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Looking over the documentation (https://ripple.com/wiki/) there is a lot of information about the protocol that is not explained. There is certainly nowhere nearly enough information to produce a competing implementation. A lot of important details are swept under the rug. For example, in "How it works", it is claimed that "Ledgers are really hash trees". No further explanation is given.

This nonsense is repeated all over the documentation, with promises that "mathematical proofs are coming soon." It is said that the ledger achieves consensus between decentralized nodes without proof of work (a bold claim) and yet, no step by step algorithm is provided. The closest it comes to anything resembling detail is that a transaction is either "passed", "soft failed", or "hard failed." With no other information provided. Answers to important questions, like how Ripple peers are discovered, the messages passed between nodes, who manages the central list of "unique nodes" (for every client's UNL) are totally missing.

The original Bitcoin paper from Satoshi was amazing. It provided enough algorithmic information to implement a baseline protocol yourself, and addressed almost every important issue that one might come up with when first exposed to Bitcoin. On the other hand, Ripple is almost completely opaque and comes to us not in the form of a rigorous paper but a deployed implementation that we are supposed to "just trust." Looking over the Ripple forum and reading some parts of the wiki, it seems that Ripple credits ("XRPs") are distributed by hand by the administrators of the system? In what way is this decentralized?

In the other Ripple thread, people are fawning over this rubbish like it's the second coming of Jesus. I suspect these are non technical individuals who have fallen in love with the idea (which is decent) but don't have any inkling of whether or not it can work at the technical level.

It's in beta and so it isn't complete.
You should wait the release here: https://github.com/rippleFoundation/ripple

Yeah nice job stating the obvious. Bitcoin is also in beta and yet we know about every intricate detail.

i have to agree with OP altho i base this off the info gleaned from the Ripple website and haven't bothered to hunt for more detailed info.

i don't get the concept and the lack of granular detail MBigg is complaining about seems valid.

Agree with OP. I also think there lacked some clear cut info about how it actually works on a technical level.

If you wanna make a fair comparison you should compare it to how complete the documentation of Bitcoin was in 2009.

Anytime i feel smart around normal people, i come on here and get brought back down to earth by the sheer amount of brilliance that occupies this forum.

Never ceases to amaze me. Always so far above my head lol

Agreed. Here's the original paper, published in 2008:

Bitcoin: A Peer-to-Peer Electronic Cash System (http://bitcoin.org/bitcoin.pdf)

Every revolutionary idea is explained, along with an analysis. This is completely absent for Ripple.

Yeah, well, it doesn't contain "every intricate detail" and it isn't "enough information to produce a competing implementation".

in the ECB paper on Bitcoin, which alt currency platform was the one that allowed selective "inflation" of the money supply by its owners?

I disagree. There's enough there to where you can create your own client that functions similarly to Bitcoin. It might not have binary compatibility (i.e. the messages passed between peers may not be compatible, and the format of the blocks would probably be different). But all of the "difficult" problems are explained in the paper and this is the guts of Bitcoin.

Compare this with Ripple, where every "difficult" problem is just swept under the rug with a non-explanation in the wiki.

I think that the simpler answer is that they are probably trying to avoid that someone come up with a competing implementation/clone before of their own product. (if you want to speculate on the "bad" view)
It's probably a good idea, and they want to be sure to take this part of the market before anyone else.
When they will be sure that the product is secure from bug/hacks and they have a good marketplace, they will release all sourcecode for servers/notes and it will become completely decentralized.
This can already happen in the next few weeks.

Anyway, this is just speculation now, but if someone is already jealous it is his own problem.

OK, I get your point. I still think that you overreact a lot when saying that is has "MAJOR problems" (or as in the original subject "flawed implementation"). So yes, don't put all your money on Ripple right now. Wait for a bit, make sure that they release the code as promised, ask questions about the protocol and have them update the wiki.

Did you know that there is a hard limit of only 500 million accounts? And that once this limit is reached it is no longer possible to create transactions? Even with the little documentation that is there, this fact can be factored out:

- Limit of 100 billion Ripple credits
- Required to have 200 Ripple credit balance in an account
- Transactions require Ripple credits

Hardly an insignificant issue.

I got the impression that it conveyed to me a decent gist of how it does consensus, except that it did not seem really clear on how to deal with someone trying to instantly doublespend such as by connecting to two nodes very distant from each other in connectivity telling each one a different place to spend the same coins to.

Thinking about it it seems to me it could be useful to flag the account doing the sends as somehow corrupt or problematic rather than to penalise other nodes for happening to prefer the spend they heard about first; otherwise both nodes might end up thinking they have the right one and the other has a wrong one.

So yeah I can see that some detail seems to be missing. I don't remember seeing anything about flagging accounts for such things, just about whether to trust nodes about items nodes have heard of.

I also agree that the desire to have their personal 20 billion ripples aquire value and their company's 80 billion ripples (minus however many it gives away) aquire value does seem decent motive for trying to establish "network effect" before all the altripples pop up.

As to the limit of 500 million accounts, that would only be if reserve requirement per account stayed at 200 ripples per account forever. Aren't reserve requirements, like transaction fees, modifiable?

-MarkM-

Exactly, these important details are not explained. I sure hope reserve requirements aren't modifiable or else they could just be lowered to zero and then they would serve no purpose to prevent spam.

i would think that the proof of work principle would need to be applied to Ripple to encourage correct behavior.

XRP aren't an asset as Bitcoin, their main function is to avoid spam on the network.
I won't be surprised if there will be the possibility to have more than 100 billion XRP in the future if they are needed.

No, I didn't. And I don't think that you know that either since, as you pointed out, not all details are explained. It's just that my initial reaction to this is not to start alarming topics but to ask them to clarify things. They are Bitcoiners you know, they are around for questions.

Regardless of their original purpose it seems to me that they have the all necessary properties to be an asset like Bitcoin.


Is this pure speculation or is there some reasoning behind it? I thought that the number of existing XRP would be in the "genesis ledger" and not possible to change just like that.

Not all details are explained but it is written that there is only 100 billion XRP ever, and that 200 XRP is required to be held in an account at all times.

References:

https://ripple.com/wiki/Reserves
https://ripple.com/wiki/Ripple_credits


This contradicts the wiki (https://ripple.com/wiki/Ripple_credits), which states:

"When the Ripple network was created, 100 billion XRP was created. The founders gave 80 billion XRP to the OpenCoin Inc. OpenCoin Inc. will develop the Ripple software, promote the Ripple payment system, give away XRP, and sell XRP."

Clearly, XRP can be sold. If you sign up for the beta and explore their interface, XRP appears just like any other currency unit.


If XRP can be created by the founders, then it dilutes the value of existing XRP units. We know that XRP have value because it says right in the wiki that they can be traded for other currencies. They are just another currency unit according to the interface.

I'm speculating that there is an open possibility that their number will increase if needed to make the network working better. (miners?)
XRP can be a good exchange system, because they will have a value for sure, but they won't be a good asset, they won't be good to safe money/value for a "long" time. (just speculation...)

https://ripple.com/wiki/Ledger
https://ripple.com/wiki/Hash_Tree

Feel free to ask for details. I'm happy to improve the wiki. From the wiki:


This is spread throughout the wiki. You're right that's not concentrated in any one place.
https://ripple.com/wiki/Continuous_Ledger_Close
https://ripple.com/wiki/Ledger_Cycle

Once they're distributed, those who hold them can do whatever they want with them, and nobody can create new ones. Large numbers of them will be given away soon.

There were several sets of technical discussions about this. Some of them are here: https://ripple.com/wiki/Unedited_Notes

I'm happy to answer your questions and improve the wiki.

