[StableCoin] About Ripple

[Red]

I've been researching Ripple. It's ledgers (blocks), transactional model, INSTANT commits, consensus building, scalability, etc...

If you read their wiki it should be obvious to the casual observer that Ripple is *Coin 2.0. There is just no question. I has every desirable bitcoin system/code improvement we've ever discussed in a StableCoin/EnCoin/GEM/Decrits thread. In the future every new coin will be a fork of the Ripple codebase. It's just better in every way.

On top of that, OpenCoin has built a business called Ripple. In that business they use XRP to control spamming the blocks/ledgers. See Ripple "Reserves". They also use it for internal accounting. They also it for things that other threads have called "Colored" bitcoins. In ripple you can have IOUs, keep track of your Dollars separately from your Euros. Send Dollars from one address to Rupees at another address.

The transaction creating system (client) finds the best rate in the ledger. Exchanges denominations in the ledger. Delivers the money in the ledger. Everything is completely 100 percent distributed, secured, anonymous and trustworthy.

The one thing that's not really their primary use case, however, is storing stable value in XRP. Those values are intended to float around. XRP are not StableCoins in the sense that we've been using that term. But it doesn't matter because the system trades from dollars to XRP to rupees in a single transaction. It doesn't need to "hold" XRP over any period in which the value can change.

Their is no reason that we/anyone couldn't build a StableCoin monetary policy using a fork of the Ripple codebase. (When available) But it's not completely clear to me if there is a long term reason for doing so. If you think the dollar sucks and is going to fail. Just send your money to Europe and store it there. Or China, or anywhere you trust a bank.

Don't trust a bank? Well I guess that's StableCoin's primary audience now.

Any thoughts?

[Impaler]

I hadn't realized Ripple actually implemented so many features long speculated about in the BTC community.  This should really be an indictment of BTC community ossification and inability to add the BASIC performance improving features that were obviously necessary to go mainstream YEARS ago.  We might see Ripple take off and turn BTC into the myspace of cryptographic currency.  If their code really is as good as you've described and is open source then it very likely will be the basis for future coins, well any that have a chance of working, the supply of scam-coins and 'coin-of-the-month from BTC community will likely still continue to be based on BTC code.

As you said they haven't got stable valuation down yet as that's much more an economic rather then technology problem (and is HARD as we have seen in our discussions).  It's becoming more clear to everyone that stability is king, simply using Fiat as the unit-of-account is certainly the quickest and easiest solution and it probably has some good effects on a monetary level (money supply by mutual credit expansion shouldn't introduce much if any interest into the economy).

[Red]

If their code really is as good as you've described and is open source then it very likely will be the basis for future coins, well any that have a chance of working

Their new code base and trading models really are "that good". In fact, it may be possible to build a whole new StableCoin INSIDE Ripple. One that can trade against XRP just like Fiat does. Ripple has the "colored bitcoin" notion of a custom currency issued by a trusted party.

Still investigating whether such a custom currency could be issued automatically, over time, based on a particular rule set. Certainly, that could be allowed by modifying their server-side code to implement specific Alt-Coin rules. (i.e. award 50 BTC every 10 minutes to every node operator that validated ledgers over that 10 minute period.)

However, it would be F***ing Awesome if new experimental rule sets could be issued externally in some general way. I doubt that will be plausible, however, because it would mean that every crack-pot with an Alt-Coin idea would spam the ledgers with worthless new coins. What a fatal way to compromise Ripple's "simple" payment message.

[Red]

Ripple has made an interesting design departure from BitCoin. One that I actually agree with given Ripple's broad-adoption goals and trivial-to-use message. A Ripple "Wallet" is basically (with one clever exception) a SINGLE address and its associated private key. By contrast, BitCoin wallets contain multiple addresses and private keys.

By philosophy, BitCoins encourages you to use a new address/privKey for every transaction to increase anonymity. Ripple, on the other hand, discourages ledger bloat (very important!) by requiring a minimum balance be maintained in every address.

The side effect of this (very important for broad adoption and fast transaction commits) design decision, is that most Ripple users will have one and only one Ripple address. Thus making it trivial to associate a real life identity with a particular address.

Sure anyone can create alternate identities at TRIVIAL cost in XRPs. But most people won't see the need to do so. At least for a while. This has certain positive and negative consequences.

