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Note: The following analysis assumes that the Ripple system eventually becomes open sourced, gets decentralized, and that rigorous mathematical analysis proves that the system is robust and fulfills its technical promises.

From the Ripple wiki (https://ripple.com/wiki/Ripple_credits)


Let's review some facts:

* XRP is a cryptocurrency implemented in the Ripple system
* Only 100 billion XRPs can ever exist
* XRP must be expended and destroyed to perform transactions
* An XRP balance is required to fund an account
* It is claimed that the purpose of XRP is to prevent spam

There has been a fair amount of discussion about methods of XRP distribution for preventing spam. For example, to automatically fill each newly created account with some nominal amount of XRP. It should be obvious why such a scheme cannot work to prevent spam; all a spammer need do is repeatedly create accounts to harvest any amount of XRP and produce transactions. As the representatives of OpenCoin have pointed out numerous times, distributing XRPs evenly is a difficult problem. It is safe to conclude that:

XRPs must be scarce to prevent transaction spam

XRPs have similar properties to Bitcoins:

* They are divisible to many decimal places
* They are easily transmitted electronically
* They are fungible and homogeneous

XRPs have advantages over Bitcoins

* They cost less to transmit electronically
* They have intrinsic value (they enable transactions)
* They are truly deflationary (they get destroyed when used as transaction fees)
* They operate on a network that can scale almost limitlessly

XRPs have all of the attributes that define a good currency

The Ripple network implements a self-issued credit system that leverages transitive trust relationships to enable the broad circulation of digital IOUs. These money substitutes require risk management on the part of every user, as they need to trust at least one other entity in order to participate. But the XRP currency that circulates in Ripple system is special compared to the gateway IOUs:

XRPs have no counter-party risk, and transmitting them doesn't require gateway fees

In a fashion similar to Bitcoin, XRPs are secured by the consensus algorithm and cryptographic properties of the system. There is one big difference between Bitcoins and XRPs:

XRPs are distributed by a central authority

From the Ripple wiki entry, the founders keep 20 billion XRP, while OpenCoin distributes a fraction of the remaining 80 billion for free to bootstrap the system (a task currently being carried out). Whatever OpenCoin does not distribute for free, it will then sell. How much of the 80 billion is needed to bootstrap the network? If they give away 1,000 XRP to one million early adopters, that only consumes 1 billion XRP. This means that 99 billion of all the XRP that will ever be created is in the control of the authors of the system.

XRPs will trade for real currencies in an open market

Given that XRPs have no counter-party risk, miniscule fees, and all of the other properties:

Users will prefer XRPs as part of a trade over any IOUs

From all these points:

XRPs are superior to Bitcoins as a crypto-currency.

When asked directly about these disturbing facts, OpenCoin representatives give us vague answers:


This analysis brings us to one very disturbing conclusion:

The founders of Ripple will control over 99% of the purchasing power of XRPs for hundreds if not thousands of years.

Despite the lack of any significant goods and services enabled by the fledgling Ripple network recently opened to the public, there is already a robust trade in XRPs for other currencies like Bitcoin, US dollars, and foreign currencies:

https://i.imgur.com/CaiOJXo.png

To preserve XRPs function as an spam prevention, OpenCoin foundation must maintain the scarcity of XRPs by limiting their supply. This is also what creates the market for XRPs and gives them value. It is not possible to have XRPs be both worthless and also useful for preventing spam.

Combine all these facts with the odd statements and the carefully managed customer-facing facade of OpenCoin representatives and we have all the volatile ingredients necessary for the Next Big Cryptocurrency Drama.

From the ripple project website https://ripple.com/working-with-ripple/ it states:


I would call trust-based financial relationships a counterparty risk. I'm on the fence about its utility, but I don't think you can misrepresent the probability of an I.O.U. default.

OP's post is mostly about the privileged status of XRPs and their issuer relative to all the other IOUs inside the ripple system.
XRP's (inside that system) may end up having no counter-party risk, but instead perhaps ripple as a whole is subject to Systemic Risk.

Here's one scenario:

Divorce of one of the holders of the keys to XRP Fort Knox forces disclosure or master secrets by soon-to-be ex-wife's lawyers and despite her best economic interest she decides to dump her 50% of all XRPs she's entitled to simply to destroy her ex's legacy :-)

We don't know if this is true or not. As it is set up now, with just a single website, XRP/ripple has infinite counterparty risk.