The first part is correct. There are 100 billion XRP in the genesis ledger and XRP cannot be created. It's not quite correct that 200 XRP must be held in an account at all times. Rather than having fees for creating accounts or maintaining ledger entries, Ripple uses a reserve. A reserve is XRP that you cannot transfer but that can be used to pay transaction fees. This also makes it harder to jam yourself into a situation where don't have enough XRPs to perform a transaction. The reserve is enough to cover 2,000 transactions at current rates.

They can be bought and sold, but their primary purpose is to pay transaction fees to protect the network from denial of service attacks and spam transactions.

In theory, a critical mass of users of any system can change the rules. However, there is no mechanism to create XRP other than a fundamental change in the system. While this could be done in principle, just as Bitcoin could be modified to keep the block reward at 25 forever, this would severely undermine confidence in the system and it's hard to imagine everyone needed to make such a change being willing to do so because of the damage it would do.

This is so dumb.  Someone please show me the light.

I see NO POINT in Ripple being decentralized like Bitcoin.

Ripple is a way to transfer debt.  But debt only has value when there is a legal framework to collect it.  That is, a centralized legal framework that can and will refuse to help you collect on debt that hasn't been legally transferred to you.  Until somebody passes a law to the contrary, using Ripple is not recognized by ANY legal system as a valid way to transfer debt.

The biggest Achilles heel to Ripple is not that someone will shut it down if it's not decentralized.  It's that if someone pays you with Ripple debt, and you try to collect on it, and the person refuses to pay, YOU ARE SCREWED.  The debt is worthless.  At best, you can pass this worthless debt on to another bagholder before the music stops.  It's no revolution, it's a way for people to pay people with bits that are worth nothing.  May as well just use SolidCoin.

When someone defaults on repaying lunch money, you suck it up and move on.  But when it's $100k, it's totally a different story.  You won't use Ripple because you might not get paid.  So it is good for nothing more than lunch money.

The world isn't demanding a new decentralized database for tracking lunch debt, certainly not one where you have to go find and pay for some XRP on the market before you can even use it just so your activity doesn't look like spam.  You may as well just use PayPal's iPhone app and click "Request Money".

I think you misunderstand how people pay you. They pay you by making entities that *you* choose owe you money. It's just like the regular financial system -- when you pay me $50, you do it by making *my* bank owe me $50 more. The only entity I ever have to collect from is the one I've chosen to trust.

The idea is more or less to be a nearly-free, decentralized system like PayPal, except with no chargebacks, no entity that can force arbitrary policies on you, easy cross currency transactions, and so on.

And if I don't trust anyone that would make this system irrelevant? Also what does prevent the entity I chose to trust to go out of business?

Scammer's paradise:

Build a reputation like pirateat40 (he had over 100+ positives on OTC)
Issue a million IOUs
Run

So each Ripple's IOU would need to be rated..

So I would rate for an example:

casascius's IOUs at 100%, each $1 owned by him I would give $1

But for pirateat40's IOU at 0.01% (just an example) I would give only 1 cent.

Basically in a nutshell each IOU would have its own exchange rate....

Yea, it looks like a trading platform for debt, not a payment system.

edit: Of course that gets a lot more complicated since each IOU could be dominated in a different currency.

So how any casascius's dollar dominated IOUs would you give for theymos's bitcoin dominated IOUs.

Hmm..

Pretty much. If you literally don't trust anyone to owe you anything, then you can't transact in fiat currencies using Ripple.

It depends just how risk averse you are. You could stick to just regulated financial entities insured by major governments. You could stick to only individuals personally known to you with whom you have "withdraw on demand" agreements. Any one of them wouldn't be able to do you much harm.

This really wouldn't work. You wouldn't extend significant trust to anyone unless their trust network was worth more than their total trust. So anyone who did this would do it at their own detriment and to your benefit. For example, say you've used Amazon for a few years. When you pay Amazon for an order, do you worry that they'll run off with your money and not ship your order? Even forgetting the possibility of a chargeback, you know that Amazon's business is worth much more than the total value of all the money they're holding at any one time. Plus, even the cost of them betraying you on one typical order will still leave you with a net plus for having trusting them because of the accrued benefit of hundreds of fulfilled orders.

The biggest threat would be a gateway going out of business due to a theft or an insider running off with all the customer's money. If you're very risk averse, don't use the system as a store of value for fiat currencies.

We've tried to design the system so that gateways have very strong incentives to run a solid, reliable business.

There's really no difference. Checks are used as payment and all they do is trade debt.

Let me give you a different example... PayPal.

You have used PayPal for few years.
Do you worry that PayPal will run off with your money or lock them forever?

Yea. Exactly.

Also I have 2 BTC locked up in MtGox.. So much for their IOU. Let's see how AML will affect these IOUs.

Right, but that's because PayPal can default on just you. Do you worry that they'll choose to shutdown their business while your money is there? Probably not, especially considering there's an entire economy that only exists because of them. But if you did worry, the solution would be to keep as little money with them as possible, not to miss out on the economic opportunities PayPal has created.

A ripple gateway can't stop you from trading IOUs that you hold to others who wish to accept them.

This is the nice thing about the way Ripple IOUs work -- unless the gateway stops paying everyone, their IOUs should hold value. And if the gateway stops, or slows, redeeming, it will become quickly obvious as the exchange rate on their IOUs changes.

Of course unless they issue unique IOUs to you. Since anyone can issue IOUs then a company could have many different types of IOUs.

Which is leads me to the next question.. How do I know which IOU is owned by who? Let's say I trust theymos, but how do I know that the IOU that is given to me is actually his IOU?

If you only trust theymos, then he is the only person who can owe you money. You cannot hold any other kind of IOUs. Nobody can give you an IOU that you haven't chosen to accept. Internally, the ledger holds a "ripple balance node" for a pair of accounts and a currency. So if you trust theymos to owe you up to 50 USD, there will be a "vampire/theymos/USD" node in the ledger with a credit limit in the "theymos owes vampire" direction of $50. If that's the only trust you have extended, the only way I can pay you $10 is to make theymos owe you $10 or to you make you owe $10 less to someone you already owe money to.

People generally form a ripple payment transaction by knowing who they want to pay and how much. "I want to pay vampire 10 US dollars". To do that, I have to make someone you've chosen to trust owe you $10 more than they do now. I can do that by exchanging any IOUs that I hold or any credit that's available to me. But you decide which IOUs I have to get to you. I can, of course, always pay you with your own IOUs if I can find them. So if I can make you owe $10 less to anyone you currently owe money to, that's a $10 payment to you too.

They couldn't issue unique IOUs to you unless you had agreed to accept them. You can't give anyone an IOU they haven't agreed to accept (other than their own).

Thanks for making an appearance and offering to address some areas where information is scant. I will try to consolidate my list of question marks but for now I wanted to step in and say thanks.

I see that there is a second line of criticism here that claims that the concept behind Ripple is unsound. Let me distance myself from that - Ripple the concept sounds great (more on this below). But Ripple the implementation / specification seems lacking. The impact of a finite amount of XRPs seems hard to determine. Does this mean that eventually it will be impossible to produce new transactions? Again why are 80 billion XRP kept on reserve? Perhaps I just need to re-read the wiki a few more times to have a clear picture but it is not obvious how to analyze the system for correctness given only the published docs.

Whats to stop someone from creating a bunch of accounts and using them to spam the network by creating new bogus currencies?  Is this what the XRP are for? What prevents someone from making a new currency that has the same name as someone else's currency? Who controls the master list of Nodes? How does a node add itself to the list? How do you prevent someone from spamming the list of Nodes? Where is the "order book" (global list of bids and asks for all currencies)? How does someone place orders in the book? What happens when an order is filled? What prevents someone from spamming the order book? Is it guaranteed that everyone has a global view of the order book? How does this scale? etc... These are the kinds of questions that the wiki doesn't answer. There's no way to do an attack analysis because fundamental algorithms are not described.

