All bitcoin exchange deposits are IOUs, there's no way to get around that unless you never trade bitcoins on an exchange. IOUs are debt, but its a very simple form of debt. Much simpler than the case of ponzi-type "fractional debt", unless a gateway is operating fractionally and issuing more IOUs than it has in actual deposits. Thankfully, on ripple we can see exactly how many IOUs a gateway is issuing, this is one of the primary reasons I like ripple so much (eg current bitstamp gateway capitalization is $272,957 USD and 2,583 BTC).


You're right, one of the settings in the web client is to fetch your wallet blob from "local browser", which uses the HTML5 localStorage API. But there should be a more explicit and usable way to select a wallet file. Hopefully they'll implement that soon.


You can run a local copy of the web client. You can download the ripple-client from github to do this.


Sometimes it appears that way because the web client is hosted at ripple.com. So its easy to confuse ripple.com for a centralized payment system, similar to how its easy for people to confuse the blockchain.info web client for the actual bitcoin blockchain. But there is work proceeding on a gtk client (uses GTK as a GUI framework, instead of QT), and now that the rippled server is open-source, people can also run their own ripple servers.

I thought the same thing about bitcoin, even as recently as one year ago. Six months ago I ignored ripple on similar reasoning: "well bitcoin is already so abstract and difficult to explain. The chances are very slim that a meta-bitcoin like ripple will gain any traction." It was only two months ago that I learned bitstamp is a ripple gateway. It is gaining traction, much to my surprise.

Its easy to post fake/unfunded orders (I think it was for $50 million), the client doesn't yet check streamed-in offers. They go away when you refresh the order book.

The change has to be accepted by the majority of validators. You already know that, unless you didn't read the thread where you learned about that SetFee transaction.


No it won't, you will not be on the same blockchain if you are connected to completely different nodes. That's why the bitcoin client connects to a bootstrap IRC channel, so that everyone can connect to the same set of ip addresses. The UNL basically serves the same purpose, except where bitcoin requires hash power as a defense against an ip address Sybil attack, ripple uses an explicit list of non-colluding nodes. The function of the UNL is analogous to a miner choosing to mine at three different pools because she trusts that all three will not collude against her.



Running the bitcoin client only means you can broadcast transactions, that's somewhat shallow participation in the network (you aren't mining blocks). The ripple client has a setting in Advanced -> options to set your validator node / rippled server, so its just not true that it doesn't allow you to choose your own validators (the setting is an explicit field right there in the UI).


That's fine, but bitcoin alone is only a trust-free solution if you never do any trading on exchanges. You are the one comparing apples to oranges, because the ripple protocol decentralizes multi-currency exchange. The bitcoin protocol decentralizes bitcoin transactions.



Ripple did not print BTC, they printed XRP. Every alt-chain miner decides, on a whim, to print their own pet alt-coins (litecoins, feathercoins, ppcoins, etc). May the best alt-coin win.



Start your own ripple ledger.

Precisely. What makes bitcoin so much more valuable is the fact that merchants trust them enough to accept them, and more importantly that there is already a big market for them on (trusted) exchanges. My point is that the value of bitcoin comes mostly from the trust that people have in the market. Not so much its intrinsic properties (or the various alt-coins would be of equal value).

All the alt-coins also have similar properties as bitcoin. What is it about bitcoin that sets it apart from the clones and makes it so much more valuable?

Well, C would be out $100, since she is the one who trusted D. But ripple-chains won't usually work like that. That's something closer to "classic ripple". before the name was given over to ripple the crypto-currency.

For Ripple/XRP the crypto-currency, trust paths are used for converting IOUs. So person A trusts gateway 1, person B trusts gateway 2, person C trusts two gateways, 2 and 3, and person D only trusts gateway 3.

Now A only holds IOUs from gateway 1, but wants to send a payment to D. Then path-finding automatically finds the cheapest path, say gateway 1 IOUs getting sold for XRP, then that XRP is used to buy gateway 2 IOUs, and finally ripples through person C to swap gateway 2 IOUs for gateway 3 IOUs. (person B doesn't trust two gateways so B never gets rippled through). And so D receives her payment in gateway 3 IOUs (she should redeem them right away, unless she really really trusts gateway 3).

If gateway 3 goes bust, then holders of their IOUs will sell them off for far less XRP (bad luck for persons C & D who trusted gateway 3). But if gateway 3 finds an investor to bail them out, then the price of gateway 3 IOUs would bounce back to face value.

That's right, different gateway IOUs will be valued differently to different people in different places. That's why the prices will vary on the ripple order books. The most trusted gateways will have the most valuable IOUs.

If funds can only be moved across the world using bitcoins, then we are the mercy of exchanges (you STILL have to trust an exchange). What if you are in a place where the exchange has funky prices? Or is taking forever to process your fund withdrawal? Ripple brings more exchanges on board, and it gives people the power to do what they like with exchange IOUs.



