I'll see if this can be remedied.
Modify 3 as follows, changes in red. These changes also ensure that the interest rates are 100% risk free, with the risk now being spread equally over all of the users of the currency, not just those participating in bond markets. I have an idea for further simplifying things by combining 3 and 4, but I'm not sure I have the will power to spend further time arguing here...
Okay... After reading, this is all technically feasible and plausible. Except for the last point.
And the last point is, what benefit does the community at large derive from this activity that makes it reasonable for them to freely choose to act as guarantors? Why would they not prefer another cryptocurrency that exposes them to no guarantor risk?
BTW, I am delighted to have someone who actually knows something about financial markets here, and I sincerely want to understand how that knowledge can be used to improve the state of the art in cryptocurrency. I appreciate your work and knowledge, and sincerely thank you.
I don't intend my responses to be belligerent or argumentative, but instead keep asking questions because much still isn't clear to me. I don't understand for example the motivations of people who would choose to use an over-collateralized market in debt instruments over the option of using the collateral itself.