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

[nybble41]

Money is merely information. That's all it is. Who owes what to whom. Information should not be scarce.

You're absolutely right that money is merely information, but it's information about scarcity! After all, scarcity is the fundamental economic problem, i.e., the reason we need money in the first place. And that's why money needs to be scarce. If it's not, it can't accurately convey information about the underlying scarcity of real resources.

No, the idea that "money is merely information" is wrong to begin with. Trading with money is just a special case of barter which happens to involve highly-marketable commodities. Your net worth conveys information about your past balance between production and consumption; money is just one component, one which happens to be easier to account for than most, and more convenient for economic calculation. To be of any use, money has to be a marketable good, and anything which isn't scarce can't remain marketable, because no one would trade scarce goods for "money" anyone can get for free.

Note that Ripple doesn't eliminate the scarcity of money; not only does it have an even more restricted cap on the internal currency (XRP) than Bitcoin--the supply is not merely capped, but actually required to decrease over time--but the other currencies are limited by the participant's credit-worthiness, as measured in more conventional terms. In theory I could grant a trillion BTC of credit to a few of my closest friends, but no one would trust me to actually pay it back. In practice, the total credit actually traceable back to a trusted source, typically a gateway, will probably be limited to little more than the total amount on deposit with the gateways, or perhaps by the real-world property they can seize in the event of non-payment.

Ripple's problem isn't any lack of scarcity, but rather they it's trying to make a currency out of something non-fungible (loans with variable likelihood of default). Gateways mitigate this somewhat, by providing "trusted" centralized organizations with a low perceived risk of default, but if you have to rely on them for most trades you might as well employ the existing banking network.

[Roger_Murdock]

No, the idea that "money is merely information" is wrong to begin with. Trading with money is just a special case of barter which happens to involve highly-marketable commodities. Your net worth conveys information about your past balance between production and consumption; money is just one component, one which happens to be easier to account for than most, and more convenient for economic calculation. To be of any use, money has to be a marketable good, and anything which isn't scarce can't remain marketable, because no one would trade scarce goods for "money" anyone can get for free.

You don't think the blockchain is just information? You don't think your private keys are just information? I'd agree that traditional money is not JUST information. But it seems to me that money in its purest form is. (And Bitcoin is money in its purest form.) I agree that trading with money is just a specialized form of barter. And I agree that money is a marketable good. But I think that marketable good is information, or more specifically, a means of credibly conveying information about value given but not yet received.

[JoelKatz]

Ripple's problem isn't any lack of scarcity, but rather they it's trying to make a currency out of something non-fungible (loans with variable likelihood of default). Gateways mitigate this somewhat, by providing "trusted" centralized organizations with a low perceived risk of default, but if you have to reply on them for most trades you might as well employ the existing banking network.

There are a lot of reasons you might prefer Ripple to the existing banking network, even if you assume that Ripple "only" provides the same functionality as the existing banking network. You can easily transact in multiple currencies and get exchange rates without fees. The rules are the same globally, well-defined, and nobody can enforce an arbitrary policy on your money. You have precise control over who you trust. And so on. The idea is to provide rules and functionality that is very similar to Bitcoin but with amounts denominated in existing fiat currencies.

[herzmeister]

That monetary units today have to be scarce in order to be recognized as valuable and barter-able is merely a limitation of the currently available toolset.

Imagine a giant super-computer network (and a pretty dystopian one though) which can record every good, every service, every job, and every transaction in a society. It could relieve people entirely from having to deal with any form of money we know today, be it tangible or electronical. If you want that nice car over there, you'd just ask the computer network if you contributed enough to society already so that you're eligible to have it; or how longer you'd have to work in your current job to be. The internal calculations this computer network uses would be the monetary system here, and it would resemble nothing that we know today. It would not have to artificially create any scarce units just to be able to make these calculations. Resources are scarce, our time is scarce, that's all it needs to know.

[cbeast]

Ok, so I created a Ripple account. How do I get credits to spend? I am willing to loan my slave out to wash a car or mow a lawn. How much does that get me? 

[nybble41]

You don't think the blockchain is just information? You don't think your private keys are just information?

Both the blockchain and private keys are indeed just information, but they aren't bitcoins. They're information about bitcoins and their owners, respectively. The bitcoins themselves, while completely virtual, are not information--they're a scarce commodity.

I agree that trading with money is just a specialized form of barter. And I agree that money is a marketable good. But I think that marketable good is information, or more specifically, a means of credibly conveying information about value given but not yet received.

