Ripple will provide immediate benefits to Bitcoin. For example, the Kraken exchange ( http://kraken.com) will make it tremendously easier to buy and sell Bitcoins, and Kraken accounts are also Ripple enabled. Awesome, I didn't know that. Have you had a look at Open Transactions yet? It looks great. I wish I had stumbled upon all this a couple of years ago, but to be honest I only got interested after I kept coming across newspaper articles talking about Bitcoin crossing the $1B market cap value... |
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ok suppose a scenario where they hide a flaw in the network in the interest of pumping the value of their freely self-issued XRP? how does that work out?
How would such a flaw work? How could they "pump" the value of their own XRP and not everybody else's? And if there's a flaw that undermines trust in Ripple, how could it not also undermine trust in XRP? |
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That "not meant to be a currency" goes for things like trading goods and (third party) services for it, which it really isn't intended to be used for. But intention and outcome often differ, so I wouldn't be surprised if it did.
After all I don't see any mechanism that would prevent that.
I think that must be their goal, how else would their XRP holdings become valuable? |
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surely you must see that by them wanting to make money and being a centralized point of control and distribution/issuance of XRP, and currently a closed source of code, that there may end up being a conflict of interest?
Their interest is to maximise the value of XRP. And again, if you don't like XRP as a currency, don't use it as such. You'll only need tiny amounts in order to be able to use it for other currencies. In my opinion the most likely application would be exchanging between BTC and fiat currencies and for that it would be far superior to Mt Gox. |
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if fees are negligible then how would the gateways make any money?
Those fees aren't paid in XRP but in the currency you are redeeming. Ripples are only used for transactions within the Ripple system itself and they are negligible. And they are destroyed, they don't go to OpenCoin. |
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MT gox charges a 1 % fee. Ripple is not going to be a successful exchange while XRP remains as expensive as it is now or unless it takes less ripples to perform an exchange then it does now. Maybe I am wrong but it looks like it is much more expensive when you factor all fees to exchange on Ripple as it is on the popular bitcoin exchanges.
Huh? Ripple transaction fees are negligible. |
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with all other issues of Ripple aside. why are they holding 20% of all the XRP? that alone makes me weary of using them
To make money obviously. If you think holding XRP yourself won't be profitable, then don't do it. You only need tiny amounts of it if all you want to do is to use Ripple as a far superior, distributed alternative to Mt Gox. |
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I was waiting for something like this. I always wondered why I never got any real answers to; "How many people control Ripple?". Bitcoin is decentralized and only decentralized markets should handle it. This form of "decentralized" thinking will keep bitcoin being "bitcoin".
What do you mean "never get any real answers"? The obvious answer is that right now Ripple is controlled by OpenCoin and its affiliates. The protocol is distributed though and the software holds great promise if it is open sourced, as OpenCoin has announced it will be, and as appears to be greatly in their interest. If they are successful, it will be great for the ideals the Bitcoin community has been pursuing. Being skeptical is one thing, but many here appear to be out to stop it from being successful. That suggests they aren't doing it out of idealism, but out of selfishness, perhaps because they worry their stash of BTC will not make them rich after all. Actually, I think Ripple will be great for them because it will provide them with an excellent, and nearly impossible to suppress, exchange mechanism between BTC and fiat currencies. |
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I don't see why I would want to trust a series of inter-indebted gateways, but holding IOUs in Ripple, when I could either:
There is no reason you must do so, but for each of the alternatives you mention there are reasons why some might choose to do so. 1) Trust the gateway directly (example by just hold my USD or Bitcoin directly in my Bitstamp balance)
You could do so, but then you are at risk of seizure / blocking by the government in whose jurisdiction the gateway operates. 2) Trust purely in the market/a single protocol (hold in Bitcoin wallet)
Then you'd have exchange rate risk and exchange fees because not everybody accepts Bitcoin right now. 3) Truth a government and hold fiat directly
Not a good course of action for many governments. Why would i choose option 4:
4) Hold an IOU in a gateway that is holding IOUs from other gateways as the reserve for my balance, hold this IOU with a virtual currency protocol, having the virtual currency protocol controlled by a single governing body.