It seems that the authors of the Ripple software have developed a fully decentralized distributed database that has read, update, and write capabilities (is this true?) Furthermore they have designed it to be resistant to spam, in a way that doesn't require proof of work. This is what's known in computer science as a hard problem. Just solving this problem in a straightforward and robust fashion would be a significant advance (look at the complexity of Freenet, which still has issues). I find it hard to believe that this difficult problem was solved in such a short period of time.

As a concept, I think Ripple sounds great. The trust is definitely an issue but that is not something that Ripple claims to solve (nor should it). In my opinion the biggest value is that there can be an network of independent local nexuses that handle the conversion to and from fiat. Instead of wiring some ridiculous amount of money to an overseas bank (hello MtGox) an individual or business can deal face to face with a local entity. This has the power to address Bitcoin's biggest weakness (the exchanges).

My beef is not with the concept, but with the lack of details about the implementation. And it is exceptionally frustrating that a lot of people are jumping on this bandwagon and singing its praises when we don't have any sort of analysis to determine if the required algorithms are workable or scalable.

With all due respect, I think you misunderstand what it means to "make" someone owe someone money.  You can't just make someone owe you money, only they themselves can make themselves owe you money by agreeing to pay you.  There is a legal concept of assignment of debt, but a legal system also decides how that is to be done.  Absent a law saying that the Ripple system is how it's done, nothing in the Ripple system has the legal authority to effectuate an assignment of debt, or to make anybody owe anybody anything.


It's totally unlike the regular financial system.  When I pay you $50 to your checking account, I do so by adding the balance to a demand deposit account, which by law they must pay you the balance on demand.  The legal framework that compels them to pay you is already in place.  If the bank one day doesn't "feel" like giving you your money, a court will ultimately tell them they are wrong.


The problem is that it's like a decentralized screen-door submarine.  Just because it is decentralized doesn't mean it will work.  A debt whose repayment is voluntary and totally optional isn't a novelty, and isn't even a debt.  It's nothing.  Without an entity that can enforce arbitrary policies on you (like requiring you to settle the debts you agree to), the purported debts one can create with Ripple are totally worthless.

Hmm...I'm not entirely sure this is true. Consider the case where someone provably posts a fidelity bond (using the Bitcoin destruction method, or the secure way of giving away fees to miners). They could then self-issue credit whose total value is less than the value of the bond.

Then you have the equivalent of Bitcoins.  In that case, just pay someone with Bitcoins, and never mind the whole thing about debt.

This would be like the fiat-world equivalent of a "secured credit card", where you are really borrowing (and paying interest) on your own money.  It's for people who have ruined their own credit to try to rebuild their credit... nobody in their right mind would ever use a service like this for any other reason as they'd simply be paying interest to a bank to use money that is already their own.  One may as well use cash or a debit card, and throw out the pretense that they're using "credit" or "debt".

This is definitely not the equivalent of Bitcoins because after the debt is extinguished you still have the fidelity bond which can be re-used. This allows the the sum of the values of all transactions using the self-issued credit to greatly exceed the value of the bond, as long as at any given time the amount of self issued credit is below the fidelity bond (or else the issuer has an incentive to cheat).


From what I read, it seems like the "Nexus" is the key. You have to trust your local Nexus. You go over to them and exchange your Bitcoins for their self issued credit, which then travels around the system in a series of swaps. Eventually, someone else in your neighborhood receives some of those local Nexus credits and they want to cash out, so the Nexus hands out the previously collected Bitcoins.

In theory this is a great way to handle the decentralization of conversion to and from fiat. You go over to your Nexus and exchange cash for self issued credit (or Bitcoins, if they have them). Later on someone else who is local wants to get fiat so they head to the Nexus and exchange credits and/or Bitcoins for fiat.


Nope, the fidelity bond is not the same. For example a Nexus could post a fidelity bond, this would allow customers to feel confident transacting up to below the value of the bond in total value. Over time the Nexus could securely handle many times the value of the fidelity bond, as long as at no given time it extends total credit whose value exceeds the bond.

If one can issue promises far in excess of the "bond", then they are still junk and uncollectible.  So instead of having a promise that is totally uncollectible, you have a promise that is either a) collectible only in proportion to how leveraged the bond is, or b) collectible only if you happen to be lucky enough to collect on the bond before someone else does.  Sounds a lot more like the Federal Reserve ponzi scheme than sound money.


Of course.  You are 100% right.  It could work this way.  But the nexus is centralized.  In this case, why bother with a decentralized database?  The Nexus could just use regular database and regular software and keep track of balances the old fashioned way.  Just like PayPal or perhaps MtGox.  Instead of being revolutionary, using Ripple just makes the solution needlessly complex and use way more electricity than needed for no useful benefit.

There are a variety of advantages of the distributed database model:

1) You can easily exchange the balances for balances at different gateways. This means people who use different gateways can still pay each other instantly.

2) You can easily exchange balances for different currencies.

3) The market for exchange balances across gateways gives you a reliable real-time view of how trustworthy gateways are.

4) A gateway can't stop you from exchanging IOUs or enforce policies on anything but deposit and withdraw operations.

5) Costs are kept low because no entity can set the system's fees.

6) The gateway can't really freeze IOUs, destroy IOUs, force chargebacks, or the like. (Strictly speaking, they can. But for practical purposes, it's extremely unlikely that they will because they'll make their own customers innocent victims. It's the same reason Mt Gox had to accept tainted bitcoins from their merchants.)

7) People can easily operate small gateways in areas not served by larger gateways and offer 1-to-1 exchanges of their IOUs for a major gateway's IOUs.

8 ) Longer term, ripple may facilitate community credit.

9) You can change what gateway you use without having to notify everyone who pays you or have a change in how you integrate with the payment system.

I think the complexity argument is a red herring. Every payment system can be looked at from a high level at which it's simple and a low level at which it's complex. Ripple is no different. As for the electricity use, that strikes me as a very strange argument, but assuming it's true, I hope the benefits will significantly outweigh the costs.

Allowing customers to "feel confident" is not the same thing as customers balances being sound and secure.

This is like the FDIC... your bank account insured to $250,000!!!...by a $19 billion fund "protecting" $5 trillion in deposits (link) (http://www.fdic.gov/about/strategic/corporate/cfo_report_4qtr_08/balance.html).

tl;dr:

I don't mean to be the one to spoil the party.  By all means, let's let Ripple be built.  Who am I to say someone shouldn't be free to expend their own efforts as they see fit?  But I foresee it being no more revolutionary than a screen door submarine, certainly nowhere comparable to Bitcoin.

If ripples become scarce in the future, the transaction fee can be lowered by consensus. Ripples are quite finely divisible, but if it came to that, their divisibility could be increased in the future, just like with bitcoins. That couldn't even come close to being a problem in less than 100 years though.

Currently, currencies are just a three-letter code and a sequence number (in case a currency is re-issued). We have plans for custom currencies but they're not supported yet. If someone created a new currency, you would never see that currency unless you elected to transact in it. You can't hold an IOU you didn't agree to hold, and the currency is part of what you have to agree to.

I'm not sure if you mean nodes you might connect to or nodes you might trust. The list of nodes you can connect to is managed just like Bitcoin does it. Nodes keep lists and offer those lists to their clients. We don't currency have a DNS anchor, but will probably add one. You can have a list of known node IPs in your configuration.

As for nodes you might trust, anyone who wants to can maintain a list of such nodes. Servers can choose root trust points and then those root trust points can list additional trust points.

For clients and servers not trying to actually process transactions, you only need to use trust to determine what the current consensus ledger is. From that point on, you're just walking hash chains.