I agree with you 100%. I said that XRPs have no counter-party risk (this is direct from the wiki). Of course the gateway IOUs that get swapped around the Ripple network will have counter-party risk. But the XRPs are every bit as secure as Bitcoins are. XRP occupies a privileged and special position in the Ripple system: it is the only currency transmitted by the system that has no counter-party risk.

Users will always prefer to transact in XRPs over IOUs (because XRPs have no counterparty risk). Take a look at the BitStamp order book for BTC/XRP. It has a fair amount of depth. Now look at the order book for BTC/USD. Not much there.


Ah yes, of course you are right. I will update my post to reflect the assumption that the Ripple protocol will be decentralized and that its algorithms will withstand rigorous mathematical analysis.

Another way XRPs are privileged is that no path finding or intermediate fees (beyond tiny tx fee) will ever be required to transact in them

Good observation, I will update the OP.

I would like to see a discussion of any anti-currency properties considered for Ripple, and why they were rejected.  Like having a huge extra tx fee for transferring Ripples from one account to another, effectively forcing any Ripple trade to go only one step: from miner to antSpamRipple user.

https://bitcointalk.org/index.php?topic=145743.msg1555554#msg1555554

"You start off with premine of 1000 trillion antiSpamRipples. You sell them for 1 US cent (or a few sathoshis) each, or give them away for 3 years - the rest is destroyed. After these 3 years replacement of the destroyed ripples will be by demurrage, like Freicoin, about 5% every year. This is the miner grant for making new antiSpamRipples to somewhat replace those destroyed, and to have a distributed way of securing the network. Tulip mania is averted by making antiSpamRipple useless as a currency by having an extra large destruction of antiSpamRipples transferred from one Ripple account to another, above the mandatory tx fee. Like 10%: enough for you not to shrink from sending a few to your auntie and nephew, but enough to prevent any speculation on it becoming a currency. "

I dont understand how ripple prevents spam since XRP is virtually worthless. If the cost of 1 XRP is less than the benefit a spammer gets from spamming how can you combat it ?

Do you call this "virtually worthless?"

https://i.imgur.com/CaiOJXo.png

If you control the issuance of a currency, you can control the exchange rate. Bitcoin is popular precisely because no one directly controls the issuance of the currency. Ripple is troubling for the opposite reason.

It definitely looks like a classic alt coin pump and dump.

If Ripple is not vaporware the biggest risk is the legal risk of running everything under one for profit umbrella, OpenCoin Inc. As a veteran of the filesharing industry at least one principal of OpenCoin has a history of viewing the legal system as a technical problem. They only aim to fit exactly within the specification and tolerance. For an example that others in OpenCoin feel this way, Joel will basically respond "I do not acknowledge that Ripple has any market value" in the other thread about Ripple. He probably mistakenly believes this will allow him to avoid scienter if Ripple is doing something illegal. This guarantees failure upon scrutiny, because the legal system is more interested in seeing that actors are trying their hardest to do the right thing. Ideally the point is to soar into the net. Ripple seem to want to bounce off the goal post on their way in.

Personally, I'm glad Ripple is here to act as the canary in the coal mine for similar projects. We can at least agree they are running a lot more "hot" than Freicoin is.  Freicoin's distribution method does not involve us holding onto any tokens. To me it betrays the point of trying to make a more fair and decentralized economic system as an experiment. Keeping a large portion of the initial coins is greed with little reason. Ripple is building a dizzying array of well designed web services on their site. Why not distribute all the coin and "earn it back" by charging for their web services?

Please stop referring  to your failcoin, it has nothing to do with ripple anyway.
OpenCoin got the coins and distributes (some of) them via giveaways, you, on the other side, are "collecting" taxes from miners work, without even a faucet made by you and without doing anything actually.

YOU have NO right to speak about GREED and you know why (i guess.. if not, re-read all the failcoin threads)
And btw, wasnt you that was defending ripple the other day on some thread?

Now this is an interesting observation which attempts to provide some explanation for partially opaque replies.


But then you mention Freicoin which I think cheapens the discussion. Freicoin is nothing more than a toy currency that tries to piggyback on the greater works of others. Freicoin is flawed because it pretends that market participants have no time preference (http://en.wikipedia.org/wiki/Time_preference). It tries to push its social engineering agenda in a way that ignores economic principles.

Please don't turn this into a discussion on Freicoin. Let's stick to the question of the Ripple pre-mine.

Its not a premine as its not an actual coin imo, the correct word would be creation, as no mining is involved

I was defending Ripple's decision to not use a 100% proof of work distribution. I'm not sure about the rest of Ripple. It's kind of a decade old vaporware project and its hard for me to get that out of my mind when trying to think about its implementation. Basically its hard for me to pay attention to because I remember its history.

