Then why have XRP at all? Oh yeah, to prevent spam. But to prevent spam it must have value. So then if XRP has value, XRP is like a currency, plain and simple.
No one is disputing that but at this point you're restating things that have already been said. By me, in fact.
Here's the link to my original post:
Ripple: Disproportionate enrichment of the founders of the system?And I'll repeat the text since you can't be bothered to click the link:
_______________________________________________________________________________ _____Note: The following analysis assumes that the Ripple system eventually becomes open sourced, gets decentralized, and that rigorous mathematical analysis proves that the system is robust and fulfills its technical promises.From the
Ripple wikiXRP are the only currency in the Ripple network that has no counter-party risk and can be sent to any account without a trust relationship.
When the Ripple network was created, 100 billion XRP was created. The founders gave 80 billion XRP to the OpenCoin Inc. OpenCoin Inc. will develop the Ripple software, promote the Ripple payment system, give away XRP, and sell XRP.
Let's review some facts:
* XRP is a cryptocurrency implemented in the Ripple system
* Only 100 billion XRPs can ever exist
* XRP must be expended and destroyed to perform transactions
* An XRP balance is required to fund an account
* It is claimed that the purpose of XRP is to prevent spam
There has been a fair amount of discussion about methods of XRP distribution for preventing spam. For example, to automatically fill each newly created account with some nominal amount of XRP. It should be obvious why such a scheme cannot work to prevent spam; all a spammer need do is repeatedly create accounts to harvest any amount of XRP and produce transactions. As the representatives of OpenCoin have pointed out numerous times,
distributing XRPs evenly is a difficult problem. It is safe to conclude that:
XRPs must be scarce to prevent transaction spamXRPs have similar properties to Bitcoins:
* They are divisible to many decimal places
* They are easily transmitted electronically
* They are fungible and homogeneous
XRPs have advantages over Bitcoins* They cost less to transmit electronically
* They have intrinsic value (they enable transactions)
* They are truly deflationary (they get destroyed when used as transaction fees)
* They operate on a network that can scale almost limitlessly
XRPs have all of the attributes that define a good currencyThe Ripple network implements a self-issued credit system that leverages transitive trust relationships to enable the broad circulation of digital IOUs. These money substitutes require risk management on the part of every user, as they need to trust at least one other entity in order to participate. But the XRP currency that circulates in Ripple system is special compared to the gateway IOUs:
XRPs have no counter-party risk, and transmitting them doesn't require gateway feesIn a fashion similar to Bitcoin, XRPs are secured by the consensus algorithm and cryptographic properties of the system. There is one big difference between Bitcoins and XRPs:
XRPs are distributed by a central authorityFrom the Ripple wiki entry, the founders keep 20 billion XRP, while OpenCoin distributes a fraction of the remaining 80 billion for free to bootstrap the system (a task currently being carried out). Whatever OpenCoin does not distribute for free, it will then sell. How much of the 80 billion is needed to bootstrap the network? If they give away 1,000 XRP to one million early adopters, that only consumes 1 billion XRP. This means that 99 billion of all the XRP that will ever be created is in the control of the authors of the system.
XRPs will trade for real currencies in an open marketGiven that XRPs have no counter-party risk, miniscule fees, and all of the other properties:
Users will prefer XRPs as part of a trade over any IOUsFrom all these points:
XRPs are superior to Bitcoins as a crypto-currency.When asked directly about these disturbing facts, OpenCoin representatives give us vague answers:
So, can we get a straight answer?
...
Unfortunately, no. I am prohibited from discussing that.
This analysis brings us to one very disturbing conclusion:
The founders of Ripple will control over 99% of the purchasing power of XRPs for hundreds if not thousands of years.Despite the lack of any significant goods and services enabled by the fledgling Ripple network recently opened to the public, there is already a robust trade in XRPs for other currencies like Bitcoin, US dollars, and foreign currencies:
To preserve XRPs function as an spam prevention, OpenCoin foundation must maintain the scarcity of XRPs by limiting their supply. This is also what creates the market for XRPs and gives them value. It is not possible to have XRPs be both worthless and also useful for preventing spam.
Combine all these facts with the odd statements and the carefully managed customer-facing facade of OpenCoin representatives and we have all the volatile ingredients necessary for the Next Big Cryptocurrency Drama.