Maybe because you live in Zimbabwe, or maybe because you want to launder drugs money, or money made by providing seedboxes for BTC etc etc, or because your government has outlawed Bitcoin and you cannot trade it openly. |
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Oxymoron spotted! I think you're preaching to the wrong choir buddy.
There are a few AAA banks and credit unions left, but not many. |
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So let me get this straight any gateway that allowed IOUs from other gateways would be taking on credit risk and in the event of a run would not be able to pay back 100% of it's own IUOs because of the IOUs of other gateways it held were defaulted.
You have said that it's people own fault for using these kind of gateways that are exposed to the above credit risk. So you would therefore say that all people should use gateways that only redeem IOUs that they issued themselves (and are therefore able to pay off 100% of their IOUs)
You should only trust gateways that have earned your trust, likely through frequent audits of their assets and liabilities. And that includes IOUs issued by other gateways. Note that gateways could accept IOUs issued by other gateways at less than face value. The exchange rates between the various IOUs for the same currency issued by different issuers would be the best market estimate of their relative reliability. So lets assume all gateways only redeem their IOUs (because people would be silly to use a gateway exposed to risk you said).
It's likely to start that way, unless some very widely trusted banks get in the game. Now ask yourself, what was the point in all that? When they could have both just logged into Bitstamp and done the trade directly without ever having to go to Ripple?
If the market is comfortable with holding IOUs for a while, then you wouldn't have to redeem the IOUs after every transaction. In fact, between individuals this could be a very convenient mechanism to split a check after a dinner in a restaurant. Granting a person a trust line means you'll accept their self-issued IOUs up to a certain limit. |
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Unless of course the "Good" (non-fractional reserve) gateways had allowed people to redeem IOUs from other gateways before they realized there was run on; in which case their reserves (which includes IOUs from other gateways) are no longer sufficient to cover their own IOUs; despite being 100% funded.
It would still be their own fault, since they would not be managing their credit risk wisely. And if you can only redeem your IOUs at the same gateway that you received them...then wtf is the point of Ripple?
You can still trade them with others through Ripple. As long as the exchange in question is solid, it's much quicker, cheaper and more anonymous than using the banking system. If the exchange is really solid, IOUs would only be redeemed infrequently compared to the number of transactions. IOUs are what allows you to trade in fiat currencies on the Ripple network. And I find it pretty odd that much of your reasoning behind Ripple being a sound/safe system is that "I'm not gonna keep much money in it anyway"...so I guess it is pretty safe then, cause you didn't put much money in to lose...  I think the system is solid, but I want to see the source first before I start risking large amounts of money. And any financial institution will have to earn my trust, regardless of what software they use. |
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Hear hear. Open Transactions rocks.
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Just one more quote...so you are telling me that I could go down to my local police station and report to the police that Bitstamp wouldn't let me redeem my Ripple Dollars Sorry just can't help laughing when I think about the look on the policeman's face. No different than Mt Gox really. Do you think they could get away with not letting people withdraw their balances? |
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And please don't say something stupid like "This is a good thing, it keeps people honest".
It's not stupid, it's the truth. Yes, irrationality can trigger a stampede, but that will only be a problem for those exchanges that practice fractional reserve banking. Then that is the problem, not the XRP exchange rate, and the offending exchanges will be quickly eliminated, thus solving the problem. I'm not going to hold large sums of money at an exchange, or in the form of IOUs until they have earned my trust, which may take a very long time. |
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And bear in mind that if your accusations are false, you may well find yourself on the wrong end of a libel suit.
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I'm going to sue Bitstamp for their Ripple IOU; are you kidding me, have you actually used the system yet?
Yes, but not for large amounts and I'm not going to at least until well after the code has been released. There is nothing even closely resembling a contract between me and Bitstamp. When you transfer Bitcoins to Ripple there is nothing but "Enter your Address", there is no text as to what they will give you, what that means, what their obligations are...nothing...somehow I'm going to use that to sue them?
