I had trouble following the Alice and Bob scenario. In particular, step 3 says:
The network knows that there are 100 times as many dollars as bitcoin.
How does it know that—is it because Alice withdrew 100 dollars from her wallet for each bitcoin she put into it? Could she have withdrawn a different amount? Does she have to have had more than 10k dollars in the wallet to start with, or did her bitcoins get converted to dollars?
Yes, it would be because she withdrew the 100 times as many dollars and it is the only wallet so far that qualifies as dollars. She does get to set the amount more or less arbitrarily with the first minting transaction. Later when Bob attempts to pull out 10k dollars from his own 99-bitcoin or 101-bitcoin currency wallet, he has to reference the dollar-currency created by Alice (possibly by address or by reference to the initial transaction signature) to connect the two kinds of dollars and render them fungible with each other. When he does that he has to prove that he has enough bitcoins to justify that number of dollars, based on recent history of minting transactions as well as whatever parameters the specific currency goes by, otherwise the network won’t approve his transaction.
Oh, I think I understand part that I didn’t before. The reason you put dollars in quotes in the original post is because Alice is essentially creating a new currency with her transaction and calling it “dollars”. If Bob uses the same name (and if Alice hasn’t cleared out her transaction with an equal and opposite transaction yet), then the proposed system will require him to use the same conversion rate.
Exactly right. I might have done better to create a fictitious name for the currency, but I figured “dollars” would be suitably generic because there are many different countries also using the term. Note that you can have unlimited different currencies each with its own rules and starting point. This could also be used to mimic stock or other intangible assets.
I had trouble following the Alice and Bob scenario. In particular, step 3 says:
How does it know that—is it because Alice withdrew 100 dollars from her wallet for each bitcoin she put into it? Could she have withdrawn a different amount? Does she have to have had more than 10k dollars in the wallet to start with, or did her bitcoins get converted to dollars?
Yes, it would be because she withdrew the 100 times as many dollars and it is the only wallet so far that qualifies as dollars. She does get to set the amount more or less arbitrarily with the first minting transaction. Later when Bob attempts to pull out 10k dollars from his own 99-bitcoin or 101-bitcoin currency wallet, he has to reference the dollar-currency created by Alice (possibly by address or by reference to the initial transaction signature) to connect the two kinds of dollars and render them fungible with each other. When he does that he has to prove that he has enough bitcoins to justify that number of dollars, based on recent history of minting transactions as well as whatever parameters the specific currency goes by, otherwise the network won’t approve his transaction.
Oh, I think I understand part that I didn’t before. The reason you put dollars in quotes in the original post is because Alice is essentially creating a new currency with her transaction and calling it “dollars”. If Bob uses the same name (and if Alice hasn’t cleared out her transaction with an equal and opposite transaction yet), then the proposed system will require him to use the same conversion rate.
Is that right?
Exactly right. I might have done better to create a fictitious name for the currency, but I figured “dollars” would be suitably generic because there are many different countries also using the term. Note that you can have unlimited different currencies each with its own rules and starting point. This could also be used to mimic stock or other intangible assets.