The order book consists of entries in the ledger. There are entries that hold actual offers and index entries used to track the "tips" of the order books. Since the order book is in the ledger, the same scheme that ensures everyone operates against the same ledger does the same for the order book.

To create an offer, you have to do two things. First, you have to consume XRP for the transaction that places the offer. Second, you have to have sufficient XRP in your account to cover the increase in the reserve. The reserve drops when the offer is removed or fully taken.

I do too. And what's stunning is how simple our solution is. However, there is a lot of subtlety underneath the simplicity.

For example, one key thing we did was organize the ledger as a hash tree so the entire ledger can be stated with a single hash. This makes it easy for all participating validating nodes to sign a statement that they believed that the entire database had a particular state at a particular time.

Another thing we did was organize the ledger so that simple proof chains can be extracted from it using only hashing operations. So a client that sees signed receipts to convince them that the ledger had a particular hash can be shown a chain that proves a particular entry is or isn't in the ledger.

That's a fair point. I agree that we need to put much more effort into documenting. There just are only so many hours in the day.

Absolutely. And I should try to be clearer about what I mean.

Someone can owe you money in the sense that the system records a particular balance between you and them. Here, the words "owe you money" don't really refer to an actual legal or moral obligation but to a particular status in the system. That status has an effect though, because the system has that status, the system will act in a certain way when it receives future transactions.

Where it gets real is when people have an actual "withdraw on demand" agreement. You could have such an agreement with a friend of yours. You could agree that the ripple system says they owe you dollars, they'll pay you dollars on demand in exchange for you cancelling out that debt. More likely, you could enter into such an agreement with a "gateway", an entity that makes it their business to enter into "withdraw on demand" agreements with lots of people.

We should make it very clear that absent an agreement that says otherwise, there is no inherent obligation to settle "debts" recorded in the ripple system. The system gives those "debts" power, and you can't stop it from doing that. But that's strictly within the system until you get to a case where you have an enforceable withdraw on demand agreement (or people are willing to settle on an ad hoc basis).

If I extend you 10 USD credit, you are under no obligation to ever pay me any actual US dollars. However, I can then acquire your IOUs within the system various ways and I can use them as a medium of exchange with anyone who can accept them. I can also give them to you and obtain other IOUs you hold within the system. This is all automated. But to get actual dollars in my hand or bank account, there needs to be an agreement outside the system.

I could actually see myself doing this - something I have represented from the start in my various criticisms of Ripple.  For example, I have maintained for a long time that if I were to issue some sort of standing agreement with other big players in the Bitcoin world agreeing to settle any debt I issue as recorded on Ripple, thereby giving Ripple's data some sort of legal teeth, then Ripple would greatly complement my ability to do business.  If this became commonplace, it would add an enormous amount of fluidity to the entire Bitcoin economy.

The easiest way for me to describe how I see the benefit of using Ripple would be to take the whole concept of "MtGox USD codes" - which work in practice but are subject to the theoretical risk that MtGox may at any point choose not to honor a code and pretend it's invalid - and replace it with an open system like Ripple, where the system of swapping MtGox debt is sort of an open book to the world, forcing a certain level of integrity on the way MtGox liabilities are accounted for.  MtGox could still choose to dishonor their debt, but then at least people would be able to see that and call them out on it.

The ability to swap debt around - when done properly - would be a huge benefit and would increase Bitcoin market confidence immensely - I am convinced that the true Bitcoin market is FAR deeper than what is currently represented on MtGox, and what we see is greatly hampered by the rightful fear of people to put "good money" in MtGox knowing it can be seized or misappropriated without accountability.  If instead, people could put "good debt" into MtGox, we'd be at the multi-billion-dollar mark in market cap yesterday.  Good debt for this purpose is almost as good as money, but comes with a big benefit: it can't get seized without due process because only by due process can its repayment be forced.

Now as for Ripple... swapping debt is already possible without it.  I can draft a contract, put it in a PDF, digitally sign it, and plausibly have that digital signature recognized by a court, which the only tool I need to start creating and swapping debt.  That is, a pen, paper, and some way to add the digital stamp of approval that allows everyone to confirm that I really agreed to what I agreed to.  Courts aren't all that familiar with PGP, but they are plenty familiar with PDF as they use it daily, and the PKI for signing PDF's has been maintained well enough that they're likely to recognize a properly signed PDF as legit.

Yes, Ripple will make a fantastic open ledger for managing and settling debt among parties sophisticated enough to form the proper agreements and be trusted with issuing and making good on their debt.  And it will also be a fantastic open ledger for work buddies to trade their lunch money around.  But between these two groups, there will be this HUGE donut hole of people in the middle who will erroneously presume that because Ripple works for lunch money and the babysitter, and because they hear it also works for bigshot rich people to settle monstrous sums, that they should feel OK using Ripple to manage large undocumented debts for things like cars, vacations, bad investments, gambling losses, and all kinds of things... people are going to get their financial backsides seared and blackened repeatedly until they learn the hard way that they should not accept any "debt" as payment that they won't mind being 100% defaulted on... at which point it ceases to be revolutionary and they may as well just use PayPal.

To fill the donut hole, we need reliable gateways. If we don't have that, you're absolutely right, it's not usable for medium-sized transactions denominated in fiat currencies. (At least not without real community credit which, if it ever happens, is certainly far off.) We have a lot of things built into the system to encourage the creation of reliable gateways, we'll see if it works.

As for the benefits of Ripple versus something like PayPal, see the list I posted previously. Key advantages are lower fees, cross-currency transactions, the inability of a single entity to freeze your funds, higher speed, no chargebacks, the ability to easily change who handles your money without changing payment arrangements, and so on.

The big advantage of Ripple here, I hope, is competition. It would be like if you could choose PayPal and I could choose Dwolla and we could still pay each other seamlessly, with me putting money into Dwolla and you pulling money out of PayPal. We could choose the service that best covers our needs or our location. And if PayPal decides they have a problem with me because someone stole my identity a decade ago and they give me a lifetime ban (long story), I can move my business to another service without disruption.

Destruction of RXP for each transaction is bad economics. The number of transactions will continually decrease since the supply of RXP will continuously decrease, meaning RXP value will increase. People will begin to value their RXP more than they value their transactions, so the RXP fee per transaction will have to be manually adjusted to get people making transactions again. Ultimately what you will have is an economy dependent entirely upon a centrally-managed currency. It's exactly the opposite problem of inflationism in the real world.

The cost of transactions is managed by consensus much the same way as which transactions get into the ledger is managed by consensus. The system has a 'base_fee' that all other fees and reserves are based on. A node can introduce a transaction to change the base fee. If a trust-weighted majority of nodes vote "yes" on the transaction, it will be incorporated into the ledger and the fee will be changed.

Even without this, if there's a consensus that the transaction fee is too high, nodes could just propagate and vote "yes" on transactions with lower fees.

OP is totally wrong.  Ripple doesn't even sound nice.

Now this is exactly what I am talking about. You go and claim this enormous feature, and there is no algorithm given.

You're saying that you have already implemented a secure system for generalized decentralized consensus and deployed it to Ripple? I find that extremely difficult to believe. Claims like this are abundant throughout the Ripple framework. But there is a dearth of explanation.

Feel free to ask any specific questions. I thought I already pointed you to where the consensus process is explained in the wiki.

It's basically this:

1) Nodes announce the hash of the last closed ledger. To keep things simple, I'll assume we start from a consensus.

2) Nodes propose the hash of the tree of transactions they think should be applied to the ledger in this consensus window.

3) Nodes acquire the transactions other nodes have proposed.

4) Nodes form disputed transaction entries for transactions so long as at least one node they trust included that transaction and one didn't.

