The evolution of a dilute electron-positron fireball is calculated in the regime of strong magnetization and very high compactness (l ~10^3-10^8). Heating is applied at a low effective temperature (< 25 keV), and the fireball is allowed to expand, so that the formation of a black-body spectral distribution is inhibited by pair annihilation. The diffusion equation for Compton scattering is coupled to a single-temperature pair gas and an exact (trans-relativistic) cyclo-synchrotron photon source. We find that the photon spectrum develops a quasi-thermal peak, with a power-law slope below it that is characteristic of gamma-ray bursts. The formation of a thermal high-frequency spectrum is checked using the full kinetic equations at l ~ 10^3. These results have several implications for the central engine of GRBs, and the mechanism of energy transport. 1. Baryon rest mass carries less than ~ 10^{-5} of the energy flux at jet breakout inside ~ 10^{12} cm from the engine, with most carried by the magnetic field. 2. This degree of baryon purity points to the presence of an event horizon in the engine, and neutrons play a negligible role in the prompt emission mechanism. 3. X-ray flashes are emitted by outflows carrying enough baryons that the photosphere is pair-depleted, which we show results in faster thermalization. 4. The relation between observed peak frequency and burst luminosity is bounded below by the observed Amati et al. relation if jet Lorentz factor ~ 1/(opening angle) at breakout. 5. Stellar models are used to demonstrate an inconsistency between the highest observed GRB energies, and a hydrodynamic nozzle: magnetic collimation is required. 6. The magnetized pair gas is dilute enough that high-frequency Alfven waves may become charge starved. Finally, we suggest that limitations on magnetic reconnection from plasma collisionality have been overestimated.
Date added: Thu, 10 Oct 13