Positive: It will become the new and better captcha system. No need to give away your personal information and email address and then click a confirmation email. WOOT!
Negative: Everyone will know who your are anyway.

However, it also has an obscure and twisted side-effect...
Giving strangers a very random looking ripple address makes them feel more anonymous than today... But they aren't.

Will this cause any significant behavior changes in the general population?

[digicoin]

Interesting post. However, Ripple is not community friendly. They make a bad impression that they control everything.

[Red]

Interesting post. However, Ripple is not community friendly. They make a bad impression that they control everything.

When Ripple goes into widespread rollout I don't expect there to be any "community" of general users. No more than there is a community of PayPal or Visa Card users.

There will be a community of peer ledger validation nodes. I think that community will be smaller than bitcoin's mining POOL community. But probably about the same size as the bitcoin transaction validation community.

[Red]

So it is pretty clear to me that Ripple's XRP is not a [StableCoin] nor is it intended to be such. XRP's volatility will always be related to supply and demand similarly to BitCoin. However, XRP and BTC have opposite causes for their volatility.

BTC has a bounded supply and varying but potentially unbounded demand.
XRP has an unbounded supply (OpenCoin's cache), but bounded demand.

In other words, it simply doesn't take many XRP's/person to use the Ripple system for its intended purpose, trading non-XRP things. (Approximately 75 XRP right now) If OpenCoin could give away 75 XRP to a billion new users for free without exhausting the 80 Billion they plan to giveaway.

[Red]

However, I believe there is still a practical need for and demand for a [StableCoin] type of currency. One that, like BitCoin, intrinsically holds value inside the system, rather than just representing extrinsic value (an IOU) held by a trusted counter-party. (Exchange or Gateway)

I think such a [StableCoin] can be built either (as an Alt-Coin) by modifying the existing BitCoin source code rules. Then it could be launched as a Merged-Mining COMPLEMENTARY network/blockchain. (See my postings on why BTC speculators should welcome STC.)

Likewise, once the Ripple server is open sourced, a [StableCoin] could be created on top of that codebase. Something like [SRP] "Stable Ripple" or [XSC] "StableCoin". Such an implementation would inherit Ripple's instant confirmations and obviate the need for environmentally-unfriendly mining.

A third, (perhaps more interestingly) possibility is that a [StableCoin] might be created by building a distributed P2P "currency issuer" and generating the StableCoins directly into the existing Ripple network. The P2P issuer network would programmatically monitor STC exchange rate changes, then reach a distributed consensus on "mining issues" (How many new coins to issue and who to assign those coins to.) Once issued the new STC coins would exist independent of the P2P network's (and OpenCoin's) control and would trade inside Ripple as an equal peer to XRP.

Any thoughts?

P.S. I have a particular stability algorithm in mind. It takes advantage of the "buy low" (below target), "sell high" (above target) nature of speculators to quickly drive STC's exchange rate back toward its inherent SteadyTarget value.
Note: This is NOT the same algorithm I wrote of elsewhere.

[Red]

Monday Bump. It was a sleepy weekend.

[brenzi]

once ripple would hit critical mass, it could actually be a reliable reference for a stable coin. Exchange values between various currencies could be read from the LCL. This would allow to develop a fiatcoin approximating a certain fiat currency without a single trusted information source. This could possibly be done without being directly integrated into the ripple protocol. All we need is reliable read access to the LCL. Probably not possible until ripple server goes open source...
Very interesting. Thanks red for digesting the key elements for us.

[chrono.v]

I've been researching Ripple. It's ledgers (blocks), transactional model, INSTANT commits, consensus building, scalability, etc...

If you read their wiki it should be obvious to the casual observer that Ripple is *Coin 2.0. There is just no question. I has every desirable bitcoin system/code improvement we've ever discussed in a StableCoin/EnCoin/GEM/Decrits thread. In the future every new coin will be a fork of the Ripple codebase. It's just better in every way.

On top of that, OpenCoin has built a business called Ripple. In that business they use XRP to control spamming the blocks/ledgers. See Ripple "Reserves". They also use it for internal accounting. They also it for things that other threads have called "Colored" bitcoins. In ripple you can have IOUs, keep track of your Dollars separately from your Euros. Send Dollars from one address to Rupees at another address.