5) Nodes avalanche to a consensus on each disputed transaction by going with the majority weighted based on their trust.

6) If avalanche stalls, the agreement rate requires to get a transaction into the consensus set is raised.

7) As nodes detect that the nodes they trust have reached a consensus, they apply the consensus transaction set and publish a validation of the next ledger.

8 ) Validations push other nodes towards consensus.

9) Nodes acquire sufficient validations from other nodes they trust of the new ledger and consider that the next accepted ledger.

10) If any new transactions occurred during the consensus process or any valid transactions didn't get in, a new consensus process starts immediately.

This trust is just trust not to collude. See the wiki page on consensus.

The main reason it works is:

1) Every honest node wants a consensus. They will wait as long as it takes in order to get one. We have no fixed amount of time in which a consensus must be reached.

2) There is no moving target during a consensus window. With respect to establishing that consensus, the world is frozen. There is a fixed amount of information to be known about the state, and more information is always gathered by nodes. They don't forget anything. The ratcheting up of the agreement level required ensures a consensus will eventually be reached.

3) Dishonest nodes cannot stop transactions from propagating to the vast majority of honest nodes. A node would have to have every single one of its connections to a dishonest node. (And we imagine 'core' nodes agreeing to directly connect to each other as a safety.)

4) So long as a transaction can be applied to the ledger and the vast majority of nodes see it before the consensus window, there's nothing dishonest nodes can do to stop honest nodes from including it. (Nodes will extend the consensus window if they aren't getting votes or acquiring transaction sets from trusted nodes that have voted.)

5) If a transaction does not get into a consensus set, but is valid, every honest node that has seen that transaction will vote to include it in the next consensus set.

6) No honest node particularly cares what's in the consensus set, provided it includes transactions that were seen well before the consensus window started. There is no way a dishonest party could get something into the transaction set that shouldn't be there and have that cause any harm. Invalid transactions will have no effect, even if they get in the consensus set.

I'd be happy to answer any further questions you have.

What if one node believes the avalanche has stalled, but another node doesn't?

Where's the part where base_fee is negotiated up or down and finally changed?

Then one node will raise the agreement rate and the other won't. It doesn't particularly matter. The ratcheting up of the agreement rate is only to keep the rate from "puttering" around 50%. If we just used strict majority, and the starting position was about half the nodes saying yes and half no (say because a transaction was introduced just as the ledger closed), you could stall around 50% for a long time, some nodes seeing say 53% and some 46%. To prevent this, nodes have an internal bias that increases over time towards excluding a transaction. This prevents the long stall.

Essentially, the entire system has a huge bias towards excluding a transaction. So long as a transaction remains valid, every honest node that saw it before a consensus window starts will try to include it in that consensus window. So unless the network is heavily overloaded or most nodes trust mostly dishonest nodes, the transaction will get in during  the next consensus window anyway.

This is the key trick to the way our system works. If a transaction should unambiguously no questions asked get in, then every honest node will vote yes on it. If it shouldn't unambiguously no questions asked get in, then nobody particularly cares whether it gets in or not, and not letting it in is perfectly fine. If enough nodes disagree about a transaction for it to stall the consensus process, then honest nodes just switch to no. They value consensus over getting in a transaction that lots of trusted nodes think doesn't belong.

Any node can introduce into its consensus set a transaction to raise or lower the transaction fee. I think we have a rule that only certain ledgers (like one every 256) can have a fee change transaction in them. This is to prevent needless momentary disagreement on every ledger while some nodes want one fee and some another. A fee change transaction either gets voted into the consensus set or it doesn't. If it gets voted in, it is applied and the fees change from that point on.

The current server just votes no on all transaction fee changes. We plan to add a configuration element to set what you think the fees should be and then your server will introduce and vote yes on transactions to change the fee to the fee you set.

We also have a mechanism, I forget whether it's implemented for fee changes specifically, where a node can introduce into specific validations what it thinks the fee should be. This also is done on specific "flag" ledgers. So on flag ledger X, you can put in your validation that you think the fee should be Y. Then on ledger X+2, everyone looks at the validations for the flag ledger to see if there's a super-majority for fee changes. This also helps to void a needless momentary disagreement and it allows nodes to use a more sophisticated algorithm to decide what fee to propose Say the fee is 10, and you think it should be 12, and half your weighted trust wants 11 and half wants 12, you might want to vote yes on 11.

Do you realize that this explanation is rather lacking? Saying "nodes have an internal bias that increases over time towards excluding a transaction" offers no clear insights in writing out an outline of the algorithm. Compare your explanation with an excerpt from the original Bitcoin paper:


Perhaps you could provide an outline similar to the one from the Bitcoin paper that provides a step by step explanation. You said "the entire system has a huge bias towards excluding a transaction" - what does that even mean, in formal terms? What's this "agreement rate" and what is the algorithm for increasing it? Does it go up by 10% each time?

Where's the beef!

Yes. It's an outline.

I'm not sure I follow you. If you want more details, I can provide them. The basic idea is very simple -- a node looks at how long the consensus process has in progress compares to how long the previous consensus round took and adjusts the threshold for a yes vote up from 50% based on that time period.

It's a summary description of a lot of things, for example, no votes on transactions are implicit, you just don't vote yes on them. And, as I mentioned above, nodes increase the number of nodes they require to vote yes to keep their own vote at yes oevr time.

Actually, that's still being adjusted. The current algorithm is as follows:

1) Until 50% of the time the previous ledger's consensus took has passed, 50%.

3) From 50%-85% of the time the previous ledger's consensus took, 65%.

4) From 85%-200%, 70%.

5) From 200% on, 95%.

That is, initially, if 50% of your weighted trust list (including yourself, if you believe you are synchronized) votes "yes" on a transaction, you vote yes on it. Once 50% of the time the previous consensus process took has passed, this goes up to 65%.

A two second minimum is enforced on a consensus round to ensure that well connected nodes have enough time to get an initial proposal in. In addition, nodes won't let a consensus close significantly more quickly than the previous round, for the same reason.

This algorithm actually is about to be adjusted. It has a slight defect  -- the first round of dispute resolution could occur after 85% of the time the previous round took has passed, resulting in transactions getting excluded without reason. Though harmless, this effect wasn't intended. Most likely, it will instead slide gradually up rather than in steps.

There is no harm in conflicting transactions both getting voted in -- a deterministic algorithm ensures only one of them will actually get applied and nodes will agree on which. The same applies if two conflicting transactions each bump each other out -- a deterministic algorithm determines which one all honest nodes will vote yes on in the next round.

The basic concept of trading debt along a social network graph seems straightforward enough to me, but I have difficulty seeing how it will actually work in practice. This could be because I lack imagination in this area or because the idea has major problems; I'm open to both possibilities. These are some of the questions that came up for me after experimenting with the site for a while:

At first glance it doesn't look like Ripple is useful at all until a critical mass of users sign up and assign trust. How do you bootstrap the network especially since the concept seems to be even harder to explain than Bitcoin? Have existing major players in bitcoin commerce already bought in to the concept and plan to use Ripple as soon as it's ready? In terms of actual usage Ripple most closely reminds me of #bitcoin-otc or localbitcoins.com. Is Ripple a replacement for, or an enhancement to these services? Are there any plans to link Ripple to them in any way so that existing trust relationships could be incorporated somehow and/or Ripple data exported to them?

Can you document somewhere how Ripple can be used in situations that people are already familiar with so that it's easier to understand how the concept can be expanded to more advanced transactions? For example, how could a group of coworkers use Ripple to keep track of whose turn it is to buy lunch?

Let's say I owe a friend $20 due to some pre-Ripple interaction. Once we both get accounts, is there any way to import this existing IOU into the Ripple ledger?

