Ripple SOUNDS nice but there are some MAJOR problems

[casascius]

Ripple would make a ton more sense to me if it were not referred to as MONEY.  Further, if Ripple were called something other than money, the "donut hole" problem would disappear, because the "donut hole" problem only exists when people think Ripple balances are money and apply the same assumptions to them that they have learned apply to money.

Ripple is an EXCELLENT "asset ownership tracking system".  Any "in-a-nutshell" description would do well to say that "Ripple itself is never the asset, but the journal that records ownership of the asset in a publicly accessible manner.  Ripple is the online equivalent of the county recorder's office that tracks ownership of real estate, except it's not limited to a county, and it's not limited to real estate, and most importantly, nobody can take an eraser to the books and change history.  It's a worldwide public system for recording transfers and ownership of many kinds of assets, a system that brings unprecedented integrity and transparency to recordkeeping."

Once framed in that context, you can start to create all kinds of legal assets and contracts whose ownership self-describes as an entry in the Ripple system.  The assets could be physical property, shares in companies, debts, you name it.  In other words, instead of Ripple first, legal asset second, it's legal asset first, and the legal asset self-describes its ownership by reference to Ripple second.

Simply changing what Ripple is called is an act of paying proper deference to the rightful authority of a legal system as the final arbiter of property rights.  This will allow Ripple to be far more respected by legal systems, versus a pretense that it's an anonymous money system like Bitcoin that operates without regard for, and arguably circumvents, the law.

The advantage that Ripple brings to the table in such a case is transparency as to whether someone still owns what they say they own, unencumbered, as well as a public way to register that the history of ownership of something is exactly as it is claimed.  Even the oldest of the old-school legal folks can grasp the benefit of this.

tl;dr: stop calling it money, people will misunderstand its true novelty and value!

[misterbigg]

You don't need a dense web of trust. All you need is every account to trust at least one major gateway and healthy paths between any two major gateways. And even if you don't have that, unless an account is an island, you'll almost always still be able to find a usable path.

Easy to say but can you quantify this with a rigorous proof? It's easy to imagine that the degree of connectedness does not reach a critical threshold required for the desired liquidity.

[JoelKatz]

You don't need a dense web of trust. All you need is every account to trust at least one major gateway and healthy paths between any two major gateways. And even if you don't have that, unless an account is an island, you'll almost always still be able to find a usable path.

Easy to say but can you quantify this with a rigorous proof? It's easy to imagine that the degree of connectedness does not reach a critical threshold required for the desired liquidity.

The proof is trivial if everyone holds IOUs from at least one major gateway, everyone trusts at least one major gateway, and there's a healthy path between any two major gateways. If you don't meet these conditions, it still might work.

Thus:

1) If you expect people to be able to pay you, you should accept IOUs from at least one major gateway in one of its major currencies.

2) If you expect to be able to pay people, you should hold IOUs from a major gateway in one of its major currencies.

3) Any time there isn't a healthy path between two major gateways major currencies, that's a profit opportunity for someone to provide such a path. Note that, by default, anyone who holds IOUs from one gateway and trusts another gateway (in the same currency) is a path between those two gateways. Cross-currency paths have to be explicitly offered by creating exchange offers.

It's very easy for one person to be an outbound island if they don't hold any IOUs that others trust. It's very easy for one person to be an inbound island if they don't accept any major IOUs that others hold. However, it's very hard to create a situation such that someone who is not an outbound island can't pay someone who is not an inbound island. To have two large disconnected groups, you need a case where nobody in that group has any path to any of the people in the other group. If XRP catches on as a bridging currency, of course, it will be all but impossible.

This will be especially true if gateways make it their business to ensure they have good paths to other major gateways. I don't know whether this will happen or not, but it seems like if it is a problem, a gateway would have a strong incentive to solve it.

[misterbigg]

1) If you expect people to be able to pay you, you should accept IOUs from at least one major gateway in one of its major currencies.

