I have described the solution in the best possible way that I could.

Please go through this solution and comment on feasibility.

There are various bitcoin transactions; like, pay-to-pubkey-hash, pay-to-pubkey,
 or transaction that requires solving given puzzle, etc. This new transaction,
'pay-to-fiat-currency' can be made as follows,


what's missing unknown ?

IIRC the previous topic, someone said there isn't enough entropy by just using a bill's serial number. But I'm not a programmer, so all your posts above might as well be in Enigma code as far as I can understand them.

I'm proposing 'pay-to-fiat-hash' transactions, and may be we need special script keywords. We can use one more key, to protect the transaction other than fiat serial number hash.

Or, may be other solutions that enable anyone to exchange bitcoins by exchanging fiat currency. We also need a way to check the balance on the fiat. It's ($xx + yy btc), means even one can transfer 100 btc to a $10 note.

May be my solution, and they way I explained it not so perfect, but anyone understands the problem (exchange btc, just by exchanging fiat), can start think towards the solution.

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?

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.

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.

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.

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 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'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.