Payward Inc, which you might remember as the group behind Ogrr.com, has submitted two draft proposals to the IETF which, if implemented, would form the framework for the legitimization of virtual currencies like Bitcoin, and mark the first steps toward the elimination of the archaic financial framework upon which we currently depend.
The first proposal concerns the creation of an Internet-based Market Identification Code (MIC), "with which the internet community can develop viable, interoperable alternatives to legacy financial systems."
The Market Identification Code (MIC)(ISO 10383) is a unique identification code used to identify securities trading exchanges, regulated and non-regulated trading markets. For examples trades that are executed in US NASDAQ market are identified using MIC code XNAS. The MIC is defined in ISO 10383  by International Organization for Standardization (ISO).
The MIC is used to identify the trading market in various communications like trade processing, settlement and other automated processes.
From Payward's first draft proposal:
An Internet MIC (IMIC) identifies an internet-based financial market.
No assumptions are made about settlement paths or the currencies or commodities exchanged on the market. IMIC provides a building block with which the internet community can develop viable, interoperable alternatives to legacy financial systems.
Technically, IMIC is an unofficial superset of the ISO's existing Market Identification Code standard [ISO10383] that is widely used for global identification of conventional financial exchanges. Against the ISO's MIC registry [MIC-REG], IANA assumes name space management rights for codes beginning with the digits 0-9 in order to obtain an adequate name space with which to provide a financial market registrar service for the internet community.
In recent years the internet has seen the emergence of online markets trading in both conventional and novel [BITCOIN] financial instruments.
Given this trend, it makes sense to propose a standard mechanism for the consistent, global identification of internet-based markets. IMIC provides such a mechanism.
Just as the Internet Protocol provides a mechanism for Address Allocation for Private Internets [RFC1918], so too IMIC provides a mechanism for address allocation for private financial networks. Private financial networks MAY include those operated associated with Massive Multiplayer Online Roleplaying Games (MMORPGs) or financial simulations.
Payward's second proposal is even more ground-breaking. What they describe is an evolved standard for identifying end-users of financial systems, i.e., the implementation of Internet-based bank accounts. Such a proposal would provide a structure upon which a virtual currency such as Bitcoin could satisfy the existing legal framework surrounding international financial transactions.
From Payward's second draft proposal:
An Internet IBAN (IIBAN) identifies an internet-based financial endpoint in a manner that is superset-compatible with the existing European Committee for Banking Standards (ECBS) International Bank Acccount Number (IBAN) standard [ISO13616].
An Internet IBAN (IIBAN) identifies an internet-based financial endpoint. No assumptions are made about settlement paths, currencies or commodities being exchanged, or trust relationships between parties. IBAN provides a building block with which the internet community can develop viable, interoperable alternatives to legacy financial systems.
Technically, IIBAN is an unofficial superset of the European Committee for Banking Standards (ECBS) International Bank Acccount Number (IBAN) standard [ISO13616] that is increasingly used in conventional global financial networks, including outside of its original home of Europe. Against the IBAN registry [IBAN-REG], IIBAN subsumes the position of National Numbering Authority (NNA) for the nominal [ISO3166] 'nation' of AA (the Internet) in order to provide a financial endpoint registrar service for the internet community.
In recent years the internet has seen the emergence of an increasing variety of online financial settlement scenarios. Such scenarios include web based commerce, high frequency trading (HFT) on stock markets, mobile phone 'in app' payments, mobile near field communication (NFC) physical proximity-based payments, online banking based bill payment, and interpersonal payments within Massive Multiplayer Online Roleplaying Games (MMORPGs) amongst others. These scenarios vary in at least the following aspects:
* Typical payment size
* Acceptable settlement latency
* Currencies or commodities supported
* Nature of trust relationships between parties (if any)
* Requirement for offline operations
Despite these differences, in each case the need remains to precisely identify each of the parties within a transaction.
Given this trend, it makes sense to propose a standard mechanism for the consistent, global identification of internet-based financial endpoints. IIBAN provides such a mechanism.
Conventional financial settlement systems typically assign endpoint creation, maintenance, and identification responsibility to large incumbent players (for example banks, major telecommunications carriers, online payment processors, credit card companies, stock exchanges or brokerage firms). In addition, financial settlement processes themselves typically occur via a relatively small number of relatively centralized networks.
Whilst this centralized approach is understandable from an historic perspective, today its age and drawbacks are becoming more visible:
* Systems integration and maintenance overheads due to disparate endpoint identification schemes, centralized endpoint identifier validation and differing prerequisite communications security configurations (for example, TLS client certificates [RFC5246])
* Poor fault tolerance. Incumbent players and their physical, legal and communications infrastructure represent undesirable Single Points of Failure (SPOFs) that act to reduce system availability. Classic examples of this are banking services that suspend over the weekend, and unpredictable international
settlement delays due to differing holidays affecting financial services in foreign jurisdictions.
* Potential for abuse. Attackers (or indeed individual nation-states or organizations wihin conventional centralized financial systems) may consider temptation for abuse too great to resist. Abuses observed include constant, passive, warrantless surveillance of entire populations [SWIFT2], illegal financial blockade [WL] [WL2] and abusive asset seizure [WSJ].
It is hoped that IIBAN will assist the internet community to develop systems that move beyond the above limitations.
Using distributed hash tables (DHT) or a similar mechanism it may be possible to provide dynamic identifier name space management within a financial network itself, such that individual users can self-issue IIBANs and have them corroborated by other network participants.
The primary benefit of this approach is that it is completely decentralized, thus avoiding the issues associated with centralization (described above).
You've probably heard the suggestion that Bitcoin is to finance what the Internet was to publishing. We're now starting to see why that just may be.