Why Ripple™ is against everything Bitcoin

[oakpacific]

I am neutral about Ripple and taking a wait-and-see attitude, there are good arguments both pro and con whether the system will actually work as marketed.  As part of my research, I have a question which hopefully someone here can answer:

OpenCoin, Developer of Ripple Protocol, Closes Funding From Andreessen Horowitz, FF Angel IV, Lightspeed Venture Partners and Angel Investors

What is the sustaining business model for OpenCoin on which this investment was predicated?  Or did these firms simply receive a large chunk of XRP with the assumption that the value will appreciate?  Basically I'm trying to understand how investing in OpenCoin was pitched, and what the VC exit strategy is going to be.  These guys would not have handed over money without the expectation of a 10x or 100x rate of return.

Given that OpenCoin doesn't take a cut on transactions, and that once the source code is released and cloneable the technology stops being a scarce resource, is OpenCoin planning to offer additional/ongoing/proprietary paid-for services and products, or is the entire monetization strategy based on widespread network adoption and a rising XRP value?

The OP talks about trademark, a further possibility could be patents, random speculation.

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[misterbigg]

is the entire monetization strategy based on widespread network adoption and a rising XRP value?

It seems the answer is yes. Jed himself when asked how OpenCoin plans to raise revenue answered "we hold XRP and hope they go up in value."

[SamS]

I think the problem here is lack of vision. Many people only know what is here now and cannot see potential or future progression of technology. What Ripple is now is a closed beta distributed platform. What is it has the potential to become is a decentralized, superior protocol which solves many of the problems Bitcoin faces. Do not abort a baby before it has the time to grow into a productive human being. 

Well, if you can provide some vision as to what the intent of Ripple is here and how it addresses the shortfalls of the current system, I for one, would be appreciative.

Candidly, I just don't see the problem that Ripple is meant to solve yet. What I have read so far suggests that BTC doesn't seem to be able to scale properly for "Mom and Pop" read day to day demand levels. That doesn't seem to be controversial and I'm sure people are working on it. This may, in fact, be the issue that Ripple is intended to solve. If so, then it's not a "perfect" solution in that it appears that you need to accept a substantial amount of counter-party (read Gateway) risk in exchange for rapid processing. The argument in favor of this that I am hearing is that it's no worse than the current system and may actually reduce transaction fees as well. OK. That would be something to discuss if true.  What else am I missing from the big picture -- a lot I'm sure.

Problems Ripple solves:

1) exchange bottlenecks
2) communication and transfers between Bitcoin companies
3) no electronic, standardized way to track and exchange debt
4) no electronic standardized way to track commitments and bills for future pay
5) high load on completely decentralized Bitcoin network reduces speed and scalabilty (need parallel Universe)
6) interfacing with Bitcoin companies and individuals programmatically requires too many APIs and reliance on specific companies
7) no standardized way to handle complex financial instruments and social constructs (i.e. no way to do insurance without custom builds)
51% attack imminent on Bitcoin protocol - avoidance requires waste of resources and increased hashing rate/dedication of processing power

to name a few.

OK, so we agree that BTC doesn't scale well and that Ripple is offering a solution for that -- pluses and minuses aside. I can also see that a great deal of work needs to be done to move BTC from its current state to a real interoperable electronic payments system -- and your comment about the parallel Universe seems right from what little I've gleaned. Tracking debt, bills, complex financial instruments (you mean derivatives?), etc... seems more like a nice to have rather than a real problem that needs to be solved right now. From what little I know about the 51% attack technique, the primary intent is to kill the system -- as there are easier ways to make money and it sounds like it could work. That's really unfortunate for BTC as the protocol isn't really bullet proof then. In effect, I'd rather have inflation wound me financially than the 51% attack kill me.

I can see that Ripple is certainly one way to go to try to solve these problems. Time for me to take a break and ponder the data for awhile. I really appreciate everyone's comments and willingness to help a new person like myself come some part of the way up to speed.

Thanks.

[theskillzdatklls]

ripple irritates me

[slothbag]

I think had Ripple not kept an insane amount of XRP for themselves and had found a way to fairly distribute XRP like bitcoin mining does then I would say Ripple does everything Bitcoin does and more.

But Because of this I won't ever rely on XRP to store wealth, at least not for 10-20 years until they are evenly disbursed and opencoin have spent most of their stash.

So bitcoin is still the winner in that sense.  And given it only costs like $1 or less in XRP to start benefitting from the Ripple system right now, why not embrace both.  You don't need to care about XRP to start using Ripple.

[mobile4ever]

Ripple is not a scam...
1) It is closed source.
2) It is centralized.
3) Ripple does not allow users to send "every kind of currency."
4) Issuance of XRP's is left to the whims of men.
5) The security model of Ripple is untested.

I must have missed that one at first, glad I got it now. Thanks!

[datz]

I think had Ripple not kept an insane amount of XRP for themselves and had found a way to fairly distribute XRP like bitcoin mining does then I would say Ripple does everything Bitcoin does and more.

But Because of this I won't ever rely on XRP to store wealth, at least not for 10-20 years until they are evenly disbursed and opencoin have spent most of their stash.

So bitcoin is still the winner in that sense.  And given it only costs like $1 or less in XRP to start benefitting from the Ripple system right now, why not embrace both.  You don't need to care about XRP to start using Ripple.

Bitcoin mining is the problem with Bitcoin.