I don't want this to turn into a Freicoin discussion. Please delete your thread and re-post it as a new topic.


Yeah, I suppose that's technically accurate but I believe it has become common to use the term "premine" to refer to any cryptocurrency where the creators of the system extract some or all of the wealth before the system is published.

Can anyone refute or otherwise provide counter-arguments to the points I listed in bold?

With "pre-mined" currencies such as the U.S. dollar, the Euro, and in general pretty much all fiat, gift cards, queues, IOUs and so on, the value seems in the long run to come from how reliably the issuers can be trusted to buy back their currency when its market value starts to decline.

UKB, CDN, GMC, GRF, MBC. NKL and UNS are all 'full pre-mine" coins, each of them except NKL being the standard 21 million coins, following the tradition established by Bitcoin. NKL has 20 times as many coins, with the idea that that should result in it being worth about 1/20 of a "normal" (only 21 million ever minted) coin.

I thought none of them would ever "Catch up" to Bitcoin, let alone "surpass" it.

http://galaxies.mygamesonline.org/digitalisassets.html

It will be interesting to see how things go, both with those coins and with Ripple.

Maybe Ripple will turn out to be a better platform for them to run on than the current Open Transactions implementation, at least until/unless they do ever attain sufficient volume of transactions to be able to attract merged-mining miners. (Enough transaction-fees to attract enough miners to secure them as blockchains again which is what they were originally before the disinclination of miners to merged-mine additional chains led to the realisation that blockchains are just too hard to secure without massive transaction volume.)

-MarkM-

I think we should also provide possible solutions and ask why they don't choose to do it.

For example, they could giveaway 99,9% of the XRPs. Why only 80%? And how can we prove that there are really doing that?

one simple question: does xrp have value or not? some say it's an anti-spam device, but others argue that such is not feasible unless the xrp has value, to which others again reply that xrp does have value, and on and on in circles...

either 1: if xrp is valueless, why even bother discussing this silly concept if there is no value
or 2: if xrp does have ANY value, then it's absolutely ludicrous to let even george washington or abraham lincoln themselves from being in charge of 'distributing' 80% (in a purely fair way, of course--as mark m will all too eagerly assure you), while retaining a whopping 20% for developers...absolutely insane...we'd hang a banker for that kind of talk!

^ Exactly.

OpenCoin's scheme boils down to one simple, logically irrefutable fact: either XRP have significant market value, or they do not. They can't have it both ways. It cannot be both a disincentive to spam and at the same time worthless. They cannot retain 20% to pay off their business costs if they are worthless.

The only possibilities are that the company and its paid shills are ignorant of basic economics and logic, or they are running a sophisticated "soft-scam" (not illegal, but designed primarily to make them money off the original Ripple idea they bought from Fugger).

http://www.reddit.com/r/Bitcoin/comments/19a1nj/introducing_ripple_a_detailed_look_at/ (http://www.reddit.com/r/Bitcoin/comments/19a1nj/introducing_ripple_a_detailed_look_at/)

+1 and can i get an amen?

Although the above problem is fatal for the legitimacy of OpenCoin's Ripple implementation and there's no need to go deeper, it gets even worse. The delusions about distributing the 80% of the market cap "fairly" - the part they AREN'T keeping for themselves -  are either the most naive central planning Soviet-era bullshit or - more likely - an opportunistic scheme for bribing bitcoiners and others who would otherwise object to what is, objectively viewed, an obvious pie-in-the-sky scam. I think the creators get this, but to them it's "just the way business works."

The XRP are refered to as an afterthought because they wanted to sneak in this little "worthless anti-spam token" to make sure they made the big bucks. Well they fucked up, the secret's out. The little "chits" took on a market value earlier than the schemers were expecting, so all plausible deniability is lost from here on.

The original Ripple will be a casualty, hopefully to rise again in proper form some day. It's really genius how they bought the idea from Fugger so they could use the name and website, so that anyone attacking this bastardized form of Ripple would be seen as attacking the original great idea that Ripple was. Imagine if someone had done this to Bitcoin? Messed with its structure so as to make it so there is no real choice but to default to giving all the coins to one group at the start. It'd have destroyed the project in its cradle. It would be unforgiveable.

Who is Fugger? I would like to learn more about the origins of Ripple and how the domain was transferred, can you provide references please?

Ryan Fugger, the original creator. http://news.ycombinator.com/item?id=5254737 (http://news.ycombinator.com/item?id=5254737)


Piggybacking on the name to buy the legitimacy that people had contributed in their comments about the old Ripple and earn the confidence of bitcoiners for this switcheroo'd version bastardized to suit their business needs rather than the open source community. Brilliantly executed, until these little play tokens started betraying the economic reality that scarcity + usefulness = value.  

