Ripple: A Distributed Exchange for Bitcoin

[misterbigg]

A few seconds might be great for transfers, for trades however... just look at mtgox.

In Ripple I believe all orders are limit orders. But you do bring up a good question. Ripple can't support enormous trade volume with millisecond latency. Is this a problem? I don't know.

Also who is the one running the order book? The server?

There is no "server." All validating nodes process the order book using a deterministic algorithm. Since they all have the same ledger and set of proposed transactions, the application of outstanding orders is deterministic. All nodes come to the same conclusion regarding orders, since they began with the same state and use the same rules.

[BubbleBoy]

Q: What if OpenCoin sells all it's XRPs at once?
A: There is little incentive to do that, since the price would crash and OpenCoin would make less money. Even so, the result would be similar to recent Bitcoin crashes. Mass panic, and then the price recovering. But OpenCoin could only do this once. After that, the market will set the price. The core Ripple functionality of sending fiat-denominated IOUs securely to anywhere on the planet would be largely unaffected.

How about this outcome: we hoard billions upon billions of XRP. If you fork our implementation and remove the government mandated deanonymization, we will spend all our XRP and crash the price of that alternate chain. It cost us nothing. If instead you remove our initial endowment from the alternate chain, you will make everybody's wallets worthless because everybody has received coins that were initially ours. So there's no possibility for mutiny and you are our bitches.

Well, I certainly agree that Opencoin can only be trusted to care about Opencoin.  However, the exchange doesn't have to involve XRP (apart from the transaction fee, i.e. one side doesn't have to be denominated in XRP).  To be fair, you're saying you've seen it but you flat out asked where it was a second ago, which is the only reason it was brought up.

One the long term XRP is the least common denominator and people will hold it, injecting value, especially if it's stable or slowly appreciating. That's the whole business model, sell people XRP and make them seem like a good investment. They can buy USD IOUs only when they need to cash out.
That wasn't me asking.

[Sukrim]

Also who is the one running the order book? The server?

There is no "server." All validating nodes process the order book using a deterministic algorithm. Since they all have the same ledger and set of proposed transactions, the application of outstanding orders is deterministic. All nodes come to the same conclusion regarding orders, since they began with the same state and use the same rules.

So in case node 1 gets offer 1 and then offer 2 with identical timestamps and node 2 the other way round, how is this resolved? Do they ask a third node?

[Calavera]

Q: What if OpenCoin sells all it's XRPs at once?
A: There is little incentive to do that, since the price would crash and OpenCoin would make less money. Even so, the result would be similar to recent Bitcoin crashes. Mass panic, and then the price recovering. But OpenCoin could only do this once. After that, the market will set the price. The core Ripple functionality of sending fiat-denominated IOUs securely to anywhere on the planet would be largely unaffected.

How about this outcome: we hoard billions upon billions of XRP. If you fork our implementation and remove the government mandated deanonymization, we will spend all our XRP and crash the price of that chain. It cost us nothing. If instead you remove our initial endowment from the chain, you will make everybody's wallets worthless because everybody has received coins that were initially ours. So there's no possibility for mutiny and you are our bitches.

You're assuming XRP has to be something more than a necessity to stop the network being flooded.  Screw XRP.  It's clearly a toy currency, but if you want to replace it as an anti-DOS device then come up with something better.  Bitcoin's distribution via mining was ingenious, but there's no mining in Ripple (ie there's no voting with computing power).

In your example they'd crash the price of XRP, but as I say screw XRP, it's only there out of necessity. 

Well, I certainly agree that Opencoin can only be trusted to care about Opencoin.  However, the exchange doesn't have to involve XRP (apart from the transaction fee, i.e. one side doesn't have to be denominated in XRP).  To be fair, you're saying you've seen it but you flat out asked where it was a second ago, which is the only reason it was brought up.

One the long term XRP is the least common denominator and people will hold it, injecting value, especially if it's stable or slowly appreciating. That's the whole business model, sell people XRP and make them seem like a good investment. They can buy USD IOUs only when they need to cash out.
That wasn't me asking.