The transaction creating system (client) finds the best rate in the ledger. Exchanges denominations in the ledger. Delivers the money in the ledger. Everything is completely 100 percent distributed, secured, anonymous and trustworthy.

The one thing that's not really their primary use case, however, is storing stable value in XRP. Those values are intended to float around. XRP are not StableCoins in the sense that we've been using that term. But it doesn't matter because the system trades from dollars to XRP to rupees in a single transaction. It doesn't need to "hold" XRP over any period in which the value can change.

Their is no reason that we/anyone couldn't build a StableCoin monetary policy using a fork of the Ripple codebase. (When available) But it's not completely clear to me if there is a long term reason for doing so. If you think the dollar sucks and is going to fail. Just send your money to Europe and store it there. Or China, or anywhere you trust a bank.

Don't trust a bank? Well I guess that's StableCoin's primary audience now.

Any thoughts?

Why do you seem to believe that increasing the supply of a currency leads to it being "stable"?

Read this post that I made on the Netcoin thread:

I said that a no cap coin could be successful. I didn't call for a massively inflationary coin. You can look at inflation in two ways. There's the overall number of currency units, and there's the number of currency units per person using the currency. As long as the number of grows slower than the number of currency users, you have an increase in the overall money supply but a decrease per capita.

Here's the thing lots of people don't grasp. Excessive DEFLATION can be just as bad as excessive inflation. An economy needs the money to move around, be passed from person to person. The more this happens, the more an economy tends to grow. If your money goes up in value just from you holding it, you're less likely to spend it on something. The Great Depression in the U.S. during the '30s was a result of deflation. There wasn't enough money to go around, and so lots of people didn't have any.

And that's the crux of it. Yeah, sure, you can make a currency divisible up to x units, however many you want that too be.  And in the pure mathematical theory of it, yeah, sure, that could totally work, even on a worldwide scale. The problem you run into with that is that people are trained to view fractions of the base currency unit as being not worth much at all. Because, almost universally, they aren't. I can buy a gumball with a quarter. I'm not aware of anything I can buy with a dime, nickel, or penny.

Over the last week or however long that I've been reading and posting in this thread, I've been getting a very distinct vibe along the lines of "we're gonna get in first, and we'll be rich. And then all the other people can go screw themselves. And while they're doing that, they'll also use this currency, because it's so awesome. While they're off screwing themselves"

That sounds amazingly like what I would expect major banks to say, except about quantitative easing aka government/tax funded bailouts instead of about getting there first.

Also, and this is what really bothers me, if there's a small number of coins overall, it's a lot easier for an enthusiastic early adopter to grab a huge amount of them, and then walk in front of a bus while he congratulates himself on how awesome he is. At this stage in the game, it's fairly unlikely that anyone who knows what crypto currency is will find his wallet, so, hey, there goes 30 percent of the money supply

The Great Depression was not caused by "not enough money" moving around. The Great Depression was seeded with the Federal Reserve's inflation policy and ignited by the policies of the New Deal. If you want to learn what really happened, read David Stockman's "The Great Deformation" and http://wiki.mises.org/wiki/Great_Depression.

Deflation encourages saving and investment, whereas inflation encourages consumption. If a currency with a relatively fixed supply (given that hybrid PoS / PoW currencies need to have minimal inflation in order to work) based on the free market appreciates by 400% annually from a beginning market capitalization of a few million current US dollars to a market capitalization of a fraction of the total market capitalization of all fiat currencies and of gold, or that is to something like 20 trillion current US dollars, then the holder of such a currency is called a saver, and such a saver will also want to invest part of his or her profit while the currency is appreciating, and a significant percentage of his or her total profit once the currency has reached its true market capitalization.

Therefore, the saver is also called an "investor". This is something that people who believe in Keynesianism and Monetarism don't understand, that savers are investors.

It is really important for the developers of Netcoin and its initial users to understand the economics behind currencies well, otherwise they are going to make severe mistakes in Netcoin's development.

To learn economics, read http://library.mises.org/books/Gene%20Callahan/Economics%20for%20Real%20People.pdf, David Stockman's "The Great Deformation", and https://mises.org/journals/qjae/pdf/qjae14_3_3.pdf.

The only flaws in Austrian economics are Mises' Regression Theorem and the reliance on anarcho-capitalism.