Let me say, though, that I've been a little to quick to jump to conclusions attributing malice. It may just be that OpenCoin sees it as a win-win situation: they get to bootstrap Ripple into being quickly and equitably, while profiting handsomely for their service to the cmmunity.

I just don't think this can work, despite the best of intentions. Power corrupts even the best of people, does it not?

All boils down to one question: Why inventing "XRPs" while bitcoins would have been enough? What are the properties of XRP that Bitcoin doesn't have?

The old wiki is still out there. IT has a link to the old mailing list too:

http://archive.ripple-project.org/


They're inside the ripple system. You can't use bitcoin for antispam within the ripple network because btc will always have an issuer in ripple and thus btc IOUs in ripple aren't fungible.

The source code will supposedly become available at some point.

Maybe by that time we should have a distribution list or something ready so we can immediately make a new RIpple network, immediately distributing all of its Ripples "equitably" ?

-MarkM-

Even so, the question of  how would probably swamp up any democratic efforts.

Yeah but maybe we could at least get 100 or 1000 or whatever people who complain that the current system is not fair, give them each 1/100 or 1/1000 of all the Ripples in the new fairer one, and they can each distribute their portion in accordance with their proposed fairer method, so at least the fraction they get can be done fairly in accordance with their idea of what is fair.

There'd be lead-time, anyone who really thinks the current system is unfair could make sure to get onto the list of people who will be "fairly" doling out the new system's Ripples. Each of the proposed fairer systems would each have an equal fraction of the total to give out, though maybe they still might claim an equal share is not a fair share I suppose...

-MarkM-

The more I read, the more it seems like Ripple was designed from the ground up to enrich the authors. The shady way they bought the domain, code, and technical assets from the original author. The 100 billion XRP. The measured responses to the public regarding inquiries into the protocol.

But most importantly, the LACK of answers from JoelKatz when asked specific questions regarding the usage of XRP as currency.

Yes XRP is a currency and can be used as such.

Yes we will open source the ripple software. We understand that that is essential if the system is ever to gain adoption.

We are open to suggestions about how to distribute the coins. We are going to try to be as fair as possible but after the distribution will it really matter how we did it? A currency's distribution method doesn't really impact its usefulness.

Thank you for a straight answer. Now we can move forward honestly and state with no uncertainty that XRPs are a currency, with the founders acting as the centralized banking authority.


I never doubted this. I do have some doubts about the technical aspects but my assumption is that these will be addressed in reasonable time with mathematical rigor. These issues are minor in comparison to the enormous pre-mine. At current valuation, the XRPs held in reserve by the authors are worth around $60,000,000 (sixty million USD).


It absolutely does. Just look at every fiat currency. The currency distribution is controlled by the central bank. You're saying that the fiat money reserve system's centralized control doesn't impact it's usefulness? Of course it does. The problem with having one or more individuals with control over such a large fraction of the currency is that they can effectively set a ceiling on the price. It was stated in the wiki that one hundred billion XRP should be enough for "thousands of years" worth of transactions and account reserves.

It has been repeated often that the gateways can set the transaction fees. This is true up to a certain point. At 10 "drops" per transaction, the most they can lower the fees is by 90%. Further reduction in fees would then only be possible with a change in the protocol to add more decimal places to XRP units. If Ripple takes off, those who own the bulk of the XRPs can simply hoard them to drive up the price. This would put pressure on gateways to lower the transaction fees due to artificial scarcity of XRP. But the most they could lower the price is by a factor of 10. Once the controllers of the XRP hoard drive the gateway transaction fee down to 1 drop (the lowest it can be) they now have complete control over the price. Hoard, to make it go up, and sell to make it go down.

There is grave concern about the centralized control over the XRPs. This concern is legitimate.


Unfortunately as you have pointed out, this is a difficult problem to solve. I do not believe it can be solved perfectly. Well, there is a dramatic solution:

Biometrics. Each individual is uniquely identified by a biometric marker (DNA or facial recognition?). Individuals would be eligible for a one time 1,000XRP distribution after providing biometrics at a physical redemption location. Their biometric information is hashed and stored in a database to prevent multiple distributions.

There's something else that OpenCoin can do:

Give away the entire undistributed balance of XRPs to one or more separate organizations not associated with the development of the Ripple software. Each organization can come up with its own rules for voting in its board members and distributing the XRPs. Here are some ideas:

- A "commerce board" with 13 council members that distributes a billion XRPs through votes.

