Can there be dollar version of bitcoin?

Question

Why can't there be a p2p software that works like bitcoin but you load it with dollars?

Can't something be made that's just p2p dollar transfers and not deal with a speculative new currency and its volatility?

Answer 1

That would be absolutely possible. In fact, there is a cryptocurrency out there called "Hashdollar" which is trying just that. I didn't look into it yet but if you tie the value of the Hashdollar to the US Dollar, you could use the p2p network to make "real" dollar transaction. The problem here is though, who will guarantee for the value of the Hashdollar? The value of Bitcoin is mostly made by market mechanisms but if you tie the value of a crypto currency to the dollar, you would need to have some authority to guarantee for that value and I do not see that happening.

Of course the feds could just come up with their own version of a cryptocurrency (eDollar?) and this might actually happen very soon.

Hashdollar: https://bitcointalk.org/index.php?topic=368237.20

Answer 2

The first problem is that the supply of USD is controlled by the Federal Reserve, not the source code of a cryptocurrency.

Second, since the cryptocurrency does not control the supply or is even permitted to issue USD, the cryptocurrency would have to owe USD. As Jori has already stated, that would be centralized thus difficult and risky.

The speculation & volatility could be removed if a cryptocurrency included some means of price stability. Then, it could increase its supply in response to deflation/rising price in the market (such as the per USD spike) and remove its supply in response to inflation/decreasing price in the market (such as if Bitcoin is a forex bubble and pops).

Otherwise, it could be argued that cryptocurrencies have already surpassed traditional debt based paper, coin, and liability money since cryptocurrencies are backed by nothing except trust and their own supply, so there's never a fear that Bitcoin bought too many long term Treasuries right before their interest rates rose, causing a collapse in USD.

Answer 3

To a certain extant, that's exactly what Ripple and its network are supposed to be:

You "transfer" euros, or dollars, yens, yuan or whatever from one account to the other thru the network, always getting the best exchange rate that is possible at that moment. It has its own currency, the aptly named "ripple", but it's meant more to prevent people abusing the system (i.e. sending US$ 0.01 back and forth to overload it) than to be used as a currency per-se, since an amount of ripples are destroyed with each transaction and never replenished for all possible ripples have already been mined (a contentious point to some people).

I put "transfer" in quotes for technically you're not transfering money, but rather debt - the system works as a gigantic network for people sending "IOU" notes to each other, taking debt in their friend's name, and settling their debts against the IOUs of their lenders. It's really interesting though a bit complicated, has the property of working "with" the current banking system as opposed to "outside" of it - some people see this as an advantage, others as a profound disadvantage :)

Right now it's closed source though its creators claim they'll release the code sometime in the future. I guess due to contractual requirements with the banks this will be difficult to accomplish, nonetheless it's still a very interesting development, and the only distributed currency (as the gateways are distributed, rather than the miners) that's not derived from Nakamoto's original code.

Answer 4

What you are describing can be done on top of Bitcoin itself using colored coins.

With colored coins, an issuer would have a reserve in USD, and issue a "USD-coin" per every USD they have in the reserve. They can then accept deposits from people, and give them USD-coins in exchange. They also offer to redeem every USD-coin for an actual USD.

Those coins can then be sent, received and used for payments like "normal" Bitcoins.

Because those USD-coins are backed by a reserve, they can't be minable, and therefore can't live on their own secure Blockchain. This is why using the actual Bitcoin blockchain as the infrastructure combines best of both worlds.