Ripple XRP distribution requires immediate formalization

[markm]

So what? Litecoin isn't going anywhere, heck nor even is BBQcoin. So the hedge funds don't pick them to manipulate, and their users only become millionaires instead of billionaires, aw shucks too bad... actually not *too* bad at all...

-MarkM-

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[JoelKatz]

But my proof of work proposal for distribution of XRP is compatible with Bitcoin merged mining so how much is really being wasted? Certainly not all the energy. Maybe some of it (very little).

That makes no difference. The amount of mining is determined by the value of mining. Anything that increases the value of mining would be expected to equally increase the amount of mining. All the additional mining, equal to all the additional value, would be waste. The only reason mining isn't pure waste for coins like Bitcoin is because it is required to secure the currency.

Essentially, you are arguing that it's better to waste and destroy resources than to use them to promote Ripple. You are arguing that it's better to make people do pointless work to "earn" XRP than give them away for free.

[misterbigg]

you are arguing that it's better to waste and destroy resources than to use them to promote Ripple. You are arguing that it's better to make people do pointless work to "earn" XRP than give them

..the claim of being able to balance personal financial interests with altruistic goals is inherently self conflicting, and dishonest in a sense to a community upon which you will thrive and succeed.

[becoin]

You are arguing that it's better to make people do pointless work to "earn" XRP than give them away for free.

Joel, how did you decide on this number 100 billion XRPs?

[JoelKatz]

You are arguing that it's better to make people do pointless work to "earn" XRP than give them away for free.

Joel, how did you decide on this number 100 billion XRPs?

We wanted to do XRP calculations internally in a 64-bit unsigned with one bit reserved to signal that it was an XRP amount and one bit free as a sign bit. To avoid having to deal with overflows inside operations and simplify the code, we didn't want to use more than 1/16th of the legal range. For human convenience, we wanted the main unit to be divisible into millionths. That set an upper limit of 2^(64-2) / (16 * 10^6) or 288 billion. 100 billion seemed the most human-friendly number within that range.

[jancsika]

But anyway the definition of "fair" and "wasteful" is going to be rather subjective and really there's no way for someone who works for the company that owns all the currency to answer in an objective fashion.

I'm making reasoned arguments, not offering opinions. Arguments are valid or invalid regardless of who makes them.

I believe his point is that your bias clearly affects how you weigh the evidence for your arguments. I've seen your posts for awhile, and the JoelKatz from a year ago wouldn't be tirelessly defending a new altcoin for which the future method of distributing the currency is not public knowledge.  He would also be wary of an implementation that does beta testing in a centralized manner, without full release of the source code, in which a centralized body initially controls all the tokens (and presumably will continue to do so, at least with a large portion of them, for a long time after the beta phase is over).

A phrase like "transparent after the fact" will never sound reasonable when the mechanism you're describing is hidden from your audience.  Such statements lack verifiability and are therefore not part of a reasoned argument to anyone but your (current) self.  That this logic is lost on you seems to be as good an example as any for the dangerous effects of conflict of interest.

[becoin]

If OpenCoin waits until there are already a fair number of well established gateways that have regular transaction activity, it will be virtually impossible to convince these gateways to accept a fork.

A well established gateway would require a banking license! Only banks are allowed to take deposits. How many banks will become ripple gateways before they open the code?!

[becoin]

We wanted to do XRP calculations internally in a 64-bit unsigned with one bit reserved to signal that it was an XRP amount and one bit free as a sign bit. To avoid having to deal with overflows inside operations and simplify the code, we didn't want to use more than 1/16th of the legal range. For human convenience, we wanted the main unit to be divisible into millionths. That set an upper limit of 2^(64-2) / (16 * 10^6) or 288 billion. 100 billion seemed the most human-friendly number within that range.

Ah, I see. From a tech point of view it makes much sense but from financial point it is not. Do you know how many transactions are processed every day in this world? The challenge of success... The more successful ripple becomes every day the more likely becomes its failure.

If ripple succeeds I can predict a scalability issue here. At some point transactions will become too expensive and there will be need for inflation in XRP, and OpenCoin will inevitably have to issue more.

