elebit
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June 24, 2014, 05:44:57 PM

That would imply exchanges trusting each other's IOUs. Can't happen, and rightly so (otherwise one single scam could cause a chain reaction). 

That's trivial to solve. How do you think other institutions in society do it?

The easiest way is that everyone desposits a sum with a trusted third party, which forms the top limit for IOUs. You could also distribute the third party role on several participants (where several needs to collude to cheat the system), if the trust is otherwise hard to build.

But even the easiest notary system would be a giant step up for today's exchanges.