One function of money--a side effect really, and not the reason people use it--is to convey that information. However, that isn't what money is, that's what it does, and it's not the only good which can convey that information; all goods do, really. If I do a job and receive a house in exchange, that house represents value produced but not yet consumed. We could talk about the market value of the house, of course, but only for the sake of convenience, because you can't directly compare the values of a house and a car and a week's worth of groceries without reference to some common good they could all be traded for. This is the economic calculation function of money, allowing most goods to be assigned a market value in terms of a single widely-traded commodity.

Put more simply, people don't value money and accept it in trade because of it's information-carrying abilities, they value it because it's a marketable commodity and they expect to be able to trade it for other goods later. That any good can be priced in terms of money is merely a nice bonus. That money allows you to add up the estimated market values of various goods and determine net worth and the balance between production and consumption is if little real interest to non-economists.

[franky1]

many rumours of what ripple is or potentially is are still flying around, as are the many speculations as to how to use it. so can anyone care to clarify it.. as this is how i see it.
the best way to do it, is this:

now:
imagine MTGOX holds all of the physical Yen in a "locked in" reserve. (greenbox)
imagine Bitinstant holds all of the physical  Dollar in a "locked in" reserve. (greenbox)
imagine BTC-e holds all of the physical Rubles in a "locked in" reserve. (greenbox)
imagine Vircurex holds all of the physical Euros in a "locked in" reserve. (greenbox)

they have all given each other an equal share of what they have to each other in the form of XRP that represents the fiat, much like MTGOX/BTC-E Codes (blue boxes)

the physical money stays where it is(green box) but for instance MTGOX has now 75,000 locked in as reserves for everyone  and 25,000 free to do with as they please.

now then imagine an indivicual, me... i have Bitcoin and i want Euro i am friends with BTC-E and he wants my Bitcoin. so we trade. i get an XRP for X Euro and BTC-E gets a XRP for Bitcoin. BTC-E Euro reserve decreases and my Euro reserve increases.

now it shows that i have some euro which i can use with other traders or cash out to a EURO accepting bank account.
so, say i wanted to withdraw.

i hand my XRP into the ripple withdraw system. it informs Btc-E to inform Vircurex (the phycical Euro Holder) to send the Euro to the destination i chose.

the amount of total Euro is reduced at Vircurex and the XRP is destroyed

remember BTC-E and myself never handled physical Euro. it was all done on a reserve bases.

XRP is not a minable coin. it is a IOU certificate, a mtgox code idea.
remember i just used the named of companies for examples. i could have called them dave, peter, john and andrew so the names are not of importance


the big main aim is not to have to continually accept non native FIAT where the banks would convert it to native and cause us to get less then we asked for. but to keep it in the system/community so that we are less reliant on hourly withdrawals and deposits and especially bankers exchange rate.

where by the Ripple system would work as a better method of ensuring that native currencies cross over without conversion fee's

now that i have explained it in a way that i have seen snippits of information going around... am i actually anywhere close to the reality of ripple.

[slothbag]

Your very close, the 4 exchanges would be reserves but instead of exchanging XRP you/they would exchange IOUs denominated in the currency of interest. XRP is used primarily for fees, it'll take a long time if at all for XRP to get a stable exchange rate given the owners gave themselves 100billion or whatever it is and they are handing them out for free.

Hopefully the IOUs balance out over time between the 4 exchanges but if not they could settle using btc or something.

[nameface]

here is a good overview from Money as Debt 3 (~10 min segment).

nice +1

[sublime5447]

here is a good overview from Money as Debt 3 (~10 min segment).

nice +1

I wanted to get a refresher but wondering where to start? are you saying 3-10 min mark?
So they way I see ripple right now
Ripple= insecure debt is that right?
If you wanted to loan so money out why not just loan some money out? The person you lent to knows they owe you money you know they owe you money what the hell is Ripple good for? I dont need a public ledger of my private debt.
BTW debt = slavery. 

[molecular]

here is a good overview from Money as Debt 3 (~10 min segment).

nice +1

I didn't watch the whole thing, but can someone explain their rationale on this:

We hope that the money as debt series has given you insights into why our money system functions the way it does. We also hope that we have demonstrated that a return to gold or a switch to any single uniform commodity as money does not solve the fundamental problems with money.
Manipulation of single commodity money has milked productive people of their life energies and prosperity for millennia.

What? I see bitcoin as a commodity money. So what are the problems they are pointing out in the video?

I'm currently of the opinion that gold could well be used as a global money (as medium of exchange and store of wealth), if only it could be transacted only without the need for a central authority. Does Bitcoin as a solution to this suffer from the same problems as gold does in the minds of the autors of "money as debt"?

