is ripple a trojan horse that will destroy bitcoin?

[dancupid]

How are fees dealt with in ripple?
It seems like payment providers will love this, as the single transaction is repeated many times as it ripples through. I pay my friend with paypal, my friend then pays his friend with dwolla, who then pays his friend with a wire transfer - n times.
For large amounts multiple credit lines will have to be used to make up the final amount. The fees would grow exponentially.
And who ultimately actually pays these fees? The initial seller? Do these fees ripple through too?

If only there was a way of doing this without fees (or chargebacks)

[TTBit]

All the old stuff about the old Ripple thing all took the idealistic stance that you would issue credit to your neighbors/friends out of nothing, basically giving them a line of credit.

But surely you could equally well only issue credit in an amount equal to actual "deposits"?

Afterall, banks tend to have two types of credits they give you, the easiest to get is your account balance, which you get by making deposits and they grant in amoujnt equal to your deposits. Getting an actual "line of credit" is harder.

So here is how I see it non-idealistically working, taking that hard drive at the restaurant case for example:

1) The restaurant deposits with/in you a meal worth one hard drive, so you issue them credit equal to one hard drive.

2) The restaurant gives the employee one hard drive, so the employee issues them credit equal to one meal.

I am not sure why you give the hard drive to the employee, it seems to me you'd give it to the restaurant, and any deal they make with the employee is out of scope. So lets try again:

1) The employee deposits the meal with/in you, so you issue the employee the hard drive (deposit the hard drive with the employee).

2) The employee buys the meal from the restaurant with their wages.

That maybe works.

The important thing is, you don't issue credit until you receive a deposit, in this case a meal, and the employee does not issue credit to you until you deposit the hard drive.

This way it works like the credits known as "bank account balances"; the credit represents a deposit you already received.

The old Ripple system's documentation/propaganda/literature  jumped right over that stage, directly to "lines of credit", in which you issue credit before receiving the corresponding deposit, which is, of course, risky.

There is risk the other way around though too: the restaurant takes the risk that after depositing the meal in your stomach you will not see fit to assign them any credit in the Ripple system...

So its still the same old same old "who sends first" thing...

TL;DR: Want me to grant you $10 credit? Easy peasy: just send me $10 and once I have it secure in hand, I will grant you $10 credit...

-MarkM-

Interesting. I guess I have no idea what it will be.

My point what I think would be powerful: I owe you $50 and you owe John $100. if you are on the ripple network, you have to accept me giving John $50 worth of USD/Gas/bitcoins/hard drives/sex, etc. My receipt from John is payment for our debt. Now, I owe you $0 and you owe John $50. 

[HostFat]

My point what I think would be powerful: I owe you $50 and you owe John $100. if you are on the ripple network, you have to accept me giving John $50 worth of USD/Gas/bitcoins/hard drives/sex, etc. My receipt from John is payment for our debt. Now, I owe you $0 and you owe John $50. 

Believe me, you are able to create the SEX currency on Ripple

[paraipan]

...
Believe me, you are able to create the SEX currency on Ripple

You have to login on ripple and pay before or after the actual "exchange" is made? 

[btcx]

I can see this working in a B2B context, as an alternate way of resolving the trade credit they are already extending each other.

If all the businesses in a town use each other's services on net 30 terms with each other they could use Ripple to exchange the credit directly and save the step of actually transferring dollars unnecessarily.

I just wonder what happens when Acme owes Bobtech, but Bobtech sells that debt to Corpco, and then Corpco can't collect on it because Acme can't afford to pay.  What's Corpco's recourse?

Corpco has the recourse of any creditor--put a lien on property, sue, etc.  Corpco could not have been paid with Acme IOUs by Bobtech if Corpco did not trust Acme for that amount.  Maybe Bobtech had some insider information on Acme and knew it wouldn't be able to pay its debts when it offered to pay Corpco.  When you accept an IOU from somebody, you are taking on that credit relationship.  If you're not sure about the debtor, don't issue the credit, or make sure you get a discount according to risk.

[casascius]

I can see this working in a B2B context, as an alternate way of resolving the trade credit they are already extending each other.