Both types of coins are going to make early adopters rich, but I think part of the success of Bitcoin is you can look at it now and you can know if it reaches 0.5-1% of the global economy it's going to be worth $70,000-100,000 each coin. This is actually desirable, what I'm saying is it's a good thing for Netcoin if those people who hold it are encouraged to hold it for years in hopes that each Netcoin could be worth millions. This turns people into long term stake holders and proof of stake encourages this even further. If Netcoin produced 11 million instead of 21 million then we would know that at some point if it's technology really is better than Bitcoin it's going to go head to head with Bitcoin. It's not going to aim for 2nd place like Litecoin, but instead aim for 1st place.

What I'm saying is you're not going to have any long term holders of a coin like Feathercoin, Chinacoin, or any of those coins with billions of coins being created or trillions of coins being created because there is no incentive to save these coins. And as far as spending goes, you don't have to give people an incentive to spend money. When the infrastructure exists to make it easy for people to get exactly what they want the moment they want it with these coins then people will start spending them.

We don't need to have a billion coins and be tricked into feeling rich when we can have millions of coins and actually live rich. The dollar already has trillions, and there will be no reason why we should make it cheap for billionaires and millionaires to buy into these reserved slots. 11 million coins will make it twice as expensive to buy into these reserved slots as before which would mean you'd still have the potential that some billionaire could buy a bunch of coins while they are cheap, but I don't see why we should make that easy. I see it where you have a limited supply you have limited slots,  just like not everyone can have a billion dollars, and no one has a trillion dollars,  not everyone should have a Bitcoin or a Netcoin. If we let everyone have one then the value of each wont be as high because a millionaire isn't going to pay a million dollars a coin when we'll give him a coin for 10 cent.

These opinions are mine only, anyone is free to disagree and now is the time to debate. I've made my position known, I do not support the Chinacoin/Feathercoin/Litecoin (cheapcoin) model. I support the idea of diversity where you have some cheap coins for certain purposes such as pump and dump but then you have some coins where we might want to save them for 10 years because they are so rare, and then some coins which are in the middle. Bitcoin is the center of the bellcurve and is the normal coin and normal is 21 million. Rare would be less than 21 million, and inflationary would be more than 21 million and despite the sentiments of others on this forum when I see a coin based on Litecoin with greater than 21 million total, the higher the total number of coins and the faster the generation of these coins the less likely I am to buy them and the more likely I am to see it as a pure speculation sport coin for pump and dumps or a coin so miners who premined or who got in early can make a quick profit.

Your argument is based on the position that there is psychological benefit to a currency's supply being limited so that one whole number unit is worth hundreds if not millions of US dollars.

This is a flawed argument as there is marginal, if any, psychological benefit. The average user is not going to care if one whole number unit of his currency is worth 1 current US dollar or 100,000 current US dollars, as he or she is going to simply hold 100,000 times the amount of the former if the latter's scenario is the case.

A currency's worth is derived from its supply being relatively stable, and durable, portable, and divisible.

The divisible part is where current cryptocurrencies are flawed. If Bitcoin were to reach a 20 trillion current US dollar market capitalization, its smallest unit would still be worth a significant amount of current US dollars, not making it satisfy the divisibility property.

I believe that the supply for the perfect cryptocurrency needs to be 10 trillion units, divisible to 8 decimal places. This would allow its smallest unit to be usable to round off the smallest transactions even if market capitalization for the currency was greater than 70 trillion current US dollars.

Remember that a significant portion of the world still needs to industrialize, and that further productivity gains are still possible, from making free markets actually work to technology improvements. This increases the total market capitalization of all possible currencies from 70 trillion current US dollars.

[DiamondCardz]

Ripples (XRP) are centralized and mass-produced. The developers have kept 20 billion XRP, OpenCoin has kept 40 billion XRP. 100% inflation rate. This all has evidence.

No, just no.

[syn999]

Ripples (XRP) are centralized and mass-produced. The developers have kept 20 billion XRP, OpenCoin has kept 40 billion XRP. 100% inflation rate. This all has evidence.

No, just no.

would you say know if you own a lot? lol

[Red]

Thanks red for digesting the key elements for us.

My pleasure. Glad it was useful to someone. Once the contracts feature of ripple is a little more fleshed out, distributed issuing of custom currencies inside of ripple will be a real game changer. (I hope!)

