been some really clever technical solutions as far as sending bitcoin "checks" or scratch-off cards worth a certain amount, with a private key or part of a private key included. I think this is a good idea for what it does, but I don't think it's suitable for cash, which would have to put up with too much abuse. You'd need a note that was secure in the hands of potentially hundreds of people of varying levels of cleverness and malice.

Instead, I'm interested in paper money that works the old-fashioned way: on the honor system. Bitcoin Warehouse X would issue a receipt saying, "This note is redeemable by the bearer on demand for ONE BITCOIN (or whatever amount)" on the obverse, perhaps with redemption instructions on the reverse. A public address could also be printed on the note, and the holder could check that indeed there were ten bitcoins stored at that address.

"Honor system" isn't quite the right term: Distributor X could agree to audits and such to ensure that it had enough reserves. You'd need to trust that they wouldn't renege on their obligations, but that sort of trust can be justly earned. You'd need to trust that they would remain solvent, but for a single-purpose warehouse that didn't try to branch out into market speculation and such, insolvency wouldn't be very likely.

Now for other questions:

How would the issuing agent turn a profit (or at least recoup its costs)? Off the top of my head, options include

  • a mint fee, wherein first-issue notes are sold with a surcharge to cover the cost of production, plus some. (Could be prohibitively expensive with small denominations.)
  • a deposit fee, wherein all notes (new or old) are sold at a small amount above face value. (Not bad, but it may take a while to recover the costs.)
  • a redemption fee, wherein notes are redeemed at a small amount below face value. (May hinder general acceptance of the notes.)
  • a fractional reserve system, wherein the issuer only keeps enough bitcoins on hand to honor, say, 90% of notes issued, in anticipation of never being called on more than that at one go. (Not very dangerous in itself, but could set a dangerous precedent: once you're at only 90% reserve, dropping to 89% reserve doesn't sound so bad...)
  • an expiration date: notes must be redeemed within, say, five years of issue, or be forfeit. (Sort of defeats the idea of cash.)

I'm sure no one will admit here to preferring the last two options (though a limited fractional reserve pegged to the expected rate of accidental note destruction might actually work out). But what about the first three or some combination thereof? Someone has to pay for the production, and it sure won't be the issuer. Under this view, a mint fee is the most "honest" in that it reflects the actual cost of business, and would be appropriate for (say) a volunteer effort to create physical bitcoins for the good of the community. But for a for-profit agent, transaction fees would probably make the most sense since deposit and redemption are the actual services being provided.

Another, no less important question: What would you like physical bitcoins to look like? There's no need for them to literally be paper notes, though that's probably the least expensive possibility: imprinted vinyl or ceramic "coins" would be possible too, or plastic cards, or really just about anything that can be made hard to counterfeit. Since one aim is to improve the perceived "normality" of bitcoin, coins and bills might be most appropriate, but I'd love to hear more ideas.

In case you haven't guessed, I ask because I'm interested in producing these if I find out there's a demand. I'm looking for any sort of input on what would increase the chance of general adoption, because I really can't afford to spend a ton of money on printing with no expectation of recovering the costs. In addition to design and implementation advice, it would be great to hear advice about the business model as well.
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