TL;DR

Bitnotes are:

multisig paper wallets
distributed empty as sheets of 3 notes
one key is under a tamper-evident scratch-off seal
second key is added by the customer
additional digital sig issued by the manufacturer is present if properly issued and backed

Keep it as a cold storage or pay with it. Verify it offline using a mobile app (not yet ready).

Samples (READY!) for testers and reviewers will be given out in November 2016
Production batch hopefully in Q2 2017
All necessary apps will be opensourced

Pics: https://imgur.com/gallery/jZfMD
Paper: http://www.bitnotes.org/bitnotes.pdf
Website: http://www.bitnotes.org
Twitter: https://twitter.com/BitNotesOrg

http://i.imgur.com/gxW88ful.jpg

Full post

Bitnotes - Trust-reduced physical bitcoins with offline verification

We believe that physical cash has its place even in the digital age. Thanks to Bitcoin it is possible, for the first time in history, to issue coins and banknotes with verifiable backing.

Today cash is not backed at all, being the result of a complex several decade lasting transformation of money, at the beginning of which stood a fraud of precious metal depositories. However, paper notes were originally backed in gold or silver. The holder trusted the money issuer - a bank - that there was an adequate backing in precious metal, which could be any time redeemed.

http://i.imgur.com/PXaPzXxl.png

Using Bitcoin as the asset for backing physical cash brings a tremendous advantage and shifts the cash to a qualitatively new level. The holder may redeem paper banknotes for the underlying backing any time and without assistance.

Surely you've heard of Casascius coins or Bitcoin Suisse certificates (looking like banknotes). Each of these and many other physical Bitcoins bear an integrated private key in the form of a tamper-evident box, which allows a non-stop withdrawal of Bitcoins and devaluation of the physical medium.

http://i.imgur.com/HapSJt2l.png

However, the issuer must know the private key to produce the physical Bitcoin. Therefore, the holder must continue to trust the issuer since the issuer may control the Bitcoins and, to be precise, devaluate the holder´s banknote or coin without a notice.

Thanks to Bitcoin there is an opportunity to verify the backing any time and a chance to really use it, but what remains is the fear of a future misappropriation of backing by the issuer. Who knows whether an initially honest issuer having copies of private keys will eventually resist own temptation, will not become the victim of a hacker attack or physical violence. The safety of Bitcoins seems then compromised.

That is why we have created BitNotes: Bitcoin cash which makes the holder the only person knowing the necessary secret information to deal with Bitcoins.

http://i.imgur.com/vBp7wCbl.png

In some respects, the issuer still must be trusted (see below), but used Bitcoins can no more be misappropriated.

How does it work?

The solution is built on 4 pillars:

Multisignature authorization scheme: Precisely 2 of 2
Tamper-evident technology
Security print
Digital signature

The manufacturer distributes an unbacked (blank) note with a private key integrated in the form of a tamper-evident box.

The second private key is determined by the customer holder, who sends already acquired Bitcoins to the multisig address.

As the next step, the holder asks the issuer to produce a digital signature to confirm that the given piece of note is backed. Afterwards the holder completes the note with the private key and digital signature and that way produces the note similarly to a check.

Supposing that the tamper-evident box is still intact, neither the holder nor the manufacturer can manipulate with Bitcoins. Both know only one of two required keys. However, the holder may any time decide to redeem Bitcoins, i.e. to scratch the tamper-evident box and move Bitcoins elsewhere. However, this will visibly devaluate the note.

Charged notes may be used for payments, where payees can verify the security features visually (especially the intactness of the scratch-off box, the presence of hologram, watermark, etc.) and verify the digital signature of the issuer. Both can be done offline.

Is this solution decentralized? Trustless?
No. We do not think that cash may be produced with a fully decentralized model of issuance and trustless nature of Bitcoin.

The issuer must always be a central authority, a manufacturer of physical product with security features. Although such an authority cannot misappropriate Bitcoins in our scheme, it still needs to be trusted and act honorably. In particular:

The product must feature the highest possible security using the security print as protection against counterfeiting
There must be only one copy of each note with particular serial number
The issuer may not conspire with another entity on the market in order to collect private keys of users
The issuer may not produce fake digital signatures on blank notes

However, there may be more bitcoin notes issuers active on the market under the proposed scheme and competing with each other. Being honest is the first prerequisite for business success. Violation of any of the above is easily detectable and does not indicate a systemic threat to all note holders. More likely it will result in loss of confidence in the issuer and its business death.

How does it look?

The whole gallery is here: https://imgur.com/gallery/jZfMD

Where to read more?

White paper: http://www.bitnotes.org/bitnotes.pdf

Feedback will be much appreciated!

troner

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