Finally, why is it so difficult to find out where to get XRP? I only managed to be able to use my Ripple wallet because I was lucky enough to find someone in #bitcoin-otc who would sell me a small amount. I don't have enough to give to some friends to test out the concept and I can't find out where to get more.

I'm with justusranvier: trading debt isn't nearly as useful or valuable as what bitcoin offers.

Ripple may have a nice rise but I predict it will succumb to a bubble once the initial enthusiasm wears off.

That's what gateways are for. A gateway is a company who enters into "redeem on demand" agreements with large numbers of people. They serve as gateways to get money into and out of the system. As soon as enough people hold IOUs from more than one gateway and are indifferent to which gateway's IOUs they hold (or arbitragers provide liquidity at a profit), then most paths will be user->gateway->intermediary->gateway->user.

All I can say is wait and see.

We don't see personal credit as a major application for Ripple in the short term. We see it more as a competitor to things like credit cards and services like PayPal. I agree that community credit is hard to use and understand, but I personally believe that in the long term, it could revolutionize money.

Just decide how many lunches you want to allow each coworker to owe you. When someone buys you lunch, you pay them one lunch. They now either hold a "1 lunch" IOU from you or you've destroyed an IOU they held from you. If I owed you a lunch and someone owed me a lunch, you could take that IOU from me in payment and use it to get someone else to buy you lunch.

Yes. They would have to allow you to owe them $20 on the Ripple system, and then you would pay them $20 (in your own IOUs). They would then consider the $20 debt novated by the IOUs in the Ripple system. (God bless you! I've been looking for an excuse to use the word "novated" for more than two years now.)

We're planning to begin giving away XRP shortly. We're currently releasing them slowly to manage load and use as we work through deployment and scaling issues. Stay tuned.

In that case I don't understand what problem you're solving. Personal credit seems to be the only innovation Ripple brings to the table because the others are already being solved by Bitcoin.

Bitcoin doesn't allow people to pay each other in fiat currencies or across currencies. If you wish to transact only in Bitcoins, then I agree with you, about all Ripple offers is community credit. Think of Ripple as a way to make dollars more like Bitcoins. (With both the advantages and disadvantages that entails.)

Bitcoin payment processors and exchanges do though.

Right, but that only works if you want Bitcoin on one end of the transfer -- though you don't get instantaneous competitive exchange rates and you're reliant on a system that isn't open source, does have central authorities, can arbitrarily freeze your account, and so on. There's always a risk that the fiat ends of the transactions will be reversed, so you have to pay someone to take that risk. You also can only store value in Bitcoins, which is not such a bad idea right now, but it may not always be that way. If you use it for a cross-currency transaction (say dollars to Euros), you get hit with a commission on both exchanges too.

This conversation is making me uncomfortable because I feel like you're forcing me to unfairly criticize Bitcoin by unfairly criticizing Ripple. For Bitcoin to succeed and thrive, people need to accept Bitcoins as a means of exchange. Once Bitcoin inbound gateways are working, you'll be able to pay any merchant who takes fiat currencies in the Ripple system with Bitcoins, they'll get dollars in their account, and you'll get competitive exchange rates with no commission on the exchange.

That's not my intention. I really just don't understand the benefits of Ripple if you're not focusing on the personal credit side. I can see applications for currency exchange if you focus on personal credit, if you can solve the bootstrapping problem, frankly because that can effectively bypass the regulatory barriers that hamper a the existing fiat-bitcoin interfaces. If you don't do that, I don't see how those same barriers won't just result in those companies either not using Ripple, or not using its full capabilities.

Maybe try looking at it from a merchant's point of view. They pay 2% to take credit cards. That's equivalent to losing 7 days gross revenue a year.

I don't see the connection you see between personal credit and exchanges. Perhaps you're not aware how complex, expensive, and slow cross-currency payments currently are. It's a huge real-world problem. There's a similar problem with remittances. Maybe you don't have any problems it solves, but there are plenty of people who do.

And, long term, I think personal credit may revolutionize money.

They don't have to use its full capabilities from the beginning. It just has to do something important better than they can currently get it done.

I get that bitcoin could profit from this but not how we're supposed to get XRP in the first place?!

Also, this consensus ledger thingy; I don't get that either. If you only use the latest hash of the total sum of ledgers, won't the system be weak to 51% attacks?

OpenCoin will be giving away at least half of the XRP as the system is deployed and scaled. For now, you can post your Ripple address on the Ripple forums, here, in #ripple on Freenode (I think it is) or any number of other places. There are a few people watching for them (I'm not one of them).

Then this sounds like more like a scam... so what happens when all billion XRP run out since thay are destroyed upon every transaction? Also how does giving free XRP prevent flooding the system with bogus 0.00000000000001XXX transactions?

Why do you say that?

That shouldn't be possible. Should XRP become scarcer, the XRP cost of a transaction can be reduced by consensus. If need be, the divisibility can be increased. (Currently, XRP are divisible into millionths called 'drops'.)

When the network is flooded, it raises transaction fees automatically. So anyone who wants to keep the network flooded will have to continue to supply greater amounts of ripples to do it.

Say the network can handle 50 transactions per second. And say you have a very important transaction that you need to get through. To lock you out of the system, an attacker would have to flood the network with 50 transactions per second, each consuming a transaction fee equal to the most you're willing to pay to get your transaction in. Essentially, Ripples serve as something scarce that can be used to auction off transaction slots when the network is busy, whether due to legitimate load or due to abuse.

As XRP are destroyed, those remaining increase in value. That makes transactions cost less in terms of XRP. Like bitcoins, Ripples are infinitely divisible (theoretically, with protocol updates), so smaller and smaller fractions can be used indefinitely.

After initial distribution, market forces will determine the unit value. This will prevent excessive transaction dusting.

I may be mistaken.

The connection is between decentralization and exchanges. Companies in the Bitcoin space aren't always allowed to provide services their customers want because of AML and similar restrictions make providing them uneconomical or illegal. Systems like localbitcoins.com aren't as hampered in some ways either because the transactions fall below legal thresholds or are so numerous and distributed that the regulations are impractical to enforce.

If the focus of Ripple is going to be on gateways instead of personal credit I don't see how you won't run into the same problem of transactions being technically possible, but legally blocked.

The Ripple system's rules control the flow of IOUs. You don't have to extend trust to someone to take gateway IOUs from them. You can use gateway IOUs like Bitcoins, handing them around with no concern for the fact that the gateway has withdraw on demand agreements with some people. You can pretend the IOUs just have value because people value them. You don't have to extent trust to anyone but the gateway since you're only exchanging the gateway's IOUs.

Basically, a reliable gateway's USD IOUs act much like Bitcoins except they track the value of the dollar so long as the gateway remains reliable.

(A gateway has the option to restrict who can hold its IOUs to its customers. So you still might need to open an account with the gateway, choose a gateway that hasn't enabled this feature, or use an account "in front of" a gateway that offers 1-to-1 exchange for the gateway's IOUs. This only restricts who can *hold* the gateway's IOUs, it doesn't restrict who can use the gateway in a payment path.)

 ripple seems to be a distributed Mt Gox where you dont have to send anyone your passport just to exchange one currency to another.

http://www.currencyfair.com/  is a site that seems to be a similar thing.

If you can exchange massive amounts of currency p2p without needing KYC or AML paperwork it could cause some interesting friction with governments because of "terrorism" and "money laundering" laws.

Yes but if the government cannot trust someone to co-operate in curbing terrorism how comfortable will someone be in trusting that same someone with their money? I guess if you are part of the same bunch of terrorists, maybe, but what if your gang splits up on some ideological grounds leaving some of the "branches" or "gateways" that were part of your gang suddenly in effect a rival gang wanting to seize your money because you don't agree with their variation of your previously common ideology?