- A "citizen board" that distributes a billion XRPs to individuals who display aged Bitcoin balances.

- A "public board" where anyone can join if they provide personal information (to prevent duplicates), and each person can nominate recipients for XRP grants and everyone can vote.

- Commercial entity like MtGox can transparently grant initial blocks of XRP to any of its account holders. Since people opening accounts on MtGox have to provide unique personal information the problem of duplicates and shills is avoided. This can be scaled to any traditional business that complies with AML.

- Commercial entities like MtGox can form an organization where they agree to share a database of hashed personal information on all their customers to reliably identify duplicates, this provides a fair path for giving out XRPs to people who already have opened accounts with companies that comply with "Know Your Customer" laws.

And so on and so forth. Each organization should be as public as possible. The greater the transparency, the more confidence will be inspired.

Taking some of distribution out of the hands of the founders and putting it into the hands of public people who have demonstrated wisdom, fairness, and intelligence would definitely help (although there's no perfect answer). How about Bitcoin foundation distributing some of the XRP? They could certainly keep some in reserve to fund their operations.

Now that we accept that XRPs are a form of currency and that there is a market for it, the most fair way I can think of to distribute them would be to divide the 100 billion hoard into one thousand equal portions, and give them to a thousand independent governing bodies so they can compete with each other, and let the market distribute them. This should keep the price from skyrocketing and also prevent any one person or group from controlling the market.

I think that to fund the development of the software it would be reasonable for the founders to hold some XRP in reserve. Five billion. The rest should be distributed in large blocks to independent third parties as soon as possible.

Politically separating the development of the software from the distribution of the XRPs seems the way to give Ripple the best chance of adoption.

I have to admit that this is a concern that never occurred to me. But it seems implausible in the extreme. There are a hundred billion XRP, or a hundred quadrillion drops. Let's say 1/10th of a penny per transaction is small enough that nobody need be concerned about it being a limiting factor. For one drop to be worth 1/10th of a penny, the total value of all XRP would have to be one trillion dollars.

If that ever did happen though, the divisibility of XRP could be changed by consensus. Alternatively, we could use a scheme where you prepay for a number of transactions and then can perform transactions without a fee until the account's "transaction credits" drop to zero. The number of transaction credits you got for one drop could be adjusted by consensus.

Your example is flawed. You say that the transaction fee will be only 1/10 of a penny. What happens if Ripple grows and new XRPs are not handed out in the system? The value of XRPs will go up without bound. Especially because, once an account is funded the XRPs are "locked in." From an analysis perspective they are effectively destroyed since they can't leave the account. That means that the rate of deflation is many orders of magnitude greater than the rate of XRP destruction due to transaction fees. "Implausible in the extreme" is only true if no one controls the bulk of the XRP supply.


I keep hearing about how easy it is to change the transaction fee through the consensus mechanism. But no one has explained exactly what criteria a gateway will use to determine if the fee needs to be adjusted. How do you implement these functions:


For that matter, how do we implement this function:


But I think this is a discussion best left in another thread. The bigger issue is the XRP distribution.

50 billion XRP will be given away by Opencoin. But it still doesn't matter. So long as there are enough XRP in circulation to perform transactions, XRP still won't limit the ability of people to perform transactions. Over a quadrillion drops have already been given away, and consensus can change the base transaction fee to less than a drop.

The primary criterion will be what they believe the transaction fee should be. The secondary criterion will be what they believe they can get a consensus on.

I believe I explained the mechanism in more detail in another thread, but here's a summary:

1) Validators add to specific validations an indicator of what they think the transaction fee should be.

2) Validators look at other validations to see whether there's a sufficient consensus for moving the transaction fee up or down.

3) Validators then add pseudo-transactions to change the fee.

4) If a pseudo-transaction gets voted into the consensus transaction set, fees change as of the next ledger.

A similar mechanism is used to make logic changes, except nodes won't themselves vote yes on a change unless they see it has a supermajority or if they are specifically configured to treat the change is urgent.

There is no specific check for spammy transactions. If it has the correct fee, it will be processed. If the network is overloaded, slow nodes will bow out of the consensus process and the transaction fee will rise to maintain stability.