Why don't I just let them pay me in Bitcoin? If they got an IOU from a gateway I trust then they could have instead just gotten Bitcoins (?)

If XRP catches on as a bridging currency, of course, it will be all but impossible.

So are you saying now that XRPs will be scarce and have significant value?

It seems that when asked direct questions you do provide something that comes close to a solid rigorous answer. My question, is why is it that the Satoshi is so concrete, concise, and elegant, while Ripple is vague and poorly defined? Especially considering that both systems were designed by the same person (?)

[JoelKatz]

1) If you expect people to be able to pay you, you should accept IOUs from at least one major gateway in one of its major currencies.

Why don't I just let them pay me in Bitcoin? If they got an IOU from a gateway I trust then they could have instead just gotten Bitcoins (?)

Because unless the Bitcoin economy is deep enough, such a transaction would incur a currency conversion fee on both sides. They'd have to buy Bitcoins and you'd have to sell Bitcoins. Of course if this works for your particular case, you should do it. And, of course, you can use Ripple to facilitate this. Say they want to pay with dollars but you're perfectly happy to accept Bitcoins. They can use Ripple to convert their dollars to Bitcoins right at the instant they pay you without paying someone commission on the currency exchange.

If XRP catches on as a bridging currency, of course, it will be all but impossible.

So are you saying now that XRPs will be scarce and have significant value?

No, and I don't think that's necessary. All that's necessary is that they have some non-zero, stable value and that there be enough of them in circulation. I hope that will happen because it makes the Ripple system more efficient and everyone who holds XRP has an incentive to make that happen. But, of course, I can't promise it will happen nor can I predict the future.

It seems that when asked direct questions you do provide something that comes close to a solid rigorous answer. My question, is why is it that the Satoshi is so concrete, concise, and elegant, while Ripple is vague and poorly defined? Especially considering that both systems were designed by the same person (?)

Same person? I guess we don't have anyone with Satoshi's gift for explanation. Also, Ripple is much more complex than Bitcoin.

[misterbigg]

Same person?

Isn't Jed Satoshi?

All that's necessary is that they have some non-zero, stable value and that there be enough of them in circulation.

People in the Ripple forum, and a personal friend of mine, are acting like they think that XRP are going to skyrocket in value in a fashion comparable to Bitcoin. I think that the user interface of the Ripple web application encourages this view point as well, with the XRP/BTC currency pair.

[Phinnaeus Gage]

@JoelKatz

Perhaps I missed it, but how did you become the de facto expert on Ripple?

I'm enjoying your posts, bud.

~Bruno K~

[JoelKatz]

Same person?

Isn't Jed Satoshi?

I doubt it, but you never know.

All that's necessary is that they have some non-zero, stable value and that there be enough of them in circulation.

People in the Ripple forum, and a personal friend of mine, are acting like they think that XRP are going to skyrocket in value in a fashion comparable to Bitcoin. I think that the user interface of the Ripple web application encourages this view point as well, with the XRP/BTC currency pair.

Ironically, that would probably be bad for Ripple in the short term. I think XRP would work best as a bridging currency if it had a stable value. And, of course, if there's a bubble that bursts, that would be terrible for use of XRP as a bridging currency. Fear of a burst can be as bad as a burst. And if there's no bubble, a burst is impossible.

@JoelKatz

Perhaps I missed it, but how did you become the de facto expert on Ripple?

I'm enjoying your posts, bud.

I'm OpenCoin's (the company behind Ripple) Chief Cryptographer and one of the architects of the new Ripple. I'm not speaking for the company, only myself, but I guess I'm just the person saying the most. Thanks.

[misterbigg]

that would probably be bad for Ripple in the short term.

Look:

https://ripple.com/forum/viewtopic.php?f=1&t=89

See what I mean?

