Is Ripple a Bitcoin Killer or Complementer? Founder of Mt Gox will launch Ripple

[HorseRider]

I think Ripple will work better as a tool of issuing securities, like bond, future, option or stock. Money? Nope, I would use either fiat money or bitcoin, some people told me his IOU are money? it is IOU, it will not be money. Money should be widely accepted, that's how fiat money is money, and how bitcoin will be more and more moneyly. There will be several kinds of Ripples:


1) Securities issued by someone. It represents certain right or interest, it is a contract, with the hope for the holder to earn more money. It will work, as the free stock market will work.

2) Ripple USD: you can use one unit of certain Ripple to exchange one unit of USD, with no interest. then I would ask, why would someone issuing such ripple if he is not intended to scam you? how will you trust the guy? So it must be issued by a huge name. But it will meet the same obstacle as bitcoin met: AML, KYC and other things.

3) RippleXXXcoin: nothing, just coin, if somebody wanna buy, then it will have value. (Yes, if you wanna one HorseRidercoin, I will issue 100000000000000000 HorseRidercoin for you.( you only need to give me 1 bitcoin to me.)

[molecular]

If it's possible to answer, is Ripple still going to support any form of money, or will it have its own numeraire?

I don't think I can answer that question. On another note, what do you think of our logo?

Scherzkeks. The Logo lacks a Ƀ

yea, these three are western fiat currencies. why not use western fiat, gold, bitcoin?

[Technomage]

The logo is very cool but I'm disappointed that Bitcoin is not represented.

[epetroel]

Interesting to see Chris Larsen involved with this.  Ever since I first heard about Bitcoin I thought it would be something that would be right up his alley.  Gavin and I were also both very early adopters of his Prosper.com platform as well.

[Rassah]

My issue was specifically large central ripple lenders taking themselves out of the system.
Say there's a bug trusted borrower/lender who is Person Z. Then we have two people who are not friends, but both trust Z. They get used to exchanging transactions through Z, since Z is big, wealthy, and has a well established trust (maybe one of those two people is a merchant, depending on Z to process sales). Then, suddenly, for whatever reason, Z decides to take their wealth and leave. Maybe they had a midlife crisis, maybe they died, or maybe they just collected so much wealth by borrowing from others using their trust that they think their time would be better spent on some hard to find tropical island. We already know people will trust others who are not their friends (e.g. pirateat40), so someone like Person Z can exist. Wouldn't the end result be that the ripple network will experience a sizeable default with people losing money, AND that the two people who used to trade through Z will no longer be able to so so, since they don't trust each other directly? (Or the shop will not be able to process a lot of sales)

[Rotsor]

My issue was specifically large central ripple lenders taking themselves out of the system.

Right. My issue with internet is that a provider going offline takes all its users offline. Doesn't seem to bother anyone, does it? If the economic incentives for large robust nodes are there, the network will work beautifully.

And to incentivise the node operation, people must pay transaction fees to the intermediate nodes. Is that supported by the current protocol?

[Rassah]

My issue was specifically large central ripple lenders taking themselves out of the system.

Right. My issue with internet is that a provider going offline takes all its users offline. Doesn't seem to bother anyone, does it? If the economic incentives for large robust nodes are there, the network will work beautifully.

And to incentivise the node operation, people must pay transaction fees to the intermediate nodes. Is that supported by the current protocol?

Which protocol are you asking about, Ripple or Bitcoin? (It is in Bitcoin protocol, somewhat - miners/pools)

[Rotsor]

Which protocol are you asking about, Ripple or Bitcoin? (It is in Bitcoin protocol, somewhat - miners/pools)

Ripple, obviously. The people providing connectivity (giving you loans by taking them from others) must be paid for their service somehow. I don't know whether this problem is addressed by the existing (?) Ripple protocol.

[miscreanity]

yea, these three are western fiat currencies. why not use western fiat, gold, bitcoin?

I'd like to see BTC in there as well, but the target audience isn't familiar with cryptocurrencies yet. The dollar, euro, and yen are widely recognised, and the linkage is easily understood.

A wise decision from a marketing standpoint.

[Spekulatius]

For me there is no doubt both networks will be complementary. Ripple is obviously influenced by the fact that most of the team members come from a Bitcoin background. Bitcoin-related use cases are very much a priority. That's all I wanna say lest I get in trouble.

What I can tell you is that this project is the most fun I've had at any startup. The team is absolutely amazing and working on something like this and getting paid for it is a dream come true.

(Speaking of which - if you've got the skills, we're hiring.)