Right. We have good pseudo-code for "how" the fee is changed. But no examples for what criteria are used to calculate "what they think the transaction fee should be." For example, how does a gateway implement this function:


Do they raise the fee if "too many" transactions go through? Or do they raise if a lot of spam is coming through? For that matter, how do you identify a transaction as spam? The rationale given for the necessity of XRP is that it is "to prevent spam." I agree that spam is an issue. The first thing I would want to do is create a thousand self issued currencies called "BIGDIK" with an incrementing numbed appended to the end. How do we prevent this? How does a gateway recognize this as spam? Is it a manual process performed by the gateway operator poring over server logs? Is there a community website that gateway operators visit to hear the latest and greatest on how to combat spam?

A lot of talk has been given on the consensus model and the need for XRPs to prevent spam but nothing has been said on the exact methodology that a gateway will use to determine what an appropriate transaction fee will be, or even if the fee needs to change.


Are you saying that bandwidth is the sole criteria for determining the fees? I don't see how that prevents spam at all.

That's really up to them. I would say pretty much the only criterion is that transaction fees not be so high that they are a barrier to use and, ideally, not so low that they frequently need to be raised to control spam.

You don't need to try to figure out if specific transactions are spammy or not. You just have to look at whether the total volume of transactions is within what the system can handle and also whether the cost of a transaction isn't unreasonably low when compared to the actual costs associated with processing a transaction.

If the fee is so high that transactions are discouraged that the system could handle, it should be changed. If the fee is so low that the network is consistently overloaded and has to raise the fee dynamically, it should be changed.

Transaction spam is not like email spam. It doesn't annoy human beings directly. But it does cost bandwidth and reduce the remaining capacity of the network. The criteria is basically to make sure that transactions that cost more money to process (in terms of bandwidth and storage) than they are worth are discouraged without having to resort to dynamic changes in the transaction fee (because that makes fee and transaction clearing times less predictable).

What about areas where parts of transactions are displayed to humans? For example, the name of a self issued currency ("BIGDIK" in my example). What about phone numbers, URLs, or other messages (e.g. "Litecoin is crap") appearing in description fields?

I don't think it much matters because you can't easily get a human's attention. Most likely, nobody is going to look at those fields. We've tried to keep the design so that you can't easily compel another person's attention.

If models do arise, I think probably the best solution would simply be for the client not to report it to the user. For example, if someone not on your list of known accounts sends you a microscopic amount of XRP, you probably just don't want to get notified. If we do things like integrated messaging, they'll have anti-spam features built in such as requiring permission first.

We are not really expecting the transaction fee to protect against that kind of spam. It may to some extent do so "accidentally", but that's not what we mean when we say it protects against spam -- we mean pointless transactions aimed at clogging out legitimate transactions.

Here's an attack vector: someone who holds 50 billion XRP can easily flood the network with transactions, force everyone to raise the fees and then sell some of the XRP off at a higher price.

Well I have to admit that when technical questions are asked, they usually get an acceptable answer. Which is why I did state my assumption in the original post that the system will eventually be rigorously proven to be secure.

The glaring problem is the XRP distribution.

Someone who holds a large number of XRP can temporarily raise the cost of transactions. But to keep the cost of a transaction over, say, 10 cents, they'd have to be willing to put ten cents worth of XRP behind every transaction that they make. Presumably, the volume of their transactions will exceed the volume of legitimate transactions at that price, otherwise substantially the same thing would happen without them. So they'd be losing more XRP than the total value of all legitimate transactions that might occur. It's hard to imagine how this could possibly be done at a profit.


This has nothing do with XRP distribution. Provided they can be freely exchanged, the same problem would occur with any distribution. How you got your XRP in the first place has no effect on what you can most profitably do with them once you have them. If this attack worked, someone who bought up XRP could perform precisely the same attack with precisely the same effects. If it was profitable, people would be motivated to buy up XRP to attempt this.

There is absolutely no way someone could buy up enough XRP to do this in an economically viable fashion. However, someone who started with 50 billion XRP could do it easily.

Seems to me that one by one technical questions are being answered, mostly by referring to the as yet under specified and not yet peer reviewed consensus mechanism.

Let's do the following thought experiment to address the 50% of XRPs being controlled by OpenCoin and its founders (effectively the same locus of control) :

Imagine that over the next year, The Fed or some other very rich or "printing" entity patiently accumulates 10.5 million BTCs thereby effectively recreating the concentration that will be present in the ripple network after the distribution even if it costs them, say, $100 billion in freshly printed fiat.

Can this new overlord of Bitcoin suppress the price of Bitcoin from that moment on ? No, because in a non-fractional reserve crypto currency system ( as long as they can't introduce a "paper bitcoin" substitute similar to today's paper gold or silver. Ironically, Ripple if successful, can make highly leveraged fractional reserve BTC IOUs viable, watch out !!! ) with a hard upper bound on total possible number of units that can ever exist, the only way to keep the ceiling on the exchange rate would be to continue selling at whatever rate they chose to be the ceiling, but doing that keeps draining their bounded hoard, therefore that attempt will fail and in this resect ripple would be the same as Bitcoin in this imaginary capture scenario where 50% of all possible coins have been hoarded by The Fed.