[JoelKatz]

If ripple succeeds I can predict a scalability issue here. At some point transactions will become too expensive and there will be need for deflation in XRP, and OpenCoin will inevitably have to issue more.

It's not difficult to change the scheme from a fee per transaction to a special "fund" transaction that sets a certain number of "prepaid transactions" in your account. You can then perform that number of transactions for no fee. The amount of transaction credits you get per drop could be adjusted by consensus. Similarly, the currency could be made more divisible by consensus.

[Meni Rosenfeld]

The only reason mining isn't pure waste for coins like Bitcoin is because it is required to secure the currency.

In Bitcoin there is a fairly clear distinction between the mining done to determine initial distribution and the mining done to synchronize transactions. The first few years are for distribution (with security taking a free ride), after that it's for security.

Bitcoin could have been easily designed so that Satoshi starts with all 21M coins, and hashing is used only for security and paid for by transaction fees. That would definitely cause less resources to be wasted, but it would no longer be a decentralized currency.

There's a tradeoff, the shorter the distribution halflife the less resources are wasted (since the coins are created when they are less valuable) but the less decentralized the currency. If you're worried about the wasted resources, choose a shorter halflife.

Ripple is taking the centralized extreme of this spectrum. If you think about why Satoshi didn't say "I'll assign all the bitcoins to myself, and use them to promote Bitcoin! I'll distribute them to people however I see fit, trust me on this.", you'll understand why we don't think it's a great idea for Ripple.

It's true that Ripple is about more than just the XRP as a currency, but it's a significant part of it and should be treated accordingly.

Essentially, you are arguing that it's better to waste and destroy resources than to use them to promote Ripple. You are arguing that it's better to make people do pointless work to "earn" XRP than give them away for free.

I am arguing that it's better to make people do measurable, algorithmically verifiable pointless work to "earn" XRP than to give a central body built-in authority over a decentralized system.

[alexkravets]

Essentially, you are arguing that it's better to waste and destroy resources than to use them to promote Ripple. You are arguing that it's better to make people do pointless work to "earn" XRP than give them away for free.

I am arguing that it's better to make people do measurable, algorithmically verifiable pointless work to "earn" XRP than to give a central body built-in authority over a decentralized system.

The distinction between the two methods of distribution becomes less important over time though.
Assuming in a year or two both systems have distributed 50%+ of total posible units (already true of Bitcoin), how will they differ afterwards ?

Bitcoin will continue small incremental distributions effectively indefinitely while Ripple will have that 50% "Fort Knox" stash in the background.

At that point various scalability issues in Bitcoin (TPS ceiling, blockchain size, etc) will be contrasted against scalability strengths of Ripple, while Ripple's Systemic Risk will be contrasted against Bitcoin's lack of centralization (although such centralization is still possible and maybe even likely since a large enough "printer" or just a large bank can attempt to corner the Bitcoin market, i.e. compare to how Silver market is effectively cornered and suppressed today).

I speculate that two different uses will be found, very high transaction rates and trading volumes of various assets against each other and against XRPs in Ripple, but I don't see many people feeling comfortable storing too much value in XRPs over long periods of time,
because of ever-present possibility of the XRP flood from the "Ripple Fort Knox"

In either system, there is no long term way to sustain the ceiling for too long tho, although, ironically, Ripple enabling massive BTC IOU issuance by fractional reserve gateways might create a "paper BTC market" 100x of times the actual size of the "real BTC market" again, similar to Silver today in which case Bitcoin can become as tamed as Silver or Gold are today.

[Meni Rosenfeld]

The distinction between the two methods of distribution becomes less important over time though.
Assuming in a year or two both systems have distributed 50%+ of total posible units (already true of Bitcoin), how will they differ afterwards ?

Bitcoin will continue small incremental distributions effectively indefinitely while Ripple will have that 50% "Fort Knox" stash in the background.

Do you really not see the difference between
1. 50% of the coins are in circulation, the other 50% will be distributed according to a fair, objective protocol; and
2. 50% of the coins are in circulation, the other 50% are held by a central authority to do with as they please?
Even with the unwarranted assumption that OpenCoin is noble, what about the security implications of a single party storing an amount of currency equal to the total in circulation by a single party that can be hacked?