If all the businesses in a town use each other's services on net 30 terms with each other they could use Ripple to exchange the credit directly and save the step of actually transferring dollars unnecessarily.

I just wonder what happens when Acme owes Bobtech, but Bobtech sells that debt to Corpco, and then Corpco can't collect on it because Acme can't afford to pay.  What's Corpco's recourse?

Corpco has the recourse of any creditor--put a lien on property, sue, etc.  Corpco could not have been paid with Acme IOUs by Bobtech if Corpco did not trust Acme for that amount.  Maybe Bobtech had some insider information on Acme and knew it wouldn't be able to pay its debts when it offered to pay Corpco.  When you accept an IOU from somebody, you are taking on that credit relationship.  If you're not sure about the debtor, don't issue the credit, or make sure you get a discount according to risk.

How does Corpco establish itself to a court as a creditor in the first place?  It is not as though they hold some sort of contract on which Acme has defaulted.

Certainly, Corpco would start its pleadings off by alleging that Acme owes a debt that has been assigned to it by Bobtech.  But what if Acme denies the debt exists or challenges the validity of the alleged assignment to Corpco?  The law doesn't recognize the "Ripple block chain" as any sort of binding instrument that would overcome any challenge of this sort.

Assuming future scandals are in the cards - where people repudiate Ripple debts on the premise they were hacked and the IOUs are forged and therefore aren't valid (you know this will happen at least as often as paypal "my account was hacked" chargebacks), no court is going to blindly swallow the presumption that "the ripple network says so, so it must be so!".

It would be different if Acme's debt to Bobtech took the form of some sort of written agreement, after which Bobtech executed some sort of written assignment to sell the debt to Corpco, the same way debt collectors buy consumer debt.  Courts recognize agreements like this when written properly.  But then, there's hardly any benefit to the decentralized part of Ripple anymore, it's no longer revolutionary.  Unlike Bitcoin, enforcement this sort of debt swapping arrangement is completely at the mercy of the existing legal framework, and may as well be a facebook app just like the one that lets you find a friend of a friend to take over your cell phone contract.

[JoelKatz]

How are fees dealt with in ripple?

It seems like payment providers will love this, as the single transaction is repeated many times as it ripples through. I pay my friend with paypal, my friend then pays his friend with dwolla, who then pays his friend with a wire transfer - n times.

Ripple payments can be thought of as exchanges of IOUs. For example, say I owe you $100, Jack owes me $50, and you need to pay Jack $50. With a ripple payment, you can pay Jack $50 through me and the result is that instead of me owing you $100, I now owe you $50. Jack considers you to have paid him $50 because you made him owe me $50 less (which is just as good). This one transaction accomplishes the payment.

The sender loses the $50 he sent, the receiver gains the $50 he receives, and all intermediary parties are either neutral to the transaction or benefit from it.

For large amounts multiple credit lines will have to be used to make up the final amount. The fees would grow exponentially.
And who ultimately actually pays these fees? The initial seller? Do these fees ripple through too?

There is no growth to the fee because there is only one transaction and each point it ripples through benefits the parties, or at least they are neutral to it. Otherwise, they wouldn't (or at least, shouldn't) have permitted it.

[hugolp]

Is there any place to read about the technicallities of Ripple?

Im specially curious about how they avoid double spending if it is a trully p2p network.

[JoelKatz]

Im specially curious about how they avoid double spending if it is a trully p2p network.

Grossly oversimplified: To perform a transaction, you announce it. Assuming there's no reason the transaction can't apply, every honest node (that is applying transactions) applies it. (If there's some reason the transaction might not apply, then we don't care what happens to it. But there is a mechanism to prevent divergence, of course.) Now, none of those nodes can accept the conflicting transaction because the node cannot construct a valid acknowledgement of a transaction that conflicts with a transaction they've already acknowledged. (Yes, the devil is in the details. I said this was grossly oversimplfied.)

[FreeMoney]

I don't think it's nearly attractive or destructive enough for that.