Sorry, you're right that wasn't you at all.  Just because that's OpenCoin's business model doesn't have to make it their reality.  I do agree that XRP's are the most troublesome portion of Ripple, particularly when trying to sell it to the mindset of the typical bitcoiner, but I'm not sure it's a showstopper.  This isn't bitcoin and it isn't a libertarian's wet dream, it's something in between. 

[Calavera]

Also who is the one running the order book? The server?

There is no "server." All validating nodes process the order book using a deterministic algorithm. Since they all have the same ledger and set of proposed transactions, the application of outstanding orders is deterministic. All nodes come to the same conclusion regarding orders, since they began with the same state and use the same rules.

So in case node 1 gets offer 1 and then offer 2 with identical timestamps and node 2 the other way round, how is this resolved? Do they ask a third node?

That's basically the same as the double spend problem.  https://ripple.com/wiki/Consensus_Graphic

[misterbigg]

So in case node 1 gets offer 1 and then offer 2 with identical timestamps and node 2 the other way round, how is this resolved? Do they ask a third node?

The way the Ripple consensus works, when the ledger is closed ALL nodes have come to an agreement on an identical set of transactions which will be applied. The timestamp on the transaction doesn't matter, only that they are both in the same set of transactions applied to the current ledger.

What you mean to ask is "what happens when two identical offers from different people are in the consensus set of transactions?" I don't exactly how Ripple does it, but there has to be some unique characteristic which can order the transactions in a way that cannot be manipulated. Sorting them by their hash would be one obvious way.

[Sukrim]

Well, even in the wiki server and validating node is used as synonym.

As the title here is about having a distributed exchange, I still wonder if ripple is really up for that task considering there might be a lot (!) of orders compared to transactions. Having only few validators in a market might make it possible to manipulate it, having a lot might be quite expensive memory wise... Also as I understand it I cannot just launch my own little validator at home, also existing validators need to trust mine. What's my incentive beyond being able to maybe cheat to privately run a validator for the mtgox order book and why should mtgox trust my validator?

Edit: if you sort by hash, you again create some kind of mining as there might be different ways to construct a transaction with lower hashes.

[jancsika]

That brings me to the other claim on your website: "free(ish)".  As Gateways and the intermediaries will be for-profit entities, I don't see how this will be free(ish) at all, even if the base XRP cost is near-free everybody else will charge money.  It will possibly be cheaper than other ways of sending money, but I don't even see how that's guaranteed.

It's not guaranteed. That's a forward looking statement.
[/quote]

Some projects like Bitcoin make claims based on what the software actually does at the time without giving you an honest assessment of whether it would actually scale or even be feasible to run for the typical user in the future[1].  Others like Ripple make claims based on what might be true in the future if the system does indeed scale to a larger userbase.

Then there are serious projects which tell you what they actually do and at least attempt to publicly verify how well they scale before evangelizing their software.

[1] This doesn't hold for bitcoin's claim of "anonymity", since it was never true at all, but I don't remember whether the official site ever claimed that or if it was just glib fanboys on the forums.

[hashman]

Why do I see so many calls for implementing distributed Bitcoin exchanges or putting up more robust/centralized Bitcoin exchanges when we will soon have Ripple, which perfectly provides distributed order books?

That's a pretty easy question. 

Because nobody trusts "opencoin" at all now after what looks like such a clear commitment to their short-term-control wealth over any benefits the original ripple ideas may have had to offer them.  Imagine if Satoshi said in 2009 he would keep 11m coins for his company and open up the door to later coinbase creations, and that open source code would come "eventually"?           

[tclo]

Why do I see so many calls for implementing distributed Bitcoin exchanges or putting up more robust/centralized Bitcoin exchanges when we will soon have Ripple, which perfectly provides distributed order books?

That's a pretty easy question. 