[superduh]

it's centralized and closed source . so it's very different from bitcoins and inherently there is more risk
also, the owners have 20% of the xrp.
while there are many pros there are many cons as well

[Red]

Why do you seem to believe that increasing the supply of a currency leads to it being "stable"?

Price is a measure of instantaneous supply vs instantaneous demand. Demand for a currency will always grow over time. There will be more people creating new types of valuable goods and services in the future. products and people that don't even exist today.

More available goods/services chasing the same amount of available coins means currency prices will change (not be stable). To preserve stable prices the amount of currency available to be traded must scale with the amount of goods/services seeking to be traded.

Occasionally then amount of goods and services available for trade will fall compared with the amount of currency available for trade. That will need to be compensated for as well.

[Red]

@several,

Anyone fixated on who owns how many XRP doesn't understand the Ripple System. Inside Ripple XRP isn't intended to be used as money. That is purely a projection of BitCoiners onto Ripple. It also has absolutely nothing to do with the [StableCoin] concept. Even when implemented inside the Ripple System a [StableCoin]'s value will have no dependency on XRP at all.

[chrono.v]

Why do you seem to believe that increasing the supply of a currency leads to it being "stable"?

Price is a measure of instantaneous supply vs instantaneous demand. Demand for a currency will always grow over time. There will be more people creating new types of valuable goods and services in the future. products and people that don't even exist today.

More available goods/services chasing the same amount of available coins means currency prices will change (not be stable). To preserve stable prices the amount of currency available to be traded must scale with the amount of goods/services seeking to be traded.

Occasionally then amount of goods and services available for trade will fall compared with the amount of currency available for trade. That will need to be compensated for as well.

Increasing supply beyond a marginal baseline rate distorts the market and creates a destructive feedback loop that will harshly return the market to its equilibrium. In other words, you are creating a bubble that will eventually burst creating negative consequences for everyone. The two books that I have listed in my quote in my previous post describe this very well.

Bitcoin's current volatility is because people do not trust the safety of Bitcoin. However, the trend is for the cryptocurrencies' usage to increase exponentially over the next 10 years, as more and more people realize their inherent advantage and put a greater amount of assets that they control either directly or indirectly into them. This is further abetted by the catastrophic state of the world economy, where the probability of its implosion and of the magnitude of the implosion are getting greater and greater. Whether this usage will relate to Bitcoin or to an alternative that will pop up that significantly improves upon Bitcoin's security, performance, and usability, remains to be seen.

As people's understanding in the safety of the best cryptocurrencies improves, their volatility decreases. Once the most ideal cryptocurrency becomes the dominating world currency, volatility will be a thing of the past, as people's trust in its safety will be complete and there will be no real possibility of its supply increasing beyond a marginal baseline rate therefore causing bubbles (called malinvestments).

Most of the currency will be stored in full reserve banking for safety (the company storing the currency guarantees that it will not lend it out), while a much smaller portion will be invested in fractional reserve banking (the much smaller portion of the currency is invested in another company that lends your investment without guaranteeing any reserve, just like how it is done with Ripple, where the amount a company is trusted is based on its lending performance). This means that the risk of bubbles, or that is of malinvestments, originating because of fractional reserve banking is minimized.

@several,

Anyone fixated on who owns how many XRP doesn't understand the Ripple System. Inside Ripple XRP isn't intended to be used as money. That is purely a projection of BitCoiners onto Ripple. It also has absolutely nothing to do with the [StableCoin] concept. Even when implemented inside the Ripple System a [StableCoin]'s value will have no dependency on XRP at all.

The founders, employees, and investors of OpenCoin have bet everything on XRP appreciating exponentially, and this is precisely because XRP has a relatively fixed supply and exponentially increasing demand.

Its weakness is its centralization, that can be offset from a competitor arising with an algorithmic distribution method.

[Red]

@chrono.v, I do appreciate your taking the time to comment on my thread. I understand your view of BitCoin. That has been the dominant opinion since I first came to this site in 2010.

The [StableCoin] topic however is not a debate over which ideological currency is better. It is merely a discussion of the ways an immediately value-stable currency could be created. This thread gives an introduction.
https://bitcointalk.org/index.php?topic=179918.0

So by definition the [StableCoin] topic is about creating a non-speculative currency. One where, if you save the value of 1 loaf a bread in stable coins today, in 50 years those stable coins will be worth 1 loaf of bread.