Silk Road forums
Discussion => Newbie discussion => Topic started by: ninjabanker on August 22, 2013, 04:09 am
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The Internet Freedom Bank (IFB) is a proposed distributed,
censorship-resistant bank that can fill the vacuum left by Liberty
Reserve in terms of permitting the type of private, neutral, and
unobstructed electronic fiat transfers that the legacy banking system is
legally unable to provide. The purpose of the bank is to provide
cryptocurrency exchanges with fiat liquidity until such time as no more
demand for fiat currencies exists.
The organization itself is run by a network of volunteers who can elect
to operate under their legal names or pseudonymously. Organizational
roles are generally horizontal, except for a group of trustees. The
trustees should be 7-9 individuals, not more than half of whom can be
anonymous, who must live in different legal jurisdictions. The only role
of the trustees is to hold the private keys necessary for the bank to
distribute its BTC assets, an operation which should be infrequent. The
private keys will be split such that (n/2+1) trustees must agree to
approve any outgoing transaction.
Unlike most banks, the IFB will not hold reserves in a central location.
Instead, individual members all over the world are responsible for
holding deposits and redeeming bank-issued electronic notes. Customers
who want to make a deposit to the bank must find a member near them
willing to accept fiat. When a customer deposits fiat with a member,
their account is credited with the appropriate balance. Withdrawals work
in a similar fashion. A customer who wants to withdraw fiat must find a
member willing to redeem their balance.
This basic structure will allow the bank to offer account denominated in
any currency or commodity, as long as members exist who are willing to
hold that currency or commodity in reserve and remain available for
redemptions. For the rest this discussion will refer to
dollar-denominated accounts, but the same principles apply to all other
currency (or precious metal)-denominated accounts. Also for the
remainder of the discussion "dollars" will refer to traditional USD (in
cash, legacy banking system instruments, or mainstream services like
PayPal) and "vUSD" will refer to USD-denominated balances in the IFB system.
Members join the bank by forming a reserve agreement with the IFB. For
example, Alice might sign up as a member, agreeing to hold $1000 in
reserve, she will make available for redemptions via in person trades,
ACH transferrers, or mailed money orders, within 72 hours of any request
she receives. When the agreement is accepted, the IFB credits Alice's
account with $1000 in vUSD, which she is free to spend, with the
understanding that every vUSD she spends is one she is obligated to
redeem in the future.
In order to give Alice the incentive to uphold her agreement, and to
give customers and other entities a reason to trust the solvency of the
IFB (and by extension, the validity of vUSD), the IFB requires Alice to
post collateral in order to approve the membership agreement.
The IFB trustees hold collateral in the form of the organization's BTC
reserves. Each currency for which the IFB offers deposits is assigned a
single, publicly-known bitcoin address. Members deposit their collateral
to this address, so any interested member of he public can independently
verify the bank's reserve ratios and thus its solvency.
In order to determine the amount of collateral necessary for a given
reserve agreement, the IFB will conservatively value bitcoins at 95% of
the 200 day simple moving average of the volume-weighted exchange rate.
Based on past history, the 200 day SMA for the USD-BTC exchange rate
rarely decreases significantly, so this should give the bank plenty of
opportunity to maintain solvency.
The bank will periodically check to see which members have excess
collateral based on improvements in the exchange rate. Those members
with excess collateral could request a BTC refund, or could receive
additional vUSD credit. The bank will never issue vUSD to a member
without an explicit agreement, because the member is responsible for
holding as many vUSD as they have been issued in reserve to fulfill
redemption requests.
A member closes their account by returning all the vUSD they have ever
been issued back to the IFB, who then returns the collateral and takes
the vUSD out of circulation. If a member does not possess enough vUSD to
close their account, BTC from the reserve address is sold on the open
market for vUSD to make up the difference, and the amount of BTC sold is
subtracted from their collateral. This is also the same procedure that
would be used if a member defaults.
In the event of a prolonged reduction in the BTC exchange rate, the bank
will request additional BTC collateral and/or return of vUSD from its
members prior to insolvency in an action similar to a margin call.
The computing infrastructure for the IFB will be built on Open
Transactions, with servers distributed around the world both in the
public Internet, and in the major anonymization networks. vUSD will be
issued by the IFB, and will be tradable on any OT servers and any other
services which implement the OT protocol. By adding OT support to their
platforms, cryptocurrency exchanges can allow their users to move fiat
between their exchange accounts and their IFB balances. This his how the
IFB will provide fiat liquidity to the cryptocurrency exchange ecosystem.
IFB customers need an easy way to locate IFB members near them, or
otherwise willing to exchange dollars to and from vUSD. In order to
accomplish this, the IFB could potentially work closely with LocalBitcoins
(LB). IFB members will list on LB just like traders there already do, and the
process of conducting trades will be identical to the existing process,
but instead of trading to and from BTC, they will trade to and from vUSD.
Bob is a LB user who wants to buy bitcoins. He logs on to his account
and sees that his wallet contains $0 and 0 BTC. The first thing he does
is find a trader willing to load up his dollar account, either via in
person cash trade or some type of online trade (the same as the two
existing trade types on LB). Once Bob provides this, the seller releases
the escrow and Bob now has a dollar balance in his wallet. From this
point, Bob can simply click the "Buy Bitcoins Now" button and the site
will execute a market order behind the scenes and credit his BTC
balance, or he could navigate to the trading section of the site and
conduct his own trades. When he decides he wants to cash out some
dollars, he does the exact same process in reverse: finding a trader
willing to buy his vUSD for a local cash or online sale. IFB members are
allowed to set their own commission on trades, with LB taking their fee
as well, in the same way the site is already structured.
Should LocalBitcoins prove to be uninterested in such an arrangement, it
would be possible to partner with another site, or create a new site
specifically for the IFB.
The advantage of restructuring LB in this way is that it allows the site
to focus on the P2P interactions, while the currency trading is taken
care of by a dedicated engine (perhaps based on Buttercoin). With the
IFB providing liquidity and LB providing the customer interface, the
Bitcoin ecosystem will become much more resilient to legal and banking
attacks. This arrangement allows the members of the IFB to leverage
their collective dollar liquidity, which is a resource that is too
distributed to be effectively regulated or censored. As long as
individuals are allowed to conduct financial transactions with other
individuals, the IFB will be able to manage large dollar flows without
relying directly on the legacy financial system, in a manner that would be
extremely difficult to regulate or censor.
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why did you sign this message nobody cares you arent dpr
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why did you sign this message nobody cares you arent dpr
LOL And it's their very first post too. What exactly are they supposed to be verifying if we've never seen them before to begin with??
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lol i know right, its weird. i didnt read it anyway its too long
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why did you sign this message nobody cares you arent dpr
LOL And it's their very first post too. What exactly are they supposed to be verifying if we've never seen them before to begin with??
Have you ever heard of this things called the "future"?