Because it decentralizes IOUs. With ripple, exchanges can't seize IOUs because now IOUs are crypto-coins. The same power that decentralization gives to bitcoins, ripple gives to exchange deposits.



And what happens if an exchange seizes your bitcoin deposit or fiat funds? The same scenario exists in the current world, you would have to go after them with some sternly-worded e-mails to get them to release your funds (and funds are just a deposit aka debt). The world where bitcoins are useful without debt or trust is a straw-man world. Try to trade bitcoins over the internet without trusting an exchange. Ripple just makes that trust explicit (that's a good thing).

Ripple will do great things for bitcoin - its a tool for trading them which puts bank and wire transfers to shame. It is true that bitcoin alone is theoretically capable of completely replacing bank and wire transfers. But that is a theory which is far-off in the future, the Legacy Banking system is still here and it is powerful. Ripple is here now (its not just a proposal), and it gives power to the users (again, on ripple you control your IOUs). It is not perfect, but it is a leap of a stepping-stone to a much better world.

Because if bitcoins are cheaper at a different gateway, you can move your fiat around quickly and freely. Haven't you seen how different the prices are lately?



You have to trust an exchange if you're going to trade bitcoins. Its no different with ripple, except its called a gateway, and once you get your IOUs you're free to send and trade them just like bitcoins. Looking at the current state of mtgox and bitstamp prices, that is something the ecosystem really could use: a method other than bank and wire transfers for moving around fiat IOUs.

Yes, a single global decentralized ledger. Just like the bitcoin blockchain - there's only one (unless you count forks), its global, and its decentralized.

Right, but if you ever want to trade bitcoins on an exchange, you will need to deposit them on that exchange (turning them into IOUs). So all the FUD about ripple and IOUs is a nonsense comparison to a straw-man world where bitcoins are never bought and sold online. Even with ripple, obviously you can still withdraw bitcoin IOUs to your wallet on the blockchain (nobody would use it if you couldn't). They even implemented the "bitcoin bridge" to make that a seamless process.



Yes, its true. For example, rhcGNgtHR7RRNdRgSc1EJuU7jZ23XUbRVx is the address of someone who just paid $226.81 of bitstamp USD for 21,773.76 XRP. Another address is rMLtFZE6ZvLkiRet8Bncs8EZEWQYXyXixN. That guy loves to play RippleFlip, we can see all the payments he's sent to rFLiP... (rippleFlip's address).



The 100 billion XRP cap is built into the protocol, there is no way to change without forking the ledger or convincing all the gateways. Your XRP funds are secure in the decentralized ledger (just save protect your secret key like you would protect your bitcoin wallet), the authorities would have to close down every gateway all over the world until there is no place left to buy and sell XRP. Ripple was inspired by the very same aspects we like about bitcoin (except mining, which obviously hasn't gone over well with miners). Even the ledger consensus process is borrowed from the way bitcoin transactions are broadcast among the nodes.

An issuer is a gateway. When you click "change issuer" in Advanced -> Trade, and put in a gateway's issuer address, you are asking to view the order books for for that gateway's IOUs. Say you set a trustline to Bitstamp for BTC, withdrew BTC from bitstamp to ripple, then now you have a balance of "BTC.Bitstamp" (bitstamp BTC IOUs) on ripple. To trade those for XRP, you go to Advanced -> Trade, select BTC/XRP, and put in Bitstamp's issuer address (its the rvYAfW... one). And an order book pops up.

The reason there are so many steps, I suspect, is that Ripple wants the early adopters to understand what it's about and how the system works. That's a good thing. We get to see behind the curtain, before it goes mainstream with all the magic hidden from the average user.

Bitcoin exchanges already are central points of failure! And MtGox's bank has limited them to ten(!!) SWIFT transfers per day. The exchange situation is a clusterfuck - that's why we see the ridiculous spread between mtgox price and bitstamp price.

How are the MtGox IOUs enforced? MtGox maintains utter and complete control over its IOUs - remember when they used to allow MtGox USD codes? They removed them. A ripple gateway would never be able to control its IOUs like that - a gateway's IOUs trade freely on the ripple order books.




LocalBitcoins - and now we are back to the SneakerNet - a time before the internet!! And then you get the LocalBitcoins exchangers who want to sell them at the MtGox price. No, there is a better way which takes advantage of the internet and technology utilizing next-gen cryptocurrency for decentralized exchange: Ripple.

With bitcoin, we have "fair" coin distribution controlled by an algorithm (distributed in proportion to hash power). But to determine the market price, we are at the mercy of exchanges. And clearly the current system of exchanges (networked by bank transfers) is failing at this task.