Perhaps we should give it a name: "50% of total possible money supply capture attack"

Therefore, in the long run, the non-distributed 50% of XRPs will either stay sequestered off the market or will be drained away through sales ... Either way, that concentration and its perceived Systemic Risk will either remain theoretical or will inevitably dissipate if actually attempted in practice.

Being able to mine BTC and LTC is one of the main reasons I am interested in them and invest in their economies.

I have absolutely no interest in Ripple or any other premined ecurrency.

That makes absolutely no sense. Either the scheme is profitable beyond the raw value of the XRP or it's not. If it is, then it makes sense to buy up XRP to do it. If it isn't, then it makes no sense to do it regardless of how you got the XRP.

pre-mined and post-mined, just like what Federal Reserve can do to USD.

There's no pre or post mining: there's no mining.

As I said before, it is technically true that there is no mining but the term "pre-mine" in this community has become generally accepted to mean a cryptocurrency where issuance or distribution is partly or wholly under the control of the authors.

There is a reason Bitcoin is mined: proof-of-work technology is what made Bitcoin possible, because it made it possible for the units to be acquired through the same method by anyone. Without proof-of-work, Bitcoin couldn't have come into existence; the same holds for any allocation of virtual currency. The only way to make Ripple work is to do away with XRP or find a way to make them "mine-able."

Of course bitcoin would have not existed without PoW because bitcoin relies on it for its security.
A PoW chain doesn't need to distribute the initial supply through PoW though.
Making xrp mine-able is not difficult, as I said in the thread where this issuing mechanism is proposed for xrp, it's just not economical: it's a waste of resources.

I made a post in another thread that is relevant to this one. I'll just make a partial quote here:
As an illustration, here's an example of these stamps.
https://i.imgur.com/AYvZ1kp.jpg
The Norwegian Postal Service sells one book of "A Verden" (first class air mail international) stamps for 150 NOK. But they will continue to honor them as long as they are in "business". Unlike traditional stamps which have are denominated in a currency like NOK, this is a bit like a Ripple XRP.
Of course, unlike stamps, there are no "rare" or "special" XRPs - it's fungible and divisible. Also it's more likely that Ripple will collapse than that the Postal Service will collapse. They have some partial monopoly protections in some countries after all.

Edit:
This remains to be seen. Bitcoiners prefer XRP over IOUs just like gold bugs would prefer platinum over dollars, but if Ripple is to become successful, it has to attract users who will use IOUs for transactions. To use the analogy above, the postal service can't be successful if the only ones it attracts is stamp collectors.

And even if the user Opencoin claims that XRP is a currency, I don't accept it as a real currency even if it has an acronym. It's more like stamps or frequent flier miles.

This whole Ripple thing has a horrible stink to it.

If you're the type of person who faults the Post Office for "pre-mining" stamps or the Fed for "pre-mining" USD, I guess you could see it that way.

Now, there's plenty of problems with Ripple, but a lack of "proof of work", and a lack of wasted electricity, is not one of those problems. Distributing free XRP to people is a great marketing idea, but really it would still work if everyone had to buy XRPs.

Don't think anyone faults the Post Office for "pre-mining" stamps.  But if the Post Office were to claim stamps were decentralised then I think you'd find a few people disagreeing.

The lack of source code is also preventing "post offices" from springing up everywhere.

If I'd been able to download the source I would probably have had gateways running by now for at least a few different altcoins. As it is maybe by the time the source does come out there won't be much point worrying about gateways until first a new network with some distribution that isn't so controversial is set up.

-MarkM-

Think of it as multiple post offices - and local corner stores acting as postal agents - selling stamps then - based on a common consensus about how many stamps should be distributed.

Now imagine competing chains of post offices providing the same postal money order services, but not having cross-redemption agreements. The first post office chain was started by some guys who pre-printed their stamps and threw them around, letting the post offices buy more stamps from them as needed.

In time, I think these competing chains would merge, or would start cross-redeeming their postal money orders.

When you talk about centralization, it's really a question of degree, and how you do it. The Fed also has several branches, but it's controlled by a board and subject to Congress. If every man starts his own cryptocurrency, there's no centralization, but total chaos about what these things are worth really. Ripple has a similar issue of not all IOUs being equally worth due to defaults, (see also subprime mortgage crisis), but at least Ripple IOUs are issued in a set currency, not BeepbopBux or MisterbiggCoins.

