Merging the bitcoin S/L with payments system

The works like current system. The user keeps bitcoin on the bitcoin S/L and payment exchanges takes place between  the S/L pit boss and the merchant. Bitcoins are not restored or retrieved from the master block chain  except on entry and exit of accounts.

So the bitcoin S/L has all the same scofflaw issues as the current fiat S/L banker. Reserve requirements may be set, the user needs a minimal deposit balance t all times, no interest charges can deplete the deposit balance.  Their is still a probability of scofflaw, a merchant exchange may take  chunk of the users loan and the user refuses to restore the deposit balance.

Merchants can keep an account at the bitcoin S/L, make it simpler to settle and the merchant earns interest. Then we get a one stop settlement, one transaction with both merchant and customer signatures. Any party cn move part of their balances onto the main BTC chain for trade into fiat. Or the bitcoin S/L can offer a fiat exchange pit as a side service.

But scofflaw risk never goes away in  distributed economy.  Sorry about that, but money is about taking risks and it is not all ledger technology.  Scofflaws are handled in he usual way, with the support of technology in the way of credit badges. The key to scofflaws is to keep their actions measurable and priceable so the money is there to chase them down.

Banks and merchants need share the scofflaw risk, the merchant can insist on biometric ID, for example, making the culprit easier to chase. Both can pay the scofflaw insurance. And it is in the inerest of bitcoin S/L pit boss to extend workouts for bankruptcies, which will happen.

A good idea, actually.  Peter Thiel would certainly fund this if someone sharp wants to bother with the pitch. He really can't go wrong, it is the TOE after all. One plan that makes sense is to build the S/L pit boss function, then just merge that with the Coinbase exchange. Coinbase should be using sandbox matching theory by now, if they were smart. So they my have already gotten all the components in place.