A lot of folks just won't trust terrorists, and thats okay, a lot of terrorists probably don't trust them either.

(Lets bear in mind too that some gangs some refer to or treat as governments, or are governed by, might well be terrorists, in at least some folks' eyes.)

-MarkM-

So when will ripple give away ripples? I mean when will the system be usable?

Ripple as a currency is doomed because it is just another fiat currency.

It may be an interesting experiment, but it won't last very long.

It isn't anymore fiat than bitcoin is?

There is nothing preventing anyone from using bitcoin as a fiat system. There is no way to be sure Mt Gox has full BTC reserves backing all the user balances. In the same way banks issuing paper backed by gold may not have all the gold sitting in the vault but instead will lend out 10 times their reserve.

That's why I only hold bitcoins in addresses whose private key I control.

Despite the lack of rigorous papers regarding the Ripple protocol, or any sort of in-depth analysis about the properties of the system, the trusted nexus concept is the one thing that I can easily see having great value. It directly addresses the problem of a decentralized exchange.

Right now there's no reliable way to convert physical fiat (i.e. cash / paper bills) into Bitcoins except perhaps by going to localbitcoins.com or whatever. But Ripple offers the possibility to go into business as a one man local exchange. I certainly plan on doing this in my area (Los Angeles). In addition to fiat exchange, a nexus could also offer conversion to and from precious metals, bypassing the traditional financial system for such transactions.

If you try to go through customs with 250 ounces worth of gold coins, some men in suits with earpieces are probably going to ask you to come with them to a secured room. With Ripple, you could meet your local nexus guy and physically exchange your gold coins for Bitcoins. This is a really good way to do the transaction because no trust is involved. The nexus has the opportunity to observe the coins, and you can verify from your Bitcoin client that you received the payment. Then you take your international flight with no problem, Bitcoins safely stored in the brain wallet.

When you arrive at your destination you consult a local nexus dealer and convert the Bitcoins back into gold coins, without the requirement of trust.

This is just one of many use-case scenarios that the nexus concept enables.

If I understand correctly that use case will only be practical with a dense web of trust, but that's not what they are going to focus on to start with. So that's why I'm confused, since they aren't going to start out with the most interesting feature.

A dense web of trust is only needed for credit. Otherwise, there just has to be at least one path with enough liquidity for any given transaction.

If you want to setup a local gateway to help your friends get cash into and out of the system, you can. Here's what you can do:

1) You set up your account to trust at least one gateway. Your friends pay you IOUs from any gateway you accept. You hand them cash.

2) Your friends set up their accounts to trust at least one gateway that you do business with. You pay your friends IOUs from any gateway they accept that you support.

The downside of this setup is that it doesn't allow you to grow into more of your own gateway, but it also doesn't require anyone to trust you. If you want more of a growth potential and think people would be willing to trust you, you can do this:

1) You set up your account to trust at least one gateway. You setup 1-to-1 offers between your own IOUs and IOUs at at least one gateway.

2) Your friends give you cash, you pay them with your own IOUs. You require them to trust either you or at least one gateway you support.

3) Your friends can pay you with either your own IOUs or IOUs from any gateway you support.

4) You try to encourage your friends to hold your IOUs rather than the IOUs of an other gateway. You can do this by keeping your transfer fees lower than that of other gateways. You can do this by convincing them that the risk that you, someone they know, will default is low. With your IOUs, they can costlessly switch to the IOUs of any gateway you support (so long as you aren't "out of stock").

You don't need a dense web of trust. All you need is every account to trust at least one major gateway and healthy paths between any two major gateways. And even if you don't have that, unless an account is an island, you'll almost always still be able to find a usable path.

Ripple would make a ton more sense to me if it were not referred to as MONEY.  Further, if Ripple were called something other than money, the "donut hole" problem would disappear, because the "donut hole" problem only exists when people think Ripple balances are money and apply the same assumptions to them that they have learned apply to money.

Ripple is an EXCELLENT "asset ownership tracking system".  Any "in-a-nutshell" description would do well to say that "Ripple itself is never the asset, but the journal that records ownership of the asset in a publicly accessible manner.  Ripple is the online equivalent of the county recorder's office that tracks ownership of real estate, except it's not limited to a county, and it's not limited to real estate, and most importantly, nobody can take an eraser to the books and change history.  It's a worldwide public system for recording transfers and ownership of many kinds of assets, a system that brings unprecedented integrity and transparency to recordkeeping."

Once framed in that context, you can start to create all kinds of legal assets and contracts whose ownership self-describes as an entry in the Ripple system.  The assets could be physical property, shares in companies, debts, you name it.  In other words, instead of Ripple first, legal asset second, it's legal asset first, and the legal asset self-describes its ownership by reference to Ripple second.

Simply changing what Ripple is called is an act of paying proper deference to the rightful authority of a legal system as the final arbiter of property rights.  This will allow Ripple to be far more respected by legal systems, versus a pretense that it's an anonymous money system like Bitcoin that operates without regard for, and arguably circumvents, the law.

The advantage that Ripple brings to the table in such a case is transparency as to whether someone still owns what they say they own, unencumbered, as well as a public way to register that the history of ownership of something is exactly as it is claimed.  Even the oldest of the old-school legal folks can grasp the benefit of this.

tl;dr: stop calling it money, people will misunderstand its true novelty and value!

Easy to say but can you quantify this with a rigorous proof? It's easy to imagine that the degree of connectedness does not reach a critical threshold required for the desired liquidity.

The proof is trivial if everyone holds IOUs from at least one major gateway, everyone trusts at least one major gateway, and there's a healthy path between any two major gateways. If you don't meet these conditions, it still might work.

Thus:

1) If you expect people to be able to pay you, you should accept IOUs from at least one major gateway in one of its major currencies.

2) If you expect to be able to pay people, you should hold IOUs from a major gateway in one of its major currencies.

3) Any time there isn't a healthy path between two major gateways major currencies, that's a profit opportunity for someone to provide such a path. Note that, by default, anyone who holds IOUs from one gateway and trusts another gateway (in the same currency) is a path between those two gateways. Cross-currency paths have to be explicitly offered by creating exchange offers.

It's very easy for one person to be an outbound island if they don't hold any IOUs that others trust. It's very easy for one person to be an inbound island if they don't accept any major IOUs that others hold. However, it's very hard to create a situation such that someone who is not an outbound island can't pay someone who is not an inbound island. To have two large disconnected groups, you need a case where nobody in that group has any path to any of the people in the other group. If XRP catches on as a bridging currency, of course, it will be all but impossible.

This will be especially true if gateways make it their business to ensure they have good paths to other major gateways. I don't know whether this will happen or not, but it seems like if it is a problem, a gateway would have a strong incentive to solve it.

Why don't I just let them pay me in Bitcoin? If they got an IOU from a gateway I trust then they could have instead just gotten Bitcoins (?)


So are you saying now that XRPs will be scarce and have significant value?

It seems that when asked direct questions you do provide something that comes close to a solid rigorous answer. My question, is why is it that the Satoshi is so concrete, concise, and elegant, while Ripple is vague and poorly defined? Especially considering that both systems were designed by the same person (?)

Because unless the Bitcoin economy is deep enough, such a transaction would incur a currency conversion fee on both sides. They'd have to buy Bitcoins and you'd have to sell Bitcoins. Of course if this works for your particular case, you should do it. And, of course, you can use Ripple to facilitate this. Say they want to pay with dollars but you're perfectly happy to accept Bitcoins. They can use Ripple to convert their dollars to Bitcoins right at the instant they pay you without paying someone commission on the currency exchange.