I agree that the initial distribution doesn't matter that much, but it needs to be reasonable. If it was possible, distributing bitcoins equally among all people would be superior to PoW, but that's impossible so PoW is good enough. But centralized distribution is not good enough.

At that point various scalability issues in Bitcoin (TPS ceiling, blockchain size, etc) will be contrasted against scalability strengths of Ripple

What scalability strengths? Maybe I'm missing something but AFAIK each transaction in Ripple requires much more processing than in Bitcoin, hence it's less scalable. The ways to increase Bitcoin's scalability are already known - I'm sure such ways are possible for Ripple too but they're not as widely studied.

[alexkravets]

Do you really not see the difference between
1. 50% of the coins are in circulation, the other 50% will be distributed according to a fair, objective protocol; and
2. 50% of the coins are in circulation, the other 50% are held by a central authority to do with as they please?
Even with the unwarranted assumption that OpenCoin is noble, what about the security implications of a single party storing an amount of currency equal to the total in circulation by a single party that can be hacked?

I do see the difference and I describe it further down in my post.

At that point various scalability issues in Bitcoin (TPS ceiling, blockchain size, etc) will be contrasted against scalability strengths of Ripple

What scalability strengths? Maybe I'm missing something but AFAIK each transaction in Ripple requires much more processing than in Bitcoin, hence it's less scalable. The ways to increase Bitcoin's scalability are already known - I'm sure such ways are possible for Ripple too but they're not as widely studied.

1. There is absolutely no observable convergence in endless discussions on increasing Bitcoin's max_blocksize over the years, assuming this convergence does not materialize ... Bitcoin will be limited to 7 TPS and tx fees will rise until small amounts are not sendable.

2. Bitcoin transactions can never be made secure without some confirmations by at least a few blocks, and block time gap variance is so high that two days ago I had to wait 65 minutes for a single block to come through.

3. Because block time is sacrosanct in Bitcoin, there is no feasible solution in sight for this, except perhaps for small transactions with some kind of "overlay" monitoring network ... but hey those small transactions will soon become too expensive as blocks fill up and fees rise.

None of the above affects Ripple design. It can (if dev promises are taken at face value) handle huge TPS volumes and consensus is achieved in 5 - 10 seconds. Also Ripple has superior ledger data structures ( https://ripple.com/wiki/Ledger_Format ).

What about multi-asset trading and self-issued webs of trust and IOUs ... all huge additional feature jumps that maybe implementable in Bitcoin using colored coins or Bitcoin's scripting (if / when it gets enabled ) but in reality ... none of that is likely due to 1. 2. & 3. above.

Cheers ...

[Meni Rosenfeld]

1. There is absolutely no observable convergence in endless discussions on increasing Bitcoin's max_blocksize over the years, assuming this convergence does not materialize ... Bitcoin will be limited to 7 TPS and tx fees will rise until small amounts are not sendable.

There was never a reason to; now that there is, some increase is likely to be agreed on. Anyway, increasing max_size is needed but isn't really the solution I have in mind.

2. Bitcoin transactions can never be made secure without some confirmations by at least a few blocks, and block time gap variance is so high that two days ago I had to wait 65 minutes for a single block to come through.

Also solvable with the above.

[alexkravets]

1. There is absolutely no observable convergence in endless discussions on increasing Bitcoin's max_blocksize over the years, assuming this convergence does not materialize ... Bitcoin will be limited to 7 TPS and tx fees will rise until small amounts are not sendable.

There was never a reason to; now that there is, some increase is likely to be agreed on. Anyway, increasing max_size is needed but isn't really the solution I have in mind.

2. Bitcoin transactions can never be made secure without some confirmations by at least a few blocks, and block time gap variance is so high that two days ago I had to wait 65 minutes for a single block to come through.

Also solvable with the above.

Your proposal is certainly intersting and b/c I'm unfamiliar with its details I would have to study it to have an opinion, however since being posted last July 05 did any of it make it into any branches in bitcoin's github or was there any uptake on it ? I honestly don't know.