[slothbag]

I think 1XRP = 0.0001USD sounds like a nice place to start.. Gives the devs $100k USD worth of XRP to
reward them for their hard work . Cheap enough everyone gets to play.

[misterbigg]

I'm interested in this Ripple-related question:

https://bitcointalk.org/index.php?topic=144468.0

[mobile4ever]

Agree with OP. I also think there lacked some clear cut info about how it actually works on a technical level.

I would cut them some slack, since their product is new. Having a good idea is sometimes hard to explain, especially when technology seems to be moving at light-speed.


At the same time, to remain balanced, its good to remember:

If you are in a poker game for twenty minutes and do not know who
the mark is, then you are the mark.

[slothbag]

I gotta say, I was digging through the source code of the Ripple client last night and the client alone is quite complex and must have taken a lot of development, I think its easy to underestimate how much work that simple clean web based UI has taken under the hood.

I can't even begin to imagine the amount of development time and complex problems that have been solved within the rippled c++ server.

Given the assumed limited developer resources and the amount of work that has been put into the server and client, i'm actually surprised the wiki and website for that matter are as detailed as they are.  Even if there are some vagities in the doco, I take my hat off to the Ripple team for their work so far.

With only 2-4 developers they must have been working on this for at least 12-24 months.

[ploum]

Hello,

I'm quite interested in Ripple (see http://ploum.net/post/ripple-making-bitcoin-easier-or-obsolete ) but, besides the technical questions, I would like to ask some non-technical questions:

1. Why isn't the server opensourced yet.


2. Do you really expect people to make a list of person they trust or person they don't?


3. Paying still requires a user unfriendly address like: rKXFsg5EuG4BzLxdTBFXJq2a6iNfyx1hRX  Is there any plan to make it friendlier? (like allowing to send money to an email address by allowing people to make an alias?)


4. XRP is a currency but XRP is not. Hum… If XRP is working as well as advertized, what would be the reason to keep bitcoins?


Thanks

[JoelKatz]

1. Why isn't the server opensourced yet.

As soon as the network is distributed, changes can only be made by consensus. By intentional design, logic changes are difficult to do and require establishing and maintaining a consensus on the change. You wouldn't want someone quickly pushing through a change that, for example, allowed issuers to delete IOUs!

Right now, Opencoin is acting as a central authority and running the network. This makes it much easier to fix problems and make changes quickly. We're fixing issues on a daily basis now and slowing that pace would mean a much longer time before Ripple is a decentralized payment system that people can truly rely upon.

2. Do you really expect people to make a list of person they trust or person they don't?

Not any time soon. That's why we're promoting Ripple as a payment network with gateways rather than as a community credit network. I personally believe that community credit is Ripple's long-term killer app and that it will change the way people think about money. So this will always be there and maybe one day it will really catch on. Social money may take social changes, just like social media did. Those changes happened pretty fast, so maybe these will too. It will take better tools to make managing credit more user friendly. We hope to get there, but we aren't relying on it happening soon. The bigger Ripple becomes, the higher the chances this will happen.

3. Paying still requires a user unfriendly address like: rKXFsg5EuG4BzLxdTBFXJq2a6iNfyx1hRX  Is there any plan to make it friendlier? (like allowing to send money to an email address by allowing people to make an alias?)

Yes, however, we've run into some technical problems designing a usable and safe namespace scheme. The fundamental problem is not having a central authority that approves names but also not having the first person to register names like eBay and Amazon being able to hold them hostage.

The best solution we could come up with is this:

1) Anyone can create a namespace.

2) The client can use any namespace.

3) Opencoin will create a namespace which the client uses by default.

4) Namespaces can be closed or open. They start closed. A namespace's owner can open a namespace but not close it.

5) Opencoin's namespace will be closed for a year or so. We'll come up with some fair scheme to register names. (Yuck.)

6) After a year, we'll open our namespace and it will be first come, first served.

