Here I'm just proposing using ripple to implement the web of trust.
But yes, debt as medium of exchange has been working well for most of our history:

http://blog.longnow.org/2010/04/22/debt-the-first-five-thousand-years/

What's wrong with debt?
The problem is a monetary base that needs debt to grow exponentially I think.
Also the privileges that banks currently have. Only their credit/debt can be used as a medium of exchange.
What we have today is kind of...
Banks only ripple where commercial banks need "reserves" of central banks credit and central banks always issue credit at interest.
It's really strange, the central bank charges interest on its IOUs (the currency). That's because the central bank doesn't produce anything and its IOUs are the only thing it can charge interest on.