Because nobody trusts "opencoin" at all now after what looks like such a clear commitment to their short-term-control wealth over any benefits the original ripple ideas may have had to offer them.  Imagine if Satoshi said in 2009 he would keep 11m coins for his company and open up the door to later coinbase creations, and that open source code would come "eventually"?           

Yes I had the same thought....it seems like a downside for the currency if they are holding a bunch and hoping for appreciation.  In that case, they will probably do whatever they can to push the price higher..    Of course that could be a good thing for people speculating in ripples if they can successfully move the market higher.

[Coincrazy]

A few seconds might be great for transfers, for trades however... just look at mtgox.

In Ripple I believe all orders are limit orders. But you do bring up a good question. Ripple can't support enormous trade volume with millisecond latency. Is this a problem? I don't know.

Also who is the one running the order book? The server?

There is no "server." All validating nodes process the order book using a deterministic algorithm. Since they all have the same ledger and set of proposed transactions, the application of outstanding orders is deterministic. All nodes come to the same conclusion regarding orders, since they began with the same state and use the same rules.

Misterbigg

You understand ripple best

So some questions if you have the time

1. Say the world has a fear of all fiat drowning in overprinting and inflation.  Does it make sense for the average joe to buy and hold ripple to save himself from hyperinflation ? Even With so much ripple in the hands of so few  ?

Or

2. Should the world  forget ripple as an investment or store of value and just move on to "...ripple as a credit card equivalent ... " ( no one believes that a credit card will save him later )

Or

....is it something else .... ?


Thanks

[JoelKatz]

Also who is the one running the order book? The server?

There is no "server." All validating nodes process the order book using a deterministic algorithm. Since they all have the same ledger and set of proposed transactions, the application of outstanding orders is deterministic. All nodes come to the same conclusion regarding orders, since they began with the same state and use the same rules.

So in case node 1 gets offer 1 and then offer 2 with identical timestamps and node 2 the other way round, how is this resolved? Do they ask a third node?

(I'm assuming you mean these two offers both take the same crossing offer and therefore conflict. If they just place two offers, then both offers will just get placed, no problem. If they 'fully conflict' that means one transaction makes the other impossible. If they 'partially conflict' that means it matters which you execute first.)

First, it's important to see that all that is required is for the servers to agree on the ordering of these two transactions. So long as all servers agree which is "first", then there's no problem. The second transaction will fail or execute in some way that doesn't conflict with the first (if it can). And it doesn't matter which one they agree is first really, no outcome is "right" or "wrong". They must, however, agree or ledgers diverge.

Ripple servers have an "open ledger" and a "last closed ledger". Servers process live transactions against their open ledger and snapshot the open ledger when the ledger closes. So these two servers will have different and conflicting open ledgers when the ledger closes. (If they fully conflict, one will have one and one will have the other. If they partially conflict, one will have one first and one will have the other first with different results.)

When the ledger closes, each server proposes the set of transactions it thinks should go in the next ledger. An avalanche algorithm is then used to reach a consensus on what set of transactions should go in that ledger. See the wiki for details on how a consensus on the candidate transaction set is reached. There are three possibilities:

1) If they don't fully conflict, then the servers actually agree that both transactions should go in the ledger. In this case, a deterministic algorithm decides which one is applied first. All servers will agree on the new last closed ledger.

2) One transaction winds up in the consensus set and the other doesn't. In this case, all servers will agree on the new last closed ledger and will apply the other transaction. If it was only partially conflicted, they'll likely agree to apply the other transaction in the next consensus round.

3) Neither transaction winds up in the consensus set. In this case, a deterministic algorithm decides which one is applied first to each server's new open ledger. The other transaction will also get in if the first transaction only partially conflicts it. The servers will agree on the new last closed ledger with neither transaction and will all agree on one or both transactions in the next round.

In all cases, servers will agree on the new last closed ledger and any remaining conflict will be resolved by deterministic algorithms, possibly forcing one or both transactions to be delayed into the next consensus round.

If there are unconfirmed transactions left over, a new consensus round begins immediately. So this process will typically only take about 10 seconds.