If it were a horse:

[TTBit]

I can see this working in a B2B context, as an alternate way of resolving the trade credit they are already extending each other.

If all the businesses in a town use each other's services on net 30 terms with each other they could use Ripple to exchange the credit directly and save the step of actually transferring dollars unnecessarily.

I just wonder what happens when Acme owes Bobtech, but Bobtech sells that debt to Corpco, and then Corpco can't collect on it because Acme can't afford to pay.  What's Corpco's recourse?

If Acme is a defunct company, then there is no recourse. Acme is punished by not being able to deal in ripple. Bobtech is punished by being a bad lender.

But how did it get to that point? If Acme sells pizzas for $10, you can buy a pizza by paying Corpco, but at what price would Corpco charge for a $10 Acme Pizza?

[btcx]

I just wonder what happens when Acme owes Bobtech, but Bobtech sells that debt to Corpco, and then Corpco can't collect on it because Acme can't afford to pay.  What's Corpco's recourse?

Corpco has the recourse of any creditor--put a lien on property, sue, etc.  Corpco could not have been paid with Acme IOUs by Bobtech if Corpco did not trust Acme for that amount.  Maybe Bobtech had some insider information on Acme and knew it wouldn't be able to pay its debts when it offered to pay Corpco.  When you accept an IOU from somebody, you are taking on that credit relationship.  If you're not sure about the debtor, don't issue the credit, or make sure you get a discount according to risk.

How does Corpco establish itself to a court as a creditor in the first place?  It is not as though they hold some sort of contract on which Acme has defaulted.

If you were expecting to need to redeem your IOUs with the original issuer at some point, you'd probably want to make sure that they'd take them from you.  That might entail forming a contract, creating an account with that business, etc.  If you were expecting that you'd be able to spend them with someone else then you might not worry about it.  IOUs, like gift certificates, might come with terms and if you blindly accept IOUs from entities you don't have agreements with, at full face value then you're taking some risk.  I don't see many businesses being able to get away with issuing IOUs.  I might accept a Citibank (or other too-big-to-fail bank) IOU from you at its full face value, as I would a cashiers check because I have an account with them and they've told me that they'll buy it back from me at any time.  You put your money on deposit with a trusted financial institution, they give you IOUs for it, you can trade those IOUs freely outside of their system and anyone with an account at that institution can redeem the IOUs at any time.  Anyone without an account at that institution can still safely hold and trade the IOUs--they could even sell them for cash on an IOU exchange.. they just might not be able to redeem them directly with Citibank.

Certainly, Corpco would start its pleadings off by alleging that Acme owes a debt that has been assigned to it by Bobtech.  But what if Acme denies the debt exists or challenges the validity of the alleged assignment to Corpco?  The law doesn't recognize the "Ripple block chain" as any sort of binding instrument that would overcome any challenge of this sort.

Unless Corpco had an agreement with Acme to redeem the IOUs, Corpco might be out of luck.  Acme might openly state that they do not buy IOUs from anyone but their regular vendors.  Corpco agreed with Bobtech that Acme IOUs would satisfy its debt and Bobtech paid the Acme IOUs.  What Corpco does with them after that is up to Corpco.  Maybe Corpco can find someone who Acme does have an agreement with to buy the IOUs.  I think the IOU system is valuable among social groups where personal relationships mean something, and with highly trusted, insured financial institutions who are in the business of managing money/IOUs.  I don't think you'd ever want to take IOUs from random small businesses, maybe not even big businesses like Google unless you knew you could spend them right away.

Assuming future scandals are in the cards - where people repudiate Ripple debts on the premise they were hacked and the IOUs are forged and therefore aren't valid (you know this will happen at least as often as paypal "my account was hacked" chargebacks), no court is going to blindly swallow the presumption that "the ripple network says so, so it must be so!".

Sure, this is a pretty big risk.. even Citibank could have their Ripple account hacked and issue some guy a billion dollars worth of IOUs, all of which he spends before they can revoke it.  Citibank can either pay up and honor the IOUs or not and forfeit their reputation, leaving the bag with everyone who was unfortunate enough to accept their IOUs.  IOUs are not cash.  If you're not comfortable with the risk, get USD or Bitcoin or get a big discount to compensate for it.