Well, the transparency and decentralization that we love about bitcoin (everyone knows how many bitcoins there are, and no central authority can seize anyone's bitcoins), ripple brings to exchange: everyone knows how many IOUs there are (bitstamp gateway cap currently stands at $259,210 USD and 2,321 BTC), and exchanges are not capable of seizing a user's IOUs. Instead, IOUs are traded freely on the ripple network, just as bitcoins are sent freely (as in speech) within the bitcoin network.

So there is a trade-off: free/fair coin distribution but centralized/balkanized exchange, or unfair/corporate coin distribution but free/decentralized exchange. Maybe there is a better, fairer way to do decentralized exchange, but I haven't seen one that actually exists (not to say there aren't plenty of proposals. but something that actually exists is always better than something described in a proposal). And since this is the real-world, there are always going to be trade-offs. But a real-world with Ripple is MUCH, MUCH better than real-world without it (even if it does have countless utopian proposals).

Now that fair distribution of bitcoin is reason alone why it would never be completely dropped in favor of XRP. Bitcoin's distribution algorithm could be the rock which provides stability against the whims of OpenCoin market operations. It's been said elsewhere: ripple is the dollar for the gold. Sometimes people like dollars and sometimes people like gold. But to say that ripple is an enemy is very short-sighted. At the very least, its a frenemy. Strategically, it is clear to me what ripple is: an enemy of my enemy, is my friend.

Exchanges already have the incentive to operate fractionally (ie pay themselves with depositor funds). There are no "bitcoin transactions" on ripple or anywhere else which happen outside the blockchain. You mean to say bitcoin trades - which already happen outside the blockchain. In fact, it is on the conventional exchanges that bitcoin trading takes place in an opaque system with proprietary order books where nobody knows much funds are actually backing the market.

The same transparency we have at the core of the bitcoin network (where we see all the bitcoins on the blockchain), Ripple brings to the surrounding exchange ecosystem (where we can see all the IOUs on the ripple ledger). So it is now public knowledge on the ripple ledger that Bitstamp has issued $259,210 in USD IOUs and 2,321 BTC IOUs (bitstamp's current gateway capitalization). But can you say how much USD and BTC is owed by mtgox? Or any other bitcoin exchange?

But that's begging the question: what makes people willing to exchange something valuable for bitcoins? Answer: the trust that they can trade the bitcoins for debt on exchanges, and that the exchanges are capable of paying said debt.

As the Graeber book explains, the product matching problem only exists in an economist's imagination. A much better explanation for why money was developed is that it solves the problem of a state procuring supplies for its army. It works like this: if a state has an army, it also needs to feed and clothe that army. Without a currency, it would require an additional army just to procure the food and clothes for the first army. To solve this problem, the King issues coins to its soldiers, and then mandates that every peasant pays one coin back to the King as a tax. Through such a coinage, the King has created the workforce needed to supply food and clothes for his Army.


That is not really true. The price of bitcoin is backed by the trust in exchange debt. Here's how: I wire transfer MtGox $100 to buy a bitcoin. Now MtGox is in debt to me for $100. I use that $100 USD to buy 1 BTC (which means now someone else is trusting mtgox to hold $100 USD for them). Now I'm trusting mtgox to hold 1 BTC for me (and MtGox is in debt of 1 BTC to me). Now I can withdraw this 1 BTC, and mtgox is no longer in debt to me. But MtGox is still in debt for $100 to someone else, and MtGox will remain in debt as long they have customers.

Now, you could have bitcoins that are in no way backed by debt. But in order to do so, you have to go back to when bitcoins were nothing more than worthless digital blips in a piece of p2p software: blips without a price, blips without value. The only thing that gives bitcoins real-money value is the trust that people have in exchanges to pay back held debt.

That is very much the idea with Ripple. It decentralizes exchange so that IOUs can be traded freely. Contrast with conventional exchanges who maintain total control of their IOUs (remember when MtGox removed their function for USD codes?) and nobody knows how many they've issued (on ripple this is public information. bitstamp's current gateway capitalization is $263,911 USD and 2,560 BTC).

The point about paper-checks not working when passed around through complete strangers is because you cannot trust a stranger not to counterfeit and double-spend a paper check. Issuing and trading IOUs are cryptographically signed transactions on the ripple ledger, so double-spending and counterfeiting IOUs is prevented just as it is with bitcoins on the blockchain.

XRP is also stored offline, the "secret key" you get when you create a ripple wallet is analogous to the private keys you can export on blockchain.info (on ripple.com/client, an encrypted blob is stored on payward.com and decrypted with your wallet name and password so the web-client can sign transactions with your secret key).

Now, even though you can take responsibility of your own private keys, your net worth is directly affected by problems at the major bitcoin exchanges. Especially when only one or two big exchanges maintain a monopoly (eg if trading lag at MtGox crashes your net worth). Centralized/"balkanized" bitcoin exchanges with wire transfers as the only way in and out are clearly a problem. Ripple is a solution for that (not saying that it's a perfect solution, but something that exists is better than something described in a proposal).