The server never assumes that its open ledger is reliable in any way. It just uses it to screen transactions to decide if it thinks they might succeed and therefore should be forwarded and should be included in the server's initial proposal. It also uses it to help clients form chained transactions.

[desired_username]

I'm just getting familiar with ripple.

Does anyone know if it worths to trade BTCs on it?

I have to read up some more, I'm not sure how to top the wallet up with funds (GBP, EUR).

I would be interested in other's opinion.

Cheers

[TTBit]

OP is right. Ripple has the best chance at becoming the decentralized exchange that everyone is crying for. For MtGox to function, it has to manage both assets (USD and BTC), as well as actually creating the exchange. Don't like MtGox's AML policy? Worried about their handling of BTC? Don't like the lag? What are your other options? MtGox is the jack of all trades, master of none.

But ripple brings together gateways. A gateway may only have one function, such as exchanging BTC for BTC ious. Another gateway may be exchanging USD for USD ious. The gateways don't have to worry about matching orders or creating an exchange. All they have to do is give specie for ious. With each part of an exchange broken down, now you can select where you do business with USD (and USD alone). Another gateway may have BTC security policies that you find attractive.

[Spekulatius]

Ripple is very difficult to understand and therefore is difficult to argument against it.
But what I understood it is centralized and not open source.
Another problem is that it needs gateways like exchanges by bitcoin and actually there only one gateway.
Without gateways to fiat you cannot transfer fiat money just Ripple.
So the problem which exists by bitcoin with exchanges by Ripple is even worse at the moment it is just hidden by the complexity of the system which is difficult to understand.

This is pretty much all true. But none of these things are fundamental about Ripple. It's just the difference between where we are and where we are going. You basically just summarized our priority list right now.

The XRP currency is somewhat similar to bitcoin, a fixed supply of coins that are owned by the company. The same deflationary characteristics only with a central issuer that hopes to earn money from seigniorage. So instead of individual speculators riding the deflation bubble, there is a single company dedicated to this, conjuring money out of thin air and playing the role of the central bank. I have to say the scheme is pretty sleazy and smart at the same time, but hardly revolutionary. If Ripple is successful there will be tremendous pressure from regulators to break or cripple it's anonymity and the company will have no choice but to comply. It's utterly irrelevant if the source is open, since the company owns the "central bank" keys, and there will be no reason to move to a different network with other keys where none of your money are valid anymore.

They way in which I understand it is that as soon as the server source code will be made open source, the whole network will completely become decentralized because everybody can run their own Ripple servers/nodes/gateways. OpenCoin does not have to do anything after that to keep Ripple running.
I dont know what you mean by 'central bank keys' though, I guess you are referring to the vast amounts of Ripples (XRP) that they will still be holding? Their stated pla is to distribute those over the course of the next years (decades?) to help solve the initial distribution problem. If at any point in time regulators would threaten to seize those assets (XRP), they could simply move them to an unknown address or distribute them all at once in a faucet like fashion as they have done in this forum already.

[JoelKatz]

They way in which I understand it is that as soon as the server source code will be made open source, the whole network will completely become decentralized because everybody can run their own Ripple servers/nodes/gateways.

Correct. If we, for example, change our server to do something nefarious, it would just be ignored just like someone changing their Bitcoin client to send transactions spending Bitcoins they don't have.

I dont know what you mean by 'central bank keys' though, I guess you are referring to the vast amounts of Ripples (XRP) that they will still be holding? Their stated pla is to distribute those over the course of the next years (decades?) to help solve the initial distribution problem. If at any point in time regulators would threaten to seize those assets (XRP), they could simply move them to an unknown address or distribute them all at once in a faucet like fashion as they have done in this forum already.

One could imagine a scenario where those keys get into the hands of some group bent on destroying the Ripple network. It's hard to imagine what they could do though other than release them in large quantities and cause the price of XRP to drop. But that wouldn't harm Ripple's use as a payment network. In fact, it would just make it cheaper to use.