The thread was locked but I'm re-opening it because the information is still relevant.

People who criticize Ripple without stating facts are in my opinion just trolling. Such as a certain person who put up a website dedicated to trashing Ripple. Here's a well-reasoned analysis which states facts.

Nothing there. Kinda ironic.

Please also try reading RippleScam first.

Also, this is a very big assumption to make given the profit orientated goals of OpenCoin Inc. They will open source it if it makes commercial sense to do so - and there's only commercial sense when people demand it to be open sourced, and for OpenCoin Inc to stop violating open source licenses and release their source code

How are they violating an open source license? They are not using any GPL-ed code.

I find it interesting that you made your thread "moderated" to prevent any sort of critical discussion. My thoughts on this is that you are just pissed off because they came up with a really amazing idea which just happens to have the biggest pre-mine in the history of crypto-currency.

But is it a scam? I will concede that if it doesn't become open source then there are some significant problems. However, I see no evidence of an evil plan.

And you've got proof to back it up? Hmm?

It's not to prevent critical discussion, it's to prevent dumps of copypastas. Feel free to discuss issues raised on the site.


There are problems with the "debt is money" model, in addition to how it is centralized and closed source.


You don't call something open source if it is not open source, like how it's illegal to advertise "ALL DRINKS FREE" in your signs, and when people enter you tell them "oh this will happen eventually".

The reason why I created a website is for SEO. RippleScam would have succeeded when it is the #2 result when someone searches for "ripple", and of course the #1 result for "ripple scam". I'm also looking into advertising this on AdWords for the terms meanwhile.

They're not distributing rippled, so there can be no violation. You're not mandated to share your modifications on free software, butwhen you choose to do it, you have to follow the rules.
I don't think you can violate a license with code running on your server, but please correct me if I'm wrong.

I'll be brief :)

yes, it's a premine and yes, it matters.

Your whole analysis is moot until these assumptions become true (if ever)
anyone buying into ripple today runs a considerable additional risk because today, it's not open sourced, not decentralized and not verified.

But if you only use it as a BTC / fiat exchange, then you'll be able to benefit from it greatly.

The gateway software contains a rippled binary I believe.  If so, they have distributed it.

There really is no "gateway software". There's just the rippled software. To my knowledge, we have not distributed the binary to anyone who has not also received the source. In any event, the only licenses the rippled software source code is subject to are:

1) The OpenCoin license.
2) The OpenSSL license.
3) The Boost license.
4) The LevelDB license.
5) The Bitcoin license.

Rippled also uses SQLite3 and json-cpp which are in the public domain. Additional licenses might apply to the JavaScript unit tests.

Update: As there seems to be some confusion, the portions of the Rippled source developed by OpenCoin are *not* available under an ISC-like license yet. The OpenCoin license on the server source is still strictly proprietary. This will change, but it has not changed yet.

I stand corrected, thanks for clearing this up.  The Ripple wiki https://ripple.com/wiki/Rippled_build_instructions (https://ripple.com/wiki/Rippled_build_instructions) lists ctags  http://ctags.sourceforge.net/  (http://ctags.sourceforge.net/) as an optional package, which has a GPL license.   Will this be respected, or does its optional status mean it is not necessary?

It is not necessary. It is not distributed as part of Ripple nor is it a dependency.

I do not get why it even is a discussion? The fact that ripple was premined in such amounts already makes it a failcurrency. It's only meaning is to be an IOU ponzi scheme, to feed of other greedy people.

A currency can still have value even if it took little to no effort to obtain the material being used as currency. Shell money, for example, or USD. Something has value if we give it value. The "pre mined" argument is not valid in my opinion because it supposes that all currencies should be created in the same way that bitcoins are created. There may be other legitimate concerns about ripple, but I don't believe this to be one of them.

Ripple may be over before it even starts.

Ripple-killer: https://bitcointalk.org/index.php?topic=212490.0 (https://bitcointalk.org/index.php?topic=212490.0)

We are open to suggestions about how to distribute the coins. We are going to try to be as fair as possible but after the distribution will it really matter how we did it? A currency's distribution method doesn't really impact its usefulness.

Lol at this statement, sorry. A distribution method does impact the currency. If it didn't satoshi could have just sent coins at random to a few users. Would bitcoin be the same if he did?

As far as a fair distribution method. How about bounties and contests? Make people have to work to get xrp as well as giveaways.. The users that put in work get more xrp