As far as the client is concerned, it's already open-sourced, so if you're bored waiting for more details to come out, feel free to check in on our progress: https://github.com/rippleFoundation/ripple-client/commits/master

Since some big names with entrepreneurial background are involved: How are you guys planning on licensing the source code?

Will there be an open source protocol like Bitcoin, that is free to use for everyone, but still offers the opportunity for businesses to flourish around it?

[Spekulatius]

While ripple might eventually be a great alternative to bank loans, it is still a debt system. Any debt system could collapse when there is a "run on the bank." With ripple, a run on the bank would happen when everyone decided they wanted to call in all their debts from a large borrower. Only then would you know if there was actually enough BTC currency to back the debt. Chances are the answer would be no; debt systems lend themselves to fractional reserves.

If there's a run on the bank, you may be unable to meet immediate demands for called in debt. But you can simply issue notes worth more than the called in amount [*1]. This will bankrupt *you*, but that's the risk you take when you implement a fractional reserve. Those who loaned you money won't suffer.

For example, say I have $10,000 in deposits, all of which I've loaned out. I have a $3,000 reserve. Now, I get $8,000 called in, which I can't pay. What I do is I issue $8,000 in interest-bearing notes at double the prevailing interest rates and use them to pay back my customers. My customers will be happy because they can sell these notes for more than the $8,000 they're asking for. As the loans get paid off, and using my reserve, I can pay off the notes. Nobody gets hurt but me.

Runs aren't really a problem. Of course, such systems can still collapse due to bad loans or insufficient capitalization. Generally, a bank has an equity crisis that ends with a run and people think it's the run that killed the bank. But that's just not true. A run can destroy a healthy bank but it can't hurt those who loaned the bank money.

This probably has nothing to do with Ripple though.

*1: Do you assume "you" are a central bank in this case?

*2: (not up there;) The problem with bank runs and fractional reserve is that banks loan out 10 times or more of what they actually own. When there is a bank run and people demand their deposits back the bank can only return 10% of everybodies funds, thus hurting the lenders alot. Banks in such situations find it quite hard to issue the interest-bearing notes you were talking of, because other banks have the same problems and are trying to find buyers for their own notes as well.

[bitCooper]

The problem of a large lender going insolvent or disappearing is no different than with traditional banks and lending. It happens all the time.

You could look at Ripple as a new way to do lending with large organizations. This could be much more convenient with better-than-banking hours; as long as the organization is large enough and trustworthy enough, it could work.

*Or* you could look at Ripple as a way to facilitate lots of small loans between individuals. For smaller person to person loans, it would seem to be much better than using an Internet forum to track debt. Still, I have a hard time believing that a web of trust can make these loans worth the risk.. just look at the Lending forum!

Philosophically, I wonder if lending will ever really make sense without very large entities who are being audited by the government. Banks are all about trust, after all. I know that banks won't steal my money because they have decades of history, boards overseeing activities, etc. And the idea of lending to friends might seem appealing, but I think it's bad for friendships.

[miscreanity]

Philosophically, I wonder if lending will ever really make sense without very large entities who are being audited by the government. Banks are all about trust, after all. I know that banks won't steal my money because they have decades of history, boards overseeing activities, etc. And the idea of lending to friends might seem appealing, but I think it's bad for friendships.

You're afraid of OTC members building a reputation, then absconding with funds once the payoff is large enough? Why are you not afraid of government-approved banks, some of which have spent a century building strong reputations, stealing client funds and joking about doing so while in the elevator?

Same difference, except in regard to scale (both time and population affected). Exchange with Ripple would be able to grow as large as major banks or remain as small as P2P, trust becomes more transparently assessed than it is now, and recovery to a baseline could occur much more quickly than in the obfuscated financial arena that exists today.

Multiple, dynamic layers exist in finance. At the base is a numeraire, which acts as the foundation of a monetary system. Next comes a network system, big or small, to make use of the numeraire by moving it around. Then there are higher level services that fill various niche demands, built upon the prior two.

Here's how I see Bitcoin, Open Transactions, and Ripple:

• Bitcoin (just like gold, the USD, Euro, Yen, etc.) acts as numeraire.
• Ripple provides a method of moving the numeraire - any numeraire. Incidentally, Bitcoin also provides a transaction system, but exclusively for its own units; dollars and euros cannot be moved within the Bitcoin network.
• Open Transactions is sort of an umbrella service that affords interaction between various different types of networks, both legacy and modern. By encompassing the contemporary as well as the new, it builds a bridge from the traditional financial system to that found with Bitcoin and Ripple.

