I believe it's called selling someone a bill of goods.

No, it shows how stupid it is to trust strangers in general and TF in particular.

But the IOU system itself is great, because it allows for P2P cash payments, i.e. electronic long distance transactions that are netted and then settled in cash with your trusted associates. This is exactly the sort of thing that will allow BTC <-> fiat exchanges to continue even if governments are unwise enough to try to suppress it.

Heheh, if Jed McCaleb is really Satoshi that would be hilarious. I wonder what the ripplescam.org people would say if he suddenly dumped his bitcoins...

Can anyone with a legal background explain why the route through Dwolla doesn't shield Mutum Sigillum? After all, Dwolla is a licensed money transmitter and funds that go through Mutum Sigillum only ever end up at Mt Gox.

@Adam:

Can you give more details about how you would encode the commitment within the existing transaction format? Or are you proposing a new format as well as new logic for dealing with it?

Well, for starters it will take away or greatly diminish their power to print money.

Thanks for all the explanation, I'm getting a much clearer picture now. Is there a special reason the consensus process starts with a threshold value of 50%? Near 0% it would be like set union, while near 100% it would like set intersection. It seems logical to start at a lower value to mop up some transactions, and gradually ramp up the required level to come closer to a consensus. But why 50%?

Can you say more about that avalanche algorithm? Or is it just the process of switching to the majority (or plurality) ledger if there is one? And what does a node do if for whatever reason all of its UNL nodes suddenly endorse a ledger that's on a different branch?

So how does it get out of that situation if the consensus process has been stopped? What makes nodes change their mind then?

Or operate in cyberspace and the black market.

I don't think so, but I'm afraid things will have to get even worse before they'll get better. I'm persuaded that in the end the power of cryptography will pose society a stark choice between radical liberty or tyranny, as described here. People will pull back from the brink then. But in the near future the instincts of both politicians and society at large will be to seek some sort of middle ground. It will take a long time for them to realise that none exists and to act accordingly.

This is not the beginning of the end of Bitcoin. It's not even the beginning of the coming battle against Bitcoin by the forces of statism. They are barely aware of the threat that Bitcoin poses - yet. This is just the government reacting to new ways of money laundering. The government doesn't see Bitcoin as an enemy - yet. That battle is coming however, and will take place on many fronts, and we should prepare ourselves.

OK, I thought that the algorithm switched from exchanging and combining proposals, thus implicitly voting on individual transactions, to up or down votes on whole ledgers and waiting for unanimity among its UNL nodes. If I'm understanding you correctly, what it in fact does, is merely to stop seeking a consensus at that point, and to publish a single validated and signed ledger. What happens if it subsequently detects that others on its UNL have signed conflicting ledgers?

Ripple can work with periodic cash settlement between acquaintances of netted transactions between strangers on the internet. Banks need not be involved. It is hugely important. The survival of Bitcoin may depend on it or systems like it.

Can you give some more details on the consensus process? I've studied the material on the wiki and some clarifications you've given on other forums, but it still isn't completely clear to me. I understand that whenever a node detects that the network has reached the 80% consensus level it will somehow try to declare the new ledger closed. Does it then wait for 100% of the nodes on its UNL to concur or just 50%? If the latter, I don't understand how this could mean "fully validated" or "mathematical certainty".

Things like this is part of the reason we need Ripple. It is to existing exchanges like Mt Gox as Bittorrent was to Napster. Rippling IOUs between private individuals will be impossible to repress, and that will allow an electronic market between fiat and crypto to persist even in the face of government repression.

Gateways don't hold XRP, and you get to set your trust limits for every user, including gateways. By default, you don't trust anyone.

But crucially, they can settle netted transactions in cash every now and then, which would give us a p2p payment system for cash.

Only the person who blinds a coin knows its "secret serial number" which is needed to exchange it for the money that was put up by someone who blinded a previous amount.

It also allows you to exchange currencies with strangers and settle with people you know and trust outside the banking system, up to self-chosen risk limits.