Quote from: thoughtfan on May 24, 2013, 11:07:39 PM

For me a question that has probably either been already replied to above that I missed or maybe something those more familiar with colored coins have dealt with already: The weakest link seems to me to be fiat represented by colored coin. Are we talking for instance about a generic GBP colored coin, in which case the system is as strong as its least trustworthy issuer, or about branded coins. e.g. if Max Keiser were to agree to put his name to coloured coins and I were to take cash to his representative who took it from me to keep it locked away until redeemed it would mean the people I'm dealing with would need to deem KeiserCoins as dependable? I'm not saying this is necessarily a weak link in comparison with what we have already but from what I understand it is likely the weakest link in the proposed solution as is. Have I got the gist of this aspect of it right or have I misunderstood something?

You are correct that a colored coin issuer is the "weakest link." You do have to trust that the colored coin issuer will ultimately redeem those colored coins back for GBP again.

However

--- The system described works without colored coins. You can use normal BTC. (There's no reason why you couldn't give a normal BTC to someone in return for legacy funds, instead of a colored coin.)

--- The main advantage of using colored coins is that it eliminates capital gains tax liability. (I'm not a lawyer and that's not legal advice. My point is that if you buy something for $100 and then sell it for $100, there is obviously no gain or loss.)

--- Also keep in mind that certain currencies require an issuer. For example, any gold-backed currency will need an issuer who stores that gold. Any Euro-backed currency will need an issuer who stores those Euros, etc.

--- And in the case of currencies that require an issuer, it's better to issue them first as colored coins, versus having the issuer create them directly on the OT server as IOUs. This is because it breaks the link between the issuer and the transaction server.

--- You see, if the gateway directly runs the server (Ripple) or if the issuer directly issues the currency as IOUs onto the server (OT can do this) then either way, pressure from authorities or criminals can be brought down onto the issuer, regarding that server. (Such as, "Shut that server down, or we'll shoot you!" or "Remove your IOUs from that server, or we'll shoot you!")

--- Whereas, if the issuer issues the currency first as colored coins, then the issuer cannot be held liable for those coins later being traded on various servers by various users. The issuer becomes totally divorced from the transaction servers. Just the same as the Federal Reserve being completely innocent of whatever their dollars are used for, once those dollars enter circulation beyond their reach.

--- Of course, the issuer still needs to provide bank wires in/out as a redemption of last resort, and he will need to follow KYC / AML for those wires, but as long as he does, most people will be able to get in/out of the system by buying/selling the colored coins from each other instead of having to go directly through the issuer. This is very powerful! Therefore I believe that colored coins are very important. Kudos to J.R. Willett!

--- This allows the issuer to operate legally, without any involvement in the operations of the servers themselves.

--- After that, I suggest using OT's basket currencies to distribute the risk of a single currency across multiple issuers, using jurisdictional arbitrage. For example, if there are 20 issuers in various jurisdictions who issue a GBP-based currency, we can combine those on OT into a single basket, such that no one is risking all their money with a single issuer.

--- I'm sure the recent victims of the Liberty Reserve heist, who just had all their money stolen, wish they had considered such possibilities, as I have been for the past few years.

Quote from: thoughtfan on May 24, 2013, 11:07:39 PM

PS. .75 btc sent your way (1NtTPVVjDsUfDWybS4BwvHpG2pdS9RnYyQ) towards bringing this to fruition quicker. Someone above suggested OpenCoinInc might try to buy this out too. May I request if you do get an offer and are tempted that you first give the community the opportunity to crowdfund a competing bid?

This may sound surprising to you, but I was actually talking to at least one Rippler before they started that company. When I was originally approached, it was regarding business development for Open-Transactions, but later they started the Ripple company instead. I even sent them a document of all my intimate thoughts.

In fact, since they already got to read it, I might as well make that document available to the rest of you as well:

http://ft.vm.to/files/britto/FT-thoughts.pdf

Enjoy!

That is one of the reasons I am Ripple-positive: because my whole goal with OT was to inspire related development based on these concepts. Thus, I view them as one of my "children."

We are all working towards the same goals. May a million currencies bloom!

Quote from: lexxus on May 25, 2013, 09:15:29 AM

What stops the OT server issue colored coins for fiat out of thin air, i.e. not backed by fiat but as debt?

The OT server will not issue colored coins -- currency issuers will. These issuers will be entirely divorced from the transaction server, as described above.

Once a user uploads colored coins (or regular BTC) to an OT server, the coins will not actually be received by that server, but will be stored in a multi-sig voting pool, which prevents that server from having direct control over those coins. Even if the server disappears, the coins are still recoverable.

The transaction server is also incapable of forging receipts internally. As I have said previously, inflation is the only possible crime, but that is prevented through an auditing protocol.

Quote from: VishwaJay on May 25, 2013, 10:06:25 AM

I'm also wondering about the potential for list-service emailing which would allow for multiple recipients based on an opt-in (a proof-of-work opt-in mechanism which might allow them to join a list of recipients who have all agreed using a similar mechanism)?

This sounds like a question better posed to the author of Bitmessage (Atheros.) My own project is for transaction processing, not messaging.