If they accept your money and purport to issue and redeem IOUs then you can probably sue them, or at least report them to the police. Also what if I didn't get the IOU from Bitstamp directly. It may have come from Bitstamp 10 years ago and passed through 10,000 people before it got to me and was then worthless. Somehow I'm going to trace back the debt through 10,000 people and bring Bitstamp to court?
That may be more difficult. And even if you could sue Bistamp, then what, you get half of Ripple trying to sue a company for money they don't have?
It means they have an incentive not to cheat and users have a way to weed out bad gateways. This is how banks should operate IMO. Bitstamp are going to have to earn their trust lines. You act as if XRP and the other currencies within Ripple are totally isolated and each in individual little bubbles...when in fact any panic with XRP would immediately spread across the entire system. As soon as the confidence is broken.
Releasing "excessive" amounts of XRP would not impact the reliability of the Ripple system. If XRP tanks, there is no reason to start distrusting the USD balances. Reliability is a function of the source code (and the availability of independent validators, wider adoption etc), not of OpenCoin's "monetary policy". And of course Opencoin would not try to shoot themselves in the foot, but all it would take would be to slightly misjudge the number of XRP they were able to safely unload without affecting the market. Too much and people start to notice and panic, panic, withdrawal, withdrawal, uh oh the gateways were running factional reserve and we have our first virtual "run on a bank"
Bank runs could happen and that's a good thing, because it keeps banks honest. But it's totally unrelated to the XRP exchange rate. And in fact, XRP is the only currency in the Ripple system that has zero counterparty risk and needs no exchanges gateways, precisely because it is handled entirely inside the Ripple system. Exchange rate risk, obviously, but no counterparty risks. And for IOUs it's precisely the other way round. How distributed it is; are there any stats available on this (ie how many full server nodes run by how many different organizations?
The protocol itself is distributed, but since the source hasn't been released there are only a handful of servers. If that doesn't change, no one in their right mind will trust Ripple. How is it only a problem until source is release...if when the source is release it's contains serious security flaws; and hackers are quickly able to put through double transactions, or steal balances etc...
Well, even then it's not really a problem because you shouldn't use Ripple to hold large sums of money until well after the source has been released and vetted, many independent validators and exchanges have sprung up etc. |
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1) What if a huge gateway (such as Bitstamp) just decides "nah we're not going to do Ripple anymore"...and all their IOU are now worthless; it would bring the whole thing down, everyone would be trying to unload their worthless balances, it would be total melt down. And the best part is Bitstamp could probably continue to operate as a regular exchange (what is Ripple going to do about it)
Their clients would sue them and win. 2) What if Opencoin starts leaking their billions of XRP onto the market to try to turn a profit? As soon as people start to notice everyone will dump and run
If you're worried about that, then don't invest in XRP. You only need tiny amounts to be able to use the Ripple functionality for other currencies, including BTC. And of course, OpenCoin has no motive to do this, because they would be shooting themselves in the foot if they did. They want the XRP exchange rate to go up, not down, just not uncontrollably. 3) What if Opencoin get shut down by the government?
The protocol is distributed, just like Bitcoin, so governments cannot really shut it down any more than they can shutdown Bitcoin or Bittorrent. 4) What if Opencoin gets hacked and hackers use their Opencoin servers to do all kinds of bad stuff
5) What if Ripple itself gets hacked (source is still closed so no one knows how secure it is, there may be major security flaws)
6) What if Opencoin decides to randomly start doing bad shit like making more XRP, confiscating balances, banning accounts...etc..
Only a problem until OpenCoin releases the source code. It is in their interest to do so, precisely because it will dispel fears like that. These are just a few glaring "What if"s, I imagine people with more knowledge on the subject could come up with 20 more than this.
Basically Ripple makes Opencoin the de facto Fed...
Scare mongering. |
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