It would be different if Acme's debt to Bobtech took the form of some sort of written agreement, after which Bobtech executed some sort of written assignment to sell the debt to Corpco, the same way debt collectors buy consumer debt.  Courts recognize agreements like this when written properly.  But then, there's hardly any benefit to the decentralized part of Ripple anymore, it's no longer revolutionary.  Unlike Bitcoin, enforcement this sort of debt swapping arrangement is completely at the mercy of the existing legal framework, and may as well be a facebook app just like the one that lets you find a friend of a friend to take over your cell phone contract.

Ideally, you'd have a contract with everyone you trust.  With social groups, the terms are probably implicit, verbal at best.  With businesses, they may have terms or a public statement ensuring that their IOUs are redeemable and tradeable, like any usual gift certificate.  Don't make assumptions though--they may not be worried about not being invited to your Thanksgiving dinner next year.  If you want complete protection, you may have to seek regulation.  Ripple is still a powerful system--just don't take IOUs from strangers, and look both ways before crossing.

[becoin]

Assuming future scandals are in the cards - where people repudiate Ripple debts on the premise they were hacked and the IOUs are forged and therefore aren't valid (you know this will happen at least as often as paypal "my account was hacked" chargebacks), no court is going to blindly swallow the presumption that "the ripple network says so, so it must be so!".

Sure, this is a pretty big risk..

In a system like Ripple there are several ways you can deal with such a risk. One of the best IMO is in addition to absolute IOU limit to introduce relative IOU limits between persons/entities in a given group. Thus, it'll be meaningless to hack individual accounts because to increase the individual IOU 'credit line' you have to hack every individual account within that group.

[casascius]

If you were expecting to need to redeem your IOUs with the original issuer at some point, you'd probably want to make sure that they'd take them from you.  That might entail forming a contract, creating an account with that business, etc.

I believe you are 100% right, and I believe that this negates about 98% of the "revolutionary" value of the Ripple concept.

Acme, Bobtech, and Corpco eliminate all of that complication today just by dealing with an evil bank.  You know, banks are actually quite nice to business customers who have lots of money.  They don't make their richest customers wait in line for a teller, they assign a "personal banker" who will come to you, whose full-time job it is is to be nothing but the "personal banker" of a handful of big clients and their job is to make you happy, to bring you things on a silver platter if you ask.  And these banks come with one neat benefit - they're too big to fail - the banks can't lose your money, because the Federal Reserve will just add any losses to the public tab.  With service like that, anyone in their right mind would be nuts to turn their business banking over to some beta software written by a startup and designed around friends of friends issuing lunch debt.  The banks won't even put in the effort to laugh.  At least Bitcoin is something the smartest of them already take seriously.

Keep in mind, I'm responding within the context of the subject line of the OP, which is: "is ripple a trojan horse that will destroy bitcoin?"... my essential point is, "of course not!  look at how complicated it has to get - legally - for it to have any value beyond settling up lunch, a complication that simply doesn't exist with bitcoin."

I really am eager for Ripple to be released and for me to be shown that I've jumped to conclusions.  This happens with Bitcoin every day as the "hah- that will never work" crowd gets converted, one by one, so I'm not closed minded to the possibility.

[paulie_w]

ripple apparently has its own virtual currency.

[mccorvic]

ripple apparently has its own virtual currency.

Ripple is a terrible idea and you know it. You can quit trying to troll now.

[paulie_w]

ripple apparently has its own virtual currency.

Ripple is a terrible idea and you know it. You can quit trying to troll now.

sir, you ask too much.

[kjj]

Apologies in advance, I've rewritten this post three times now trying to shorten it.  Sadly, each attempt has caused it to grow by at least a paragraph.  Just be thankful that I cut out the detour through the historic origins of debt and money.

Bitcoin and ripple are both attempts to make new electronic systems that more closely approach the abstract ideal of "money", but they do so in totally different ways.