For comparison:

System:	Comparable To:	Tier (primary in bold):
Bitcoin	Gold, USD (Visa, MC)	1,2
Ripple	Visa, MasterCard	2,3
OT	Basic & complex banking services	2,3

With all three, adapted methods of gaming the system will eventually arise, just as the current ones have been abused. Still, the trio offer massive advancements over contemporary solutions and provide immense opportunities.

* I am speculating to a large degree on Ripple's latest incarnation, and to a lesser extent with regard to Open Transactions; my information could be mistaken.

[westkybitcoins]

Great to hear that someone is actually attempting this. I'm pretty interested in seeing what comes of it.

My only two thoughts are (1) I sure hope someone's TOTAL NET DEBT (but not net credit) is shown clearly... if a friend of mine is asking for a $1000 bump in his credit with me, and I'm aware he's recently had serious medical issues, I'd like to know if he's racking up a bunch of debt from others too, before deciding whether or not to loan him the credit. And (2) I would think for this to work, and not to have a total systemic collapse at some point down the road, there must be either a gradual erosion of all debts to zero, or a periodic debt jubilee of some form or fashion (one widely broadcast well in advance across the entire network.)

Definitely watching how this turns out.

[ShireSilver]

I used a ripple type system a few years ago, and it was a bust. Basically its an attempt to get trust to scale.

IMHO, the main use case for ripple is short-term loans, particularly for businesses.

One of the biggest flaws I see is the way that credit has to be extended. Each person has to figure out how much credit to extend to each person they are connected to, and modify that amount every so often. Its way too much work for most people to bother with. Perhaps if there were some sort of smart agents that could be used to automatically track and modify your crefit settings, it might work.

[JoelKatz]

While ripple might eventually be a great alternative to bank loans, it is still a debt system. Any debt system could collapse when there is a "run on the bank." With ripple, a run on the bank would happen when everyone decided they wanted to call in all their debts from a large borrower. Only then would you know if there was actually enough BTC currency to back the debt. Chances are the answer would be no; debt systems lend themselves to fractional reserves.

If there's a run on the bank, you may be unable to meet immediate demands for called in debt. But you can simply issue notes worth more than the called in amount [*1]. This will bankrupt *you*, but that's the risk you take when you implement a fractional reserve. Those who loaned you money won't suffer.
<snip>
This probably has nothing to do with Ripple though.

*1: Do you assume "you" are a central bank in this case?

The "you" is whoever is running a fractional reserve system.

*2: (not up there;) The problem with bank runs and fractional reserve is that banks loan out 10 times or more of what they actually own. When there is a bank run and people demand their deposits back the bank can only return 10% of everybodies funds, thus hurting the lenders alot. Banks in such situations find it quite hard to issue the interest-bearing notes you were talking of, because other banks have the same problems and are trying to find buyers for their own notes as well.

Even if that's true, provided the bank has assets significantly greater than its obligations, it can still pay everyone back eventually with significant interest. People may be inconvenienced by not having the liquidity they expected, but they can't lose their savings. If a bank doesn't have assets that are significantly greater than its obligations, then it's undercapitalized, and the run just exposes that problem.

My point is simply that a run cannot cause depositors to lose their deposits if the bank was healthy prior to the run. Bank runs are a solved problem for everyone but banks -- a run can bankrupt the bank.

[Mushroomized]

watching

[cbeast]

I like the idea of Ripple. It is a Proof-of-IOU system that can complement B2B networks as barter. I wouldn't try to scale it as a B2C economy, but business reputation is easier to verify.

[miscreanity]

From Google Groups:

I should mention that the system incorporates bitcoin-style coins that
are used to pay transaction fees and regulate transaction submission
rates against consensus processing capability -- they can be used for
payment as well as Ripple and offer privacy similar to bitcoins.
There is also, of course, actual bitcoin, which I'm sure will get
integrated to the system in various ways over time.  My sense is that
these more-private coins will be useful when more privacy is
necessary.

[marcus_of_augustus]

From Google Groups:

I should mention that the system incorporates bitcoin-style coins that
are used to pay transaction fees and regulate transaction submission
rates against consensus processing capability -- they can be used for
payment as well as Ripple and offer privacy similar to bitcoins.
There is also, of course, actual bitcoin, which I'm sure will get
integrated to the system in various ways over time.  My sense is that
these more-private coins will be useful when more privacy is
necessary.

Which coins are the "more private" type I wonder?