But this raises another related issue:  After being in existence 4+ years and presumably having a whole ecosystem of companies and users around it, so far Bitcoin community has managed (maybe) to fund one full time developer (Gavin through Bitcoin Foundation).

Now compare that to 10+ (?) people (by now) furiously working for almost 2 years (my guess) on Ripple in stealth mode and furiously implementing the protocol and fixing bugs and doing multiple daily commits as their full time jobs.  

Which source tree can sustain a higher rate of evolution Bitcoin or Ripple ? The question is obviously rhetorical, since the answer (Ripple) should be pretty obvious.

Bottom line, Bitcoin was the 1.0 version and a trail blazer and despite having a huge fan base around it and being in existence for 4+ years ... it has achieve limited penetration, but worse than that its rate of evolution shows no sign of ever being anything faster than the glacial rate it has been so far ... this is partly "tragedy of the commons" and partly because not even Satoshi could get all the initial parameters tuned just right AND leave some others tunable to allow the system to evolve gracefully.

In the long run, Ripple is simply a superior technology (assuming its foundational rigor holds up in independent peer-reviews !!!) AND its implementation is being done by a much larger professional team with full time jobs and not occasional pull requests submitted once in a while ...

I will take that despite the XRP 50% Fort Knox problem lurking around in the future because that problem is either theoretical (if the hoard is securely locked up and not flood-released OR self-defeating because as soon as it starts being used to cap or manipulate XRP market it will start melting away since the absolute upper bound of 100 XRPs still exists and you can only sell so many of them before you lose control of the market.

Cheers ...

[Meni Rosenfeld]

Your proposal is certainly intersting and b/c I'm unfamiliar with its details I would have to study it to have an opinion, however since being posted last July 05 did any of it make it into any branches in bitcoin's github or was there any uptake on it ? I honestly don't know.

There are not yet concrete implementations of the prerequisites, no.

But this raises another related issue:  After being in existence 4+ years and presumably having a whole ecosystem of companies and users around it, so far Bitcoin community has managed (maybe) to fund one full time developer (Gavin through Bitcoin Foundation).

Now compare that to 10+ (?) people (by now) furiously working for almost 2 years (my guess) on Ripple in stealth mode and furiously implementing the protocol and fixing bugs and doing multiple daily commits as their full time jobs.  

Which source tree can sustain a higher rate of evolution Bitcoin or Ripple ? The question is obviously rhetorical, since the answer (Ripple) should be pretty obvious.

Bottom line, Bitcoin was the 1.0 version and a trail blazer and despite having a huge fan base around it and being in existence for 4+ years ... it has achieve limited penetration, but worse than that its rate of evolution shows no sign of ever being anything faster than the glacial rate it has been so far ... this is partly "tragedy of the commons" and partly because not even Satoshi could get all the initial parameters tuned just right AND leave some others tunable to allow the system to evolve gracefully.

In the long run, Ripple is simply a superior technology (assuming its foundational rigor holds up in independent peer-reviews !!!) AND its implementation is being done by a much larger professional team with full time jobs and not occasional pull requests submitted once in a while ...

I don't see a problem with Bitcoin's rate of evolution, these things don't happen overnight and the workforce will increase as adoption increases.

But that's not the point I originally tried to make... According to OpenCoin, XRP don't presume to be meant as the world's new global currency, and as such the goals of the Ripple project are less ambitious than those of the Bitcoin project (so it's no surprise it can achieve these goals faster).

But assuming XRP is indeed destined to become the world's currency - If Ripple's technology is indeed superior it might happen, but I wish they didn't completely botch the initial distribution.

[ploum]

tl;dr : In this message, I formalize the proposal from Andrew Vorobyov to distribute XRPs but "forcing" Ripple creator to sell 99% of all the XRPs at a fixed price. It seems to only have advantages (including for them). The only remaining question: should the fixed price be in bitcoins or in dollars (or in euros)

Idea how to give away XRP:

You must make a commitment to fill any orders that want to buy XRP above some predefined threshold...

For example, people will always be able to buy XRP from you at $0.001

Benefits:

1. People will always be sure that they can buy "fuel" to drive.
2. You will be able slowly cash out money
3. There will be price stability, such needed thing in the beginning.