No, and I don't think that's necessary. All that's necessary is that they have some non-zero, stable value and that there be enough of them in circulation. I hope that will happen because it makes the Ripple system more efficient and everyone who holds XRP has an incentive to make that happen. But, of course, I can't promise it will happen nor can I predict the future.

Same person? I guess we don't have anyone with Satoshi's gift for explanation. Also, Ripple is much more complex than Bitcoin.

Isn't Jed Satoshi?


People in the Ripple forum, and a personal friend of mine, are acting like they think that XRP are going to skyrocket in value in a fashion comparable to Bitcoin. I think that the user interface of the Ripple web application encourages this view point as well, with the XRP/BTC currency pair.

@JoelKatz

Perhaps I missed it, but how did you become the de facto expert on Ripple?

I'm enjoying your posts, bud.

~Bruno K~

I doubt it, but you never know.

Ironically, that would probably be bad for Ripple in the short term. I think XRP would work best as a bridging currency if it had a stable value. And, of course, if there's a bubble that bursts, that would be terrible for use of XRP as a bridging currency. Fear of a burst can be as bad as a burst. And if there's no bubble, a burst is impossible.

I'm OpenCoin's (the company behind Ripple) Chief Cryptographer and one of the architects of the new Ripple. I'm not speaking for the company, only myself, but I guess I'm just the person saying the most. Thanks.

Look:

https://ripple.com/forum/viewtopic.php?f=1&t=89

See what I mean?

I think 1XRP = 0.0001USD sounds like a nice place to start.. Gives the devs $100k USD worth of XRP to
reward them for their hard work :). Cheap enough everyone gets to play.

I'm interested in this Ripple-related question:

https://bitcointalk.org/index.php?topic=144468.0

I would cut them some slack, since their product is new. Having a good idea is sometimes hard to explain, especially when technology seems to be moving at light-speed.


At the same time, to remain balanced, its good to remember:

I gotta say, I was digging through the source code of the Ripple client last night and the client alone is quite complex and must have taken a lot of development, I think its easy to underestimate how much work that simple clean web based UI has taken under the hood.

I can't even begin to imagine the amount of development time and complex problems that have been solved within the rippled c++ server.

Given the assumed limited developer resources and the amount of work that has been put into the server and client, i'm actually surprised the wiki and website for that matter are as detailed as they are.  Even if there are some vagities in the doco, I take my hat off to the Ripple team for their work so far.

With only 2-4 developers they must have been working on this for at least 12-24 months.

Hello,

I'm quite interested in Ripple (see http://ploum.net/post/ripple-making-bitcoin-easier-or-obsolete ) but, besides the technical questions, I would like to ask some non-technical questions:

1. Why isn't the server opensourced yet.


2. Do you really expect people to make a list of person they trust or person they don't?


3. Paying still requires a user unfriendly address like: rKXFsg5EuG4BzLxdTBFXJq2a6iNfyx1hRX  Is there any plan to make it friendlier? (like allowing to send money to an email address by allowing people to make an alias?)


4. XRP is a currency but XRP is not. Hum… If XRP is working as well as advertized, what would be the reason to keep bitcoins?


Thanks

As soon as the network is distributed, changes can only be made by consensus. By intentional design, logic changes are difficult to do and require establishing and maintaining a consensus on the change. You wouldn't want someone quickly pushing through a change that, for example, allowed issuers to delete IOUs!

Right now, Opencoin is acting as a central authority and running the network. This makes it much easier to fix problems and make changes quickly. We're fixing issues on a daily basis now and slowing that pace would mean a much longer time before Ripple is a decentralized payment system that people can truly rely upon.

Not any time soon. That's why we're promoting Ripple as a payment network with gateways rather than as a community credit network. I personally believe that community credit is Ripple's long-term killer app and that it will change the way people think about money. So this will always be there and maybe one day it will really catch on. Social money may take social changes, just like social media did. Those changes happened pretty fast, so maybe these will too. It will take better tools to make managing credit more user friendly. We hope to get there, but we aren't relying on it happening soon. The bigger Ripple becomes, the higher the chances this will happen.

Yes, however, we've run into some technical problems designing a usable and safe namespace scheme. The fundamental problem is not having a central authority that approves names but also not having the first person to register names like eBay and Amazon being able to hold them hostage.

The best solution we could come up with is this:

1) Anyone can create a namespace.

2) The client can use any namespace.

3) Opencoin will create a namespace which the client uses by default.

4) Namespaces can be closed or open. They start closed. A namespace's owner can open a namespace but not close it.

5) Opencoin's namespace will be closed for a year or so. We'll come up with some fair scheme to register names. (Yuck.)

6) After a year, we'll open our namespace and it will be first come, first served.

The problem is that this is kind of fake decentralization. If someone tries to create a competing namespace, payments may go to the wrong person. So as a practical matter, we'll run the namespace, and we don't want to do that. We don't want to be Ripple's IANA.

We have a hard rule that we won't implement something until we find a good way to decentralize it. We're not there yet on friendly names.

We do have a domain-based naming scheme because that can be decentralized. Domains can vouch for their ownership of particular account records. You retrieve a domain's configuration file using SSL.

For example, this is bitstamp's main account:


Notice the "Domain" field? That's hex for "bitstamp.net". If you retrieve https://bistamp.net/ripple.txt, you get:


This establishes a reliable proof that the domain belongs to the "bitstamp.net" domain.

I love how everything gets answered except this one.

Yeah, sorry. My crystal ball isn't any clearer than yours anyway. I don't pretend to be able to predict what will happen.

I haven't seen your opinion on something that seems like an obvious flaw in using XRP as a store of value: lowering the account reserve, which must happen from time to time due to growth and lost/used up XRP, will unlock large amounts of XRP and lower the price. This would happen suddenly and not according to any fixed schedule, unlike Bitcoin block rewards. Why would I want to store value in XRP when I can easily convert it to BTC and avoid this?

I think that's exactly the point.. XRP is not meant to be a store of value.. its the oil that keeps the Ripple system going.  Maybe it'll go up or maybe it'll stay extremely low for ever.. its really at the whim of OpenCoin and the devs who hold the majority.. but you don't have to worry because its not a store of value like Bitcoin.

Thanks for the answer. The reason why the server is not opensourced makes sense.

I've another question: 

5. Why was XRP developed while Bitcoin would have been enough to prevent transaction spam? (requires a tiny fraction of a bitcoin to send a transaction, take that from the value being sent, even if that value is not in bitcoin)

There is no known mechanism for transacting Bitcoins off the blockchain that doesn't itself require a central authority (to hold the signing keys that would release the bitcoins). You wind up with horrible solutions like each Ripple transaction requiring a Bitcoin transaction. You also have the problem of whether you destroy the bitcoins or pay them to someone. If you pay them to someone who is not a central authority, the scheme can be rigged by someone who puts themselves on both sides.

I don't think it will even be able to function as a store of value. As stated below: Bitcoin's supply is infinitely expandable; Ripple's supply is infinitely renewable.

A bad analogy would compare Bitcoin to voltage and Ripple to current.

Perhaps the lack of full decentralization is one of the most popular criticisms of Ripple.

For beginners this does not seem such a big problem. However, for the "veterans" of the industry, decentralization is very important. Proponents of decentralized crypto-currencies consider the Internet to be an exemplary decentralized system: the flow of information flows is free and open (with some restrictions) in the absence of a single governing body.

At the same time, the other part of the crypto community is ready to put up with concentrated management, since the reverse, in their opinion, is inefficient. The developers of Ripple recognize that XRP works somewhat differently than the same bitcoyne, and is not as decentralized as they would like. But has XRP become the best form of digital money than bitcoin?

When you are out in a boat on the water, a ripple sounds nice. But when the boat has holes in it, there is a major problem.

 :D