Topic: Proposal to imprint bitcoin unto paper currency (Read 3509 times)

Thats correct. However a centralized institution having several public key holders could theoretically create redeemable bills. People using imprinted bitcoined bills would have to trust the "board" of this institution that they would not arbitrarily remove the bitcoins from bills unless the bills are also physically destroyed.

Actually I kind of like the idea of repurposing a national currency. There's something poetic about this. Consider the Venezuala Bolívar:



If I was a Venezualan, and I'd watched the value of my 500 Bolívar bill decrease 46% overnight (http://wealthcycles.com/blog/2013/02/08/venezuela-devalues-almost-47-too-late-for-many) I might take some satisfaction from "guaranteeing" the value of my bill by adding bitcoins to it.

Do I understand correctly however that this is almost a "proof of burn" type of valuation? The bitcoins allocated to a bill are *provable* yet *unspendable*?

Yeah, the best solution would be to create an organization with reputable members who would provide their own public keys and print its own currency.

Caucassius coins could do it with its own coins and they wouldn't even need to hide a private key on their own coins, just coin them with a serial number.

The main point of my OP is to show that it can be done, as long as the paper currency is hard to counterfeit and that it has a serial number.

Good idea but is a federal crime to mutilate a bill. I prefer the way to have own paper money as paper wallets, just as casaciuos coins and bills, only with multisign addresses.

You know if money is involved all these different orgs WILL cooperate. FYI you don't have to physically meet at one location to sign a multi-sig address. You can do it remotely at a time of your choosing. So all they have to do is hire someone to collect all these bills and then craft a set of transactions that are relayed to each org for signing before being broadcast. The transactions can even be made to split up the amounts equally between all these orgs.

Advocating mutilation of government bills let alone actually doing it is going to get you into serious trouble.

Yeah, the bitcoins become unspendable electronically. You can only spend them if someone else accepts the physical bill, which is kinda of the point. The way this "fork" can be prevented  is if an organization decides to print their own currency using this system with a set of public keys of which it can later get the signatures from to redeem the funds in an ordered and transparent way and physically destroying the bills afterwards. The public using the bills will have to trust the organization but up to a point because if such organization cannot actually strip the bitcoins from the bills without the public knowing it since they can continually check that the bitcoin addresses still has the purported bitcoins.

You have a good point about using currency codes.

This is clever. I'm not sure it can work. You attach value (BTC) to the paper which likely will be lost, as only few will use the BTC value. People using the paper will not know about the use. we probably rather want the ability to cheaply produce physical BTC coins (3d printer). those who transact in the coin will recognize its value.

On another topic, if you want to standarize this “national bill to bitcoin address” process, you should use currency codes (e.g. USD and MXN instead of US and MEX).

I like this idea. However, there's something that bugs me...

When you add the bitcoins to the bill address, they are unspendable online (unless you happen to agree with all the parties required for the multisig). That means that if I receive a physical 0.5 BTC payment, there's no way I can add them to my phone wallet so I can buy this nice thing I just saw on the Internet.

Doing this would “fork” the bitcoins, in the sense that physical bitcoins would be separate from the online ones, which would lead to having two currencies.

I know all this is a very tough problem, but maybe the solution doesn't need to be literally having bitcoins in your hand.

I like your idea

Hehe, but it is too much of paper work, don't you think?

Proposal to imprint bitcoin unto paper currency

I have the following idea to put bitcoin unto paper currency: you take the serial number of any government issued paper bill and create a multisig wallet with it. You then send funds to this address. Mutilate and mark the bill with the amount of bitcoins.

The bitcoins deposited in the multisig P2SH address cannot be redeemed because the multisig will be composed by several keys owned by diverse people and organizations who wouldn't care less to actually come together to sign the P2SH. This means that whoever is holding the paper bill can be assured he is holding unique bitcoins that are not spendable by anyone else.

It is important that the bill to be marked is very hard to counterfeit and that it holds a unique serial number. That is why government issued paper bills are perfect. Of course, this idea can be applied to anything that fulfills these two characteristics (unique serial number and hard to counterfeit) including issuing your own paper bills or coins with serial numbers.

It would be good if we can come up with a standard set of public keys, to make the generation and verification of multisig address conforming predictable, otherwise the one bitcoining the bills will have to publish his own set.

What is the purpose of this? It allows anyone to actually have bitcoins in their possession without access to any computer device or internet connection. Bills only have to be verified once by the possessor of the bill by consulting the blockhchain and thats it. This blockchain doesn't have to be up to date since it is virtually impossible for the bitcoins to be extracted from the multisig address so there will be no future transactions showing any redeeming of these bitcoins.

Step by step way to create the multisig address for a specific bill.