[Zangelbert Bingledack]

What is this, 2007? That "Money as Debt" video with its basic economic fallacies and - worse - pro-fiat solutions, killed dead a thousand times in the intervening years, is enjoying a necro-resurgence. Depressing.

[n8rwJeTt8TrrLKPa55eU]

What is this, 2007? That "Money as Debt" video with its basic economic fallacies and - worse - pro-fiat solutions, killed dead a thousand times in the intervening years, is enjoying a necro-resurgence. Depressing.

Yep.  They should ask Zimbabweans, Argentinians, Yugoslavians, Germans whether giving the printing press directly to the Treasury or Congress makes any difference whatsoever.

[mobile4ever]

They would of course have to compete with Bitcoin, Litecoin, whatever-coin, etc...

I dont think they are going to replace bitcoin anytime soon.


People dont buy what you do, they buy why you do it. Tell them why you believe bitcoin is the future.

Say things like. "I believe that people should be able do what they want with their own money." --- "I believe huge fees and taxes should not be placed upon the money we use."

You will perk up the ears of the right crowd, because there are plenty of people out there like that, who want the freedom to do with their money what they want.

Good luck.

[sublime5447]

What is this, 2007? That "Money as Debt" video with its basic economic fallacies and - worse - pro-fiat solutions, killed dead a thousand times in the intervening years, is enjoying a necro-resurgence. Depressing.

I dont like the solutions but what exactly has been proven to be a fallacy?

[Vladimir]

I didn't watch the whole thing, but can someone explain their rationale on this:

We hope that the money as debt series has given you insights into why our money system functions the way it does. We also hope that we have demonstrated that a return to gold or a switch to any single uniform commodity as money does not solve the fundamental problems with money.
Manipulation of single commodity money has milked productive people of their life energies and prosperity for millennia.

What? I see bitcoin as a commodity money. So what are the problems they are pointing out in the video?

I'm currently of the opinion that gold could well be used as a global money (as medium of exchange and store of wealth), if only it could be transacted only without the need for a central authority. Does Bitcoin as a solution to this suffer from the same problems as gold does in the minds of the autors of "money as debt"?

As far as I understand, the authors by "commodity money" mean some kind of money backed up by a commodity with all the fractional reserve inevitably built on top of it and as such turning into a debt based money anyway. They think that use of gold and other commodities directly is impractical for all the obvious reasons.  If only there was something that is just like gold but also cannot be confiscated easily, can be transferred instantly and at very low cost over The Internet and that could have practically unlimited divisibility, easy to transport and identify,  hard to counterfeit and easy to store  

I would say Bitcoin + Ripple is a perfect combination that has all the properties needed to eventually become worldwide currency. That would mean monetary freedom for all.


Molecular: maybe this helps http://paulgrignon.netfirms.com/MoneyasDebt/disputed_information.html (not saying that I agree or disagree with this)

[Roger_Murdock]

Both the blockchain and private keys are indeed just information, but they aren't bitcoins. They're information about bitcoins and their owners, respectively. The bitcoins themselves, while completely virtual, are not information--they're a scarce commodity.

Ok, but if we destroyed every single copy of the blockchain, would the "completely virtual" bitcoins not also be destroyed? And if the answer is yes, and if bitcoins are thus incapable of existing in any form separate and apart from information about them, doesn't that suggest that they are in fact information?

One function of money--a side effect really, and not the reason people use it--is to convey that information. However, that isn't what money is, that's what it does, and it's not the only good which can convey that information; all goods do, really. If I do a job and receive a house in exchange, that house represents value produced but not yet consumed.

Well, I think there's a difference between having money and having a house.  If you have a house, you have in fact already "consumed," or at least, you've received value in a form with which you can directly satisfy your wants and needs. 

Put more simply, people don't value money and accept it in trade because of it's information-carrying abilities, they value it because it's a marketable commodity and they expect to be able to trade it for other goods later. That any good can be priced in terms of money is merely a nice bonus. That money allows you to add up the estimated market values of various goods and determine net worth and the balance between production and consumption is if little real interest to non-economists.

Yes and no.  People certainly don't think in terms of "I'll agree to sell these goods and services in exchange for money because that will enable me to credibly signal that I've given value for which I've yet to receive any kind of real satisfaction," but that's ultimately why a system of money-mediated exchange works.  At the end of the day, I'm not sure we're really in that much disagreement (although maybe you'd disagree ).  You say that bitcoins are a "scarce commodity."  I say that bitcoins are "information."  Maybe what we both really mean is that bitcoins can be usefully thought of as a scarce commodity / information?  Or maybe you could at least agree with this, given the purpose of my original post: "one of the functions of money is to convey information about scarcity; money needs to be scarce in order to do that effectively"?