The problem is that this is kind of fake decentralization. If someone tries to create a competing namespace, payments may go to the wrong person. So as a practical matter, we'll run the namespace, and we don't want to do that. We don't want to be Ripple's IANA.

We have a hard rule that we won't implement something until we find a good way to decentralize it. We're not there yet on friendly names.

We do have a domain-based naming scheme because that can be decentralized. Domains can vouch for their ownership of particular account records. You retrieve a domain's configuration file using SSL.

For example, this is bitstamp's main account:

     "account_data" : {
         "Account" : "rvYAfWj5gh67oV6fW32ZzP3Aw4Eubs59B",
         "Balance" : "177780471670",
         "Domain" : "6269747374616D702E6E6574",
         "EmailHash" : "5B33B93C7FFE384D53450FC666BB11FB",
         "Flags" : 131072,
         "LedgerEntryType" : "AccountRoot",
         "OwnerCount" : 0,
         "PreviousTxnID" : "8E64754BE835889A4DB2E1940FD460977EEAAD5A7BC2DC8EFD74E9C4150DC53D",
         "PreviousTxnLgrSeq" : 282734,
         "Sequence" : 34,
         "TransferRate" : 1002000000,
         "UrlGravatar" : "http://www.gravatar.com/avatar/5b33b93c7ffe384d53450fc666bb11fb",
         "index" : "B7D526FDDF9E3B3F95C3DC97C353065B0482302500BBB8051A5C090B596C6133"
      }

Notice the "Domain" field? That's hex for "bitstamp.net". If you retrieve https://bistamp.net/ripple.txt, you get:

[accounts]
rvYAfWj5gh67oV6fW32ZzP3Aw4Eubs59B

[hotwallets]
rrpNnNLKrartuEqfJGpqyDwPj1AFPg9vn1

[domain]
bitstamp.net

This establishes a reliable proof that the domain belongs to the "bitstamp.net" domain.

[misterbigg]

...4. XRP is a currency but XRP is not. Hum… If XRP is working as well as advertized, what would be the reason to keep bitcoins?

I love how everything gets answered except this one.

[JoelKatz]

...4. XRP is a currency but XRP is not. Hum… If XRP is working as well as advertized, what would be the reason to keep bitcoins?

I love how everything gets answered except this one.

Yeah, sorry. My crystal ball isn't any clearer than yours anyway. I don't pretend to be able to predict what will happen.

[moocowpong1]

...4. XRP is a currency but XRP is not. Hum… If XRP is working as well as advertized, what would be the reason to keep bitcoins?

I love how everything gets answered except this one.

I haven't seen your opinion on something that seems like an obvious flaw in using XRP as a store of value: lowering the account reserve, which must happen from time to time due to growth and lost/used up XRP, will unlock large amounts of XRP and lower the price. This would happen suddenly and not according to any fixed schedule, unlike Bitcoin block rewards. Why would I want to store value in XRP when I can easily convert it to BTC and avoid this?

[slothbag]

I haven't seen your opinion on something that seems like an obvious flaw in using XRP as a store of value: lowering the account reserve, which must happen from time to time due to growth and lost/used up XRP, will unlock large amounts of XRP and lower the price. This would happen suddenly and not according to any fixed schedule, unlike Bitcoin block rewards. Why would I want to store value in XRP when I can easily convert it to BTC and avoid this?

I think that's exactly the point.. XRP is not meant to be a store of value.. its the oil that keeps the Ripple system going.  Maybe it'll go up or maybe it'll stay extremely low for ever.. its really at the whim of OpenCoin and the devs who hold the majority.. but you don't have to worry because its not a store of value like Bitcoin.

[ploum]

Thanks for the answer. The reason why the server is not opensourced makes sense.

I've another question: 

5. Why was XRP developed while Bitcoin would have been enough to prevent transaction spam? (requires a tiny fraction of a bitcoin to send a transaction, take that from the value being sent, even if that value is not in bitcoin)