1. Determine the nationality and denomination of a bill.
2. Add the serial number imprinted on the bill
3. Create a brain wallet with this data as the seed using a standard method, separating with a space the nationality, denomination and serial number
4. Select 4 or more regular (starting with 1) address from known addresses.
5. Create a multisig P2SH address combining all the bitcoin address starting with the one generated from the serial number of the bill.
6. Send funds to this address. I suggest using the denomination of the bill as guide. 0.0005 BTC for $5.00 USD, 0.001 BTC for $10 USD, etc
7. Write on the bill the nationality and denomination beside the serial number so the original address can be determined, and the amount of bitcoins it is holding.
8. Mutilate the bill so that it becomes easily distinguishable from another non bitcoined bill to avoid losing it by mistake. I suggest a standard double fold in half then a vertical cut on the third crease.

Example:
1. US. 5 dollar bill.
2. US 5 IF84621533C
3. Generate Brain Wallet
Image:  http://fantasticocomic.com/bc/bitcoinedbill-1.png
4. Generate P2SH Address. We will use the following arbitrarily chosen public keys which I took from transactions I found on the blockchain:
5. We also add the public key generated by the brain wallet with the USD 5 and serial number passphrase
Image: http://fantasticocomic.com/bc/bitcoinedbill-2.png

6. We send 0.0005 BTC funds to the Multisig addrress ( 3FScohu2zS57323xt58LBc3if9r2juLCTw ) using any wallet software. Add 0.00001 transaction fee.
7. We write on the bill the amount sent and mutilate the bill.


8. Publish the redeem script so others can verify it:
Again this step could be avoided if we can come up with a standard set of public keys to be used universally.
Alternately print the redeem script base64 encoded with a QR code on the other side of the bill. I used the handy conversion tool at http://brainwallet.org/#converter. I also added for convenience sake QR code of P2SH address and info. I used the Bitcoin QR Code generator at http://bitcoinqrcode.org/


Another example using Mexican 20 peso bill:
1. Generate Brain wallet with the following pass phrase: MEX 20 T6944908
Image: http://fantasticocomic.com/bc/bitcoinedbill-3.png
2. Generate P2SH Address, copy and paste the public key from the brain wallet and add the other 6 public keys. We will use the same 6 from the previous bill.
Image: http://fantasticocomic.com/bc/bitcoinedbill-4.png
3. Send .0002 BTC to the P2SH address ( 3JgyBtcQ7Sp9R17jSRdhi9TCWqbz2vQUed ) Be sure to add 0.0001 transaction fee.
4. Write on bill the amount of bitcoins it holds and how the passphrase was derived:

5. Publish redeem script so others can verify it:
6. Alternately print redeem script base64 encoded with additional info on the bill.

Notice how I put the writted info on the bottom unlike the 5 USD bill. THe reason for this is for the holder of the bill to be able to more easily verify that the same serial number is being used by slightly bending the bill to view the pertinent info from both sides and compare.

I used ordinary labels (2"x4") and stuck it on the bill. Ideally would be to print directly on the bill. Unfortunately the background image creates too much noise for QR codes to be readable. The important issue is that all the data can be theoretically printed on an area of an ordinary currency bill. Best would be if we could set a standard stating the list of well known public keys and use for all bills so the redeem script does not have to be printed on each bill.

How to determine if the bill has a valid multisig address with the funds:

1. First goto https://coinb.in/multisig/#verify and paste the redeem script (decode base64 if it was scanned from the QR code. It should show you the multisig address beginning with 3 and a list of public keys requiered for releasing the transaction. Also check that all of them are required. Note that if we use a standard set of public keys, the redeem script can be regenerated using the passphrase composed with the serial number and it would not be be necessary to print it on each bill.

2. Next go to a block explorer (eg blockchain.info) and see that the multisig address contains the purported bitcoins.

I believe this system could be very useful in countries that suffer from severe inflation (Venezuela, Argentina, etc). Citizens there can take their own currency and start to imprint bitcoins on them to prevent them from getting further devalued and use these bills instead of non bitcoined bills for day to day transactions. It can also serve for tips and small gifts and just regular small transactions anywhere. It might also help spread the use of bitcoin, particularly in less developed countries.

A mobile application could be develop that scans a bill, determines the type of currency and reads the serial number. Then it lists the public keys of the multisig addresses and the amount of bitcoin it has in store. The user could maintain a white list of public keys he can trust and if the multisig address contains any of these public keys he can be more reassured the bitcoins will not be withdrawn. This app could try to store the whole blockchain in order to be able to check a bill without having to be connected to the internet.

A webpage using javascript could also be developed where the user types in the currency type, denomination and serial number, and it returns the multisig addresses with its corresponding public key and the amount of bitcoins it has. It can also do the reverse: generate a multisig address, including QR codes, suggesting different well known public keys he can choose from so the user knows where to send bitcoins to fund the desired bill.

This is of course an open idea and I hope suggestions come up if it is worthwhile.

(Note about mutilating currency: the idea is to avoid the bills getting confused with normal currency. I am aware it is technically illegal in most if not all countries but then again its your own money and there are freedom of speech issues to consider. In brief I am not going to get into the legality of mutilating or defacing currency.)