Select one type of non-RTGS settlement system that exists in the existing financial system and highlight how it could theoretically work, in a Bitcoin-centric ecosystem
The National Settlement Service (NSS) is a non-RTGS settlement system in the United States. Designated agents submit electronic files on behalf of participants in a clearing arrangement. The participants are depository institutions with accounts at a Reserve Bank. Once a file is submitted, verified, and processed the settlements are final. Each debit is checked against the account balance and intra-day credit of the participant in their Federal Reserve Bank. The NSS is owned and operated by the Federal Reserve Banks.
In a Bitcoin-centric ecosystem there are more than one way to implement such a system. In the simplest implementation everything could stay the same, except the currency used would be bitcoin instead of USD. This would require a supervisory body (such as the Fed) to own and operate the system. Participants would still have deposits (although in bitcoin) at their Federal Reserve Banks that would be used to fund debits. Most transactions could take place off-blockchain. Blockchain transactions would only be used when required, such as deposits or withdrawals from the Federal Reserve Banks.
Another way to implement such a system in a Bitcoin-centric ecosystem would be to design a system in which a supervisory institution would not be necessary. This is possible through the use of smart contracts, multi-signature accounts, and decentralized autonomous organizations (DAO) that could take on more sophisticated functions, such as liquidity management, credit granting (for a fee), or insurance.
The actual system would be a DAO itself, participants would fund their account to which the DAO would have keys. According to pre-arranged rules and algorithms, liquidity can be managed either by the DAO system or another custom designed DAO. Payments could be netted over specified intervals, and priority queueing would also be available. Independent DAOs or DACs (Decentralized Autonomous Corporation) could handle extending credit and/or insurance against default. The system would be open, so that competition would be increased. Anyone with sufficient resources could form a DAC and provide some value added services. Security and uptime would be a given as both the system and all other services would be decentralized and protected by elliptic curve cryptography.
There are multiple ways of designing and implementing a non-RTGS system in a Bitcoin-centric ecosystem. The limit is the imagination of the people coding the service. New infrastructure is not required as all communication would take place over existing IP networks. Competition would be fierce as the barrier to entry would be low and not limited to an exclusive club.
Swanson Tim, Great Chain of Numbers. http://www.ofnumbers.com/the-guide/