Certain things have properties that make them more or less useful as money, but in the abstract sense, money is a means of splitting a barter transaction into two parts that can happen at different times, in different places, and between different people.

Essentially, if you buy a product or service from someone, you are getting wealth from them, and in return you give them money, which is (again, in the abstract sense) an IOU for wealth of similar value in the future.  They can then take that IOU and give it to someone else in exchange for a product or service.  In effect, they are performing a barter where they exchange one thing of value for another thing of value, with the money just as an intermediate step.  In the time that they are holding the money, they have given, but not yet received; they are owed a debt, not by one particular person, but by society in general.

Ripple is an attempt to transfer this abstract debt relationship into the electronic world, making something closer to the abstract ideal of "money" than the ledger and paper/coin system we use now.  The ripple system just helps turn your personal IOU that you give as payment into a general IOU, which is the same job that money does in a transaction.  In the end, both systems require a functional society willing and able to pay back those IOUs, and both systems can be open ended and (more or less) eternal.

All money, including bitcoin, ripple, dollars and even gold, are based on debt.  Holding gold means (more or less) that you have done something worth that gold's value, and you hope that in the future you'll be able to exchange that gold for something of similar value.  Dollars and ripple are the same, with a couple of subtle differences.  In dollars, certain players can create new debt (new dollars) at will, limited only by the willingness of people to accept them.  When you get a bank loan (or a credit card or whatever) that bank has created new dollars out of thin air by magic, limited only by their assessment of your ability to repay.  In ripple, everyone is a bank, and everyone can create money through magic, just by finding someone willing to accept it.

Gold and bitcoin, though based on debt/hope just dollars and ripple, have the advantage that no one can conjure them at will.  Gold and bitcoin are both past-looking, where holding gold or bitcoin is prima facie evidence that a party has already in the past done something of value for society.  Dollars and ripple are more forward looking, where one party has received something of value, and the other party is hoping that they will do something of similar value in the future to redeem that particular debt.

The forward looking version of money didn't grow up by accident.  It is a good system, and it works.  It has produced the amazing world we all live in today.  But it has also brought us horrifying tragedy, with new horrors brewing on the not-so-distant horizon.  I think that we are perched on a turning point in world history.  We will pick either the advantages and disadvantages of future-oriented systems like dollars and ripple, or we will pick the advantages and disadvantages of past-oriented systems like gold and bitcoin.  It isn't a one-sided choice, we are both gaining and losing either way.

But I suspect that the brewing storm will steer the next few centuries towards bitcoin (or something like it).

[justusranvier]

Gold and bitcoin are both past-looking, where holding gold or bitcoin is prima facie evidence that a party has already in the past done something of value for society.  Dollars and ripple are more forward looking, where one party has received something of value, and the other party is hoping that they will do something of similar value in the future to redeem that particular debt.

I'm not sure the distinction you are trying to make holds up to scrutiny.

"one party has received something of value, and the other party is hoping that they will do something of similar value in the future" describes any currency transaction. The customer who pays for a meal with currency has received something of value, and the restaurant owner hopes to receive a product or services of similar value in the future. It doesn't matter whether the customer pays with gold, dollars, bitcoins, or ripple. How the customer originally received the currency isn't particularly relevant to the present transaction because what's being traded for is future production. If for some reason that future production never happens it won't matter what form of currency was used.

[JoelKatz]

How the customer originally received the currency isn't particularly relevant to the present transaction because what's being traded for is future production. If for some reason that future production never happens it won't matter what form of currency was used.

For currencies based on a commodity or a central issuer, if they are functioning as currencies, any given unit of currency will change hands so many times during its life that how it was originally introduced into commerce is basically irrelevant. You can ignore the very first use of a particular unit of currency because it's drastically outweighed by all the re-uses of that same currency unit. That's not to say it's not important how new units of a currency are introduced -- scarcity is a significant factor in determining a currency's value and if new units can be introduced easily, the currency will be a lousy store of value. But it doesn't meaningfully affect the operation or meaning of the currency.

For the US dollar, all the physical currency in existence equals about 1/12,000th of the total value of all dollar transactions in a single year.