And, of course, the community of Ripple server operators could react with any technical changes needed. In principle, they can make any change whose advantages outweigh the disadvantages in the eyes of the majority of major validators.

[Coincrazy]

Hi Joel

Could you please help me understand ripple

My questions are in this thread, here
https://bitcointalk.org/index.php?topic=174854.msg1834158#msg1834158


TIA

[misterbigg]

1. Say the world has a fear of all fiat drowning in overprinting and inflation.  Does it make sense for the average joe to buy and hold ripple to save himself from hyperinflation ? Even With so much ripple in the hands of so few  ?

Or

2. Should the world  forget ripple as an investment or store of value and just move on to "...ripple as a credit card equivalent ... " ( no one believes that a credit card will save him later )

Or

....is it something else .... ?

Are you asking for investment advice? OpenCoin employees will typically not offer speculation or forward looking statements regarding Ripple or it's built-in currency. Fortunately, I don't work for them so here goes!

Is it worthwhile to hold XRP (Ripple's built-in currency)? I think so. But it's a huge gamble. Who knows if someone is going to find a fatal flaw in the system? Bitcoin is much more established. It's had over 4 years of Russian teenagers beating on it trying to break into wallets via the block chain.

You ask about the "flood risk" of XRP, i.e. "so much ripple in the hands of so few." This is a risk, but only a short-term risk. OpenCoin and the founders disgorging themselves of their XRP can only happen once. Besides, it's not in their best interests to do so. There are other more serious risks. Such as, the software not working as advertised. Or the U.S. government seizing the domains of ALL gateways, preventing them from exchanging between IOUs and fiat. What if OpenCoin has to reset the ledger for some reason, before they release the software? That would suck (although rather unlikely).

The largest threat to crypto-currencies today is that the government will make it impossible to redeem your digital currency for electronic fiat. There are a variety of ways this could happen. Should this occur, the markets would become totally disordered. The only thing you could do with your currency at that point is to buy goods and services priced directly in Bitcoin or XRP. For Bitcoin, there is very little. For XRP practically nothing. Significant price depreciation would occur overnight as everyone panics to get rid of their crypto-cash. Presumably, the market response over time would be to offer more and more things priced in cryptocurrencies but that would take time. In the meanwhile, you're stuck.

Should the world forget XRPs as a store of value? I don't think so. Like any other asset, they have their own risk/return profile. A well diversified portfolio should certainly include at least a small amount of XRP. But it's a huge gamble, there's a significant chance of a total loss. People who sold the 40,000 or 50,000 XRP they got from signing up for the Ripple giveaway in this forum are, in my opinion, fools. They had the equivalent of a free lottery ticket and they exchanged it for a handful of dollars worth of Bitcoins. But to each their own, I suppose.

If you want to protect against hyperinflation there are several ways of doing it. The best protection is to employ all of these methods:

1. Create or buy a going concern (i.e. a business). A business which generates revenues is strong protection against the confiscation of wealth through inflation. Even better if the business is one which is necessary for living, like farming.

2. Own physical gold and silver. This hedges against Bitcoin and Ripple's biggest enemy, the electromagnetic pulse from a nuclear explosion which knocks out electricity and the Internet. Or more likely, the power will go out for economic reasons, which will leave you shit out of luck if you want to spend your crypto-currency.

3. Own Bitcoins. Obvious reasons here, but there are risks such as losing your wallet or as we have seen recently, disruption at the exchanges.

4. Own some XRP. Same reasons as Bitcoin. I wouldn't bet the farm though, Ripple isn't even out of beta yet!

Every individual has to decide for themselves how much fiat they want to hold versus how many other assets, and what the percentage of each asset is.

Disclosure: I own a business, precious metals, Bitcoins, and XRPs.

[papamoi]

hi

is there any windows client for ripple?

i would like to try

thanks

[misterbigg]

is there any windows client for ripple?

The client is written in JavaScript and works on any device with a browser and Internet...