You mean with an unlimited supply of XRP? That would have us essentially selling every transaction and ensuring the system never becomes decentralized.

If you mean with a limited supply, we'd run out. We'd either have to raise the price, essentially auctioning them off, or strictly limit who can buy how many, which I think defeats the point.

We want to make the system free to many people for as long as possible.

This is actually a very hard problem.

Andrew's idea appears to be quite sensible. Here's what you can do :

1. Keep for you only 1% of all XRPs. Or 0.1%. The fewer you keep, the more people will trust Ripple to not be controlled by one big player. You currently decided to keep 10%, which is quite huge.

2. With the 99% that left, give them through give-away when possible (such as on this forum) and also allow people to buy them from you for a fixed price. A price that will never vary until the faucet dries out.

How do you fix that price? It's quite simple: make up the price you think the company should earn in the next 10 years. Say $100,000,000. Consider that you will give-away 49% and sell 50%. That values the XRP at 0.002$.

a) But then we will ultimately dry out.

That's the goal. As long as you keep a significant portion of the XRPs, there will be no trust in the system. The less you have, the more decentralized the system will be.

b) But we need to adjust the price.

No at the start. As said, this will introduce some stability and some trust in the system.

c) But we need to make money.

Remember that by doing that, you are already making 100 millions of dollars. Then you also have your services. And you keep 1% of all the XRPs in case the value increase. If it's not enough then, obviously, we cannot trust you to bootstrap Ripple to become a trully decentralized system.

d) Someone could buy a lot from us to control most of the economy.

In order to become as powerful as you, someone as to invest 2 millions of dollars in Ripple. That's already quite a lot. Why cannot we trust someone that invest 2 millions of dollars and should we trust you instead ?

e) Why not link it to bitcoin instead of dollars ?

This is an example. I would say that linking to dollars might be more appealing to those who are not familiar yet with bitcoins. It would also mean that XRP is as volatile as the bitcoin. On the other hand, as I guess you expect bitcoin's value to increase (like I do), this can only be good for you. But it can be "too good" and kill the Ripple economy. Let take the scenario where bitcoin suddenly rises to 1000$ and you still have more than 80% of all the XRPs. It means that an XRPs will be valued 100 times more. It might be a showstopper for newcomer wanting to enter the Ripple economy.



All in all, I think it is a very good thing. It kills speculation during the bootstrap phase (speculators can still play with bitcoins) and it is completely in line with the "XRPs is not a money, only a spam prevention". It also means that, once the faucet dries out, 100 millions of dollars have been invested in the Ripple economy. Until that time, a transaction would still stay cheap.

[becoin]

Which source tree can sustain a higher rate of evolution Bitcoin or Ripple ?

The irony is Ripple as a payment system is unsustainable without independent currency like bitcoin being the backbone (not saying bitcoin is perfect). The 10+ (?) people furiously working on Ripple, you've mentioned above, will hopefully understand this very soon.

[Zangelbert Bingledack]

It's hugely different. In one case, resources and energy that exist only in finite supply and could have gone to productive uses are wasted. In the other case, there is no waste at all.

I disagree completely (shocker!). Even if the sole purpose for consuming energy by mining XRP is to prevent OpenCoin from having total control over the distribution of the currency, it would be worth it in my eyes. Obviously you will have a different opinion.

But my proof of work proposal for distribution of XRP is compatible with Bitcoin merged mining so how much is really being wasted? Certainly not all the energy. Maybe some of it (very little).

Proof of work may suck, may be a waste of electricity, etc. It doesn't matter. All that matters is whether it is better to "waste" power and have Ripple succeed or not "waste" power and have Ripple very likely fail. Inasmuch as those really are the two choices, it becomes more accurate to say "utilize power" instead of "waste power."

[Meni Rosenfeld]

tl;dr : In this message, I formalize the proposal from Andrew Vorobyov to distribute XRPs but "forcing" Ripple creator to sell 99% of all the XRPs at a fixed price.

I don't think it's enforceable. OpenCoin can simply "sell" all the XRPs to itself.