[TingCoin]

Having done a bit of research on Ripple after stumbling upon this thread last night, it seems very very interesting. It definitely seems like it'll complement, rather than compete with BitCoin. From what I've read, it seems like an extension of MtGox.

I understand how the IOU's will work, and it's quite an interesting idea. But I'm not going to focus on those, I'm just going to write what I interpreted from reading about the system to see whether someone has any other interpretations. Please guys let me know if you think I've hit it bang on or whether you've interpreted their information differently.

Basically the impression I get is that the Ripple system intends to become a holding (bank) and exchange market for every currency (fiat and crypto) in the world, whilst also creating their own cryptocurrency (XRP). Basically, I can send GBP to Ripple, and with one click of a button, I can instantly convert (or send to another Ripple user or shop that accepts Ripple) this in USD, BTC, XRP, Yen, or whatever currency I want with no fees involved. And I can deposit/withdraw any currency I want WITHIN the Ripple system with no need for 3rd party exchanges. So basically, as I said above (an extension of MtGox) Ripple is a massive currency exchange market who intend to make profit only off of their own cryptocurrency (XRP), which they're hoping will become worth something (which it should do, as it will become a central medium of currency exchange).

And on top of this, they have the 'contacts' list which can be used to allow people you trust to borrow a maximum amount from you whenever they want.

This, is a fucking outstanding idea and I'm very surprised someone hasn't thought of something like this before. Instant payments/conversions to any currency within the system, obviously it'll take a few days to bring money (fiat) outside the system.

-

And this won't kill BTC, it will complement it. Why do I think this?

BitCoins have a value, because of the black market mainly. XRP's, do not (currently) have a value. And won't do unless (like BitCoin) people perceive them as worth something. In order for XRP to replace BitCoin, they would have to become widely used in the black market, which I highly doubt will happen because look at the identity checks MtGox requires. If Ripple takes off though, XRP could gain a value based on the fact that every Ripple user has access to it, and it will be the 'central' unit used for currency exchange within the system.

Definitely going to follow this development.
This has the potential to kill PayPal. And if that happens, through Ripple, BitCoin will gain in popularity.

I will admit, I don't currently use MtGox because of their requirement for identity, and I don't really want my identity associated with BitCoin. However, Ripple intends to serve a completely different purpose to BitCoin. I would use Ripple, without a doubt.

Very excited to see what happens here.

[nybble41]

Both the blockchain and private keys are indeed just information, but they aren't bitcoins. They're information about bitcoins and their owners, respectively. The bitcoins themselves, while completely virtual, are not information--they're a scarce commodity.

Ok, but if we destroyed every single copy of the blockchain, would the "completely virtual" bitcoins not also be destroyed?

No, because you can't destroy something which never existed in the first place.

One function of money--a side effect really, and not the reason people use it--is to convey that information. However, that isn't what money is, that's what it does, and it's not the only good which can convey that information; all goods do, really. If I do a job and receive a house in exchange, that house represents value produced but not yet consumed.

Well, I think there's a difference between having money and having a house.  If you have a house, you have in fact already "consumed," or at least, you've received value in a form with which you can directly satisfy your wants and needs.

A house is a durable capital good which is consumed gradually, through age and wear, as you use it to produce the more immediate good of shelter. Consider the case were you receive a house for services rendered and then turn around and sell it for money. Selling the house isn't an act of production, aside from the minor sense in which all voluntary trades improve the overall allocation of resources. If the mere receiving of the house were considered consumption then there would be an imbalance--you would have consumed the value of the house and still had the money to spend. Rather, the house represents just as much saving as the money it's sold for (or could be sold for).

Or maybe you could at least agree with this, given the purpose of my original post: "one of the functions of money is to convey information about scarcity; money needs to be scarce in order to do that effectively"?

I do agree with you on that, if nothing else. My problem with the rest of your argument is that information is not scarce, so if bitcoins were nothing but information then they wouldn't be scarce and couldn't function effectively as money.

[JoelKatz]

I do agree with you on that, if nothing else. My problem with the rest of your argument is that information is not scarce, so if bitcoins were nothing but information then they wouldn't be scarce and couldn't function effectively as money.

Your argument is essentially that if members of a set are not scarce, then members of a subset of that set cannot be scarce. That is clearly false.