[shredfvz]

A solution exactly like what you've just described is in the works. Zyocoin is a P2P Bitcoin exchange utilizing multi-signature issued "debt", where debt can be BTC, USD, EUR, or bananas.

Real contracts are created with verifiable blockchain-based timestamping.

Debt is issued with colored coins.

Ripple attempts to do something like this but I feel it must be done natively on the blockchain to see widespread acceptance.

Python programmers wanted. Send a BitMessage to BM-oq7iLGGH7e7JJaqiTcUj1qGQYxeZVo65b; IM [e-mail] or join #zyocoin on Freenode.

[eric_bullington]

Are you using Entangled? I've looked at doing the same thing, also using colored coins. But it's going to take a lot of work + luck to go up against someone as well-monetized as Ripple.

Plus, the technical issues are not even the biggest challenge, it's forming and managing a clearing house in a decentralized manner. I'm not sure it's possible. But someone has to physically conduct the exchange of dollars, euros, or bananas. Otherwise, you've just developed a p2p version of localcoins.