Today individuals who buy or sell bitcoin can do it directly with someone else who completes the transaction for both sides, usually outside the Blockchain. This would be a “wallet” agent of some kind, who accepts USD in exchange for a quantity of bitcoin.
A transfer of a value in bitcoin is one direction, one time. There is no waiting period to allow for errors and corrections, as in the ACH system for US dollars. The ACH system is also a fully electronic method, like the Blockchain, of moving ownership, but only bankers can participate. It is, however, a fully duplex payments system. Trade is always two-directions, even if the counterparty is a banker. As always in human society both sides exchanging assets receive satisfaction and ownership.
The Blockchain is one directional, and final. It is a permanent and auditable public record, which a closed bankers’ loop is not. The Blockchain element (asset) is irrevocably transferred to a new owner.
Two-way exchange of assets can be barter, but more sensibly and commonly it uses a common intermediate trade token. A conventional understanding of accounting creates the Unit of Accounting, which can be weight in some cases, volume in others. Governments intervene when they forcibly separate weight from the units and totals of accounting reports.
Your bank balance, which you access for trade by means of ACH or a debit card, is an asset to you and a liability to your banker. It is a special asset due to its liquidity (bid and ask are equal, ideally). When you buy groceries or gasoline, you transfer part of this asset and acquire the new ones. The value of this asset is in its utility as a tool of communication and agreement.
Macroeconomics was originally formulated memorably in Say’s Law, that “Supply creates its own Demand.” This is code for a detailed description of what could be called Quantum Economics. All human trade begins with ownership by you of an asset you can use to offer other people. With our social division of labor, we all must make these offers continually to live. The alternative to trade is authoritarian distribution and allocations.
The Payments System is an information system, but it has institutional scarcity (the “quantity of money”) and a method of assigning ownership to assets in detail. It is an accounting system, and a Unit of Accounting is central. The Unit of Accounting is no more substantive than a digit on the Blockchain, but it has separate scarcity. A further example of separate scarcity would be the “quantity of money” for UK Pound; for the Euro; and Renminbi.
Wall Street Journal weekend interview, Sept.23, 2017 by Tunku Varadarajan.
“Bitcoin is a way to have programmable scarcity. The blockchain is the data structure that records the transfer of scarce objects.”
“The internet is programmable information. The blockchain is programmable scarcity.” He elaborates: “All of these previously disparate things—from physical mail to television to music to movies to telephony—basically got turned into packets of information and got remixed by the internet. Plus things that we normally didn’t even think of as information—your Fitbit , your steps, your Facebook settings—became programmable.” It’s fair to say, he continues, “that the internet and all things downstream—search engines, social networks, ride sharing, and so on—have basically been the technological story of the last 25 years.”
“With the blockchain, everything that was scarce now becomes programmable. That means cash, commodities, currencies, stocks, bonds—everything in finance is going to be transformed, and aspects of finance baked into everything else.”
The scarcity of the information codified in Blockchain, which has an audit trail and coded ownership for each unit, has only a significant disadvantage. This proposal is one to reduce the cost of asset barter just as the Payments System is able to do – when paper currency and coins are used.
The utility of the Blockchain process is that ownership of units can be transferred, one way, with encoding to indicate size, new ownership, and provenance of authenticity [i.e. its history on the Blockchain, from mining to yours].
Visualize a computer chip with all the data of some quality of bitcoin, on a chip, and you can program the chip to be held in your name, your code. If you physically gave that computer chip to someone else, they could then also change the program of the chip to make it held in their name. A process could possibly be developed to link the chip to any connected computer and update records on the Blockchain. Information on your chip could be copied to the blockchain, and you could reprogram the chip to contain a new satoshi value. If you gave it to someone else it would serve as a medium of exchange for whatever programmed quantity it showed.
There seems to be little difference in this concept from what we know as the reloadable debit card, or gift card which might not be reloadable. One uses such a piece of plastic with an embedded chip to hold and allow the transfer of Units of Accounting (dollars, euro, et al.) and such a card can be used by a person different from the original owner (manufacturer; retail store; you