[Zarathustra]

Primates take note: this is what a civilized discussion looks like.

Yes, primates take note: The civilized human is the enslaved, collectivised, governed human: the citizen, a cartoon of the human.

[oakpacific]

Primates take note: this is what a civilized discussion looks like.

Yes, primates take note: The civilized human is the slaved, collectivised, governed human: the citizen, a cartoon of the human.

Also sprach Zarathustra.....

[slothbag]

Bitcoin mining is the problem with Bitcoin.

That's true, it is a problem, but it also provides fair distribution that is pretty safe from exploitation.  OpenCoin are struggling to find a fair way to distribute XRP without mining.

[oakpacific]

Mining is exactly why Bitcoin is not a Ponzi scheme. Mining provides a way for the investors/buyers to pay for the running of the network, and an incentive for the miners to further secure the payment network.

Besides, mining is how Bitcoin can prevent double-spending and remain decentralized-a probabilistic(rather than commander-and-lieutenant) solution to the Byzantine Generals problem.

[mmeijeri]

I think Erik's point about ripple moving IOUs rather than assets around is an important one.

It's an important difference, but I see IOUs issued by gateways mainly as a temporary tool for the transition to crypto. Once Ripple was widely used, XRP could be used for everything and you wouldn't need IOUs anymore, except perhaps for exchange with other crypto-currencies. I don't think there is a fundamental reason something similar couldn't be done with Bitcoin. In any event, Ripple would give us exactly what Bitcoin needs right now: an efficient, distributed mechanism for exchanging between fiat and BTC.

[tclo]

Bitcoin mining is the problem with Bitcoin.

That's true, it is a problem, but it also provides fair distribution that is pretty safe from exploitation.  OpenCoin are struggling to find a fair way to distribute XRP without mining.

Yes not sure what you mean by "fair" as their entire business plan is based on the appreciation in value of XRP.   That is why I decided to speculate in XRP because the company's interest are aligned with mine for a change.  It has worked out very well so far for myself and I assume for them as well.

[solex]

..Bitcoin is fatalally flawed in that mining and verifying the block chain wastes resources. If mining ever became unprofitable it would taper off..

Bitcoin mining is the problem with Bitcoin.

This is what I can't overlook, and therefore I can't take the rest of the content in your posts seriously.

Mining is a brilliant solution for controlled currency issuance. The tapering geometric progression in the block reward and encryption of block headers with the Merkle root of a current transaction set is also brilliant. As a package Bitcoin is doing so well that difficulty is now 10 million, an extraordinary value to reach in just 4.5 years. The only time mining was unprofitable was in 2009 when Satoshi kept the faith and Bitcoin alive until wider participation really kicked off in 2010.  It has not looked back since.

Block verification by mining nodes is massively reduced by using pools.

If you think mining will taper off then you cannot deny that difficulty will have to fall. But there is no sign of this happening. Difficulty could only fall if the fx rate fell to catastrophic lows. The fall from $266 to $50 had a negligible effect on the next difficulty (probably even if it were sustained, not brief).

The fees market for block space is comatose because it is dwarfed by the block reward, however, once blocks average 20 MB each then the fees market will start working properly. By the time blocks are 100+ MB the block reward will be a sideshow. Why would most/all people stop mining when a solved block could yield the equivalent of $100,000?  Answer: they will keep mining.

If you are worried about electricity costs then ASICs use less electricity per hash than the prior technologies. A future generation of ASICs could be made with reversible gates which means that electricity use will be negligible and fans obsolete. http://web.cecs.pdx.edu/~mperkows/CLASS_VHDL_99/tran888/lecture003-reversible-logic.pdf
"Power dissipation of reversible circuit, under ideal physical circumstances, is zero."

Bitcoin in a nutshell:

[smoothie]

Ripple is what happens when a turd drops in a toilet.

I think that image ^ explains what ripple really is. 

[mmeijeri]

This is what I can't overlook, and therefore I can't take the rest of the content in your posts seriously.

Technically it's not a fatal flaw, but if the consensus mechanism turns out to work just as well (not a given), then that could be an advantage for Ripple. It is conceivable (but by no means certain) that this could turn out to be a fatal flaw in the competition between Ripple and Bitcoin.

[oakpacific]

With mining, the rate of generation of bitcoins is provable mathematically, and the resistance to pump and dump is strong.

Think about this: can you pump and dump Bitcoin without anyone knowing? It's theoretically possible but very hard to do, especially during its initial stage. The total supply is fixed mathematically(provable), and the distribution of the supply can be changed by anyone who wants to mine,  and the ownership is, again, mathematically provable. As long as there are enough innocent participants mining, the price will be determined by the free market as no single entity controls the supply.

So let's get to XRP, can you know how many XRPs are in circulation? Probably not. Can you know how XRPs are allocated by Opencoin? No. Let's quote Joel Katz here:

The short answer is that nobody knows. In the short term, the rate of XRP release will be used to manage the network's growth. Once it transitions to a distributed network, that won't be an issue any more and it will likely then be limited just by how quickly we can give them away.

original link: http://bitcoin.stackexchange.com/questions/8519/how-long-will-it-take-for-opencoin-to-distribute-the-50-billion-xrps

So gentlemen, there is no guarantee that Opencoin could not just saturate the market with shills and limiting the supply to honest participants. How can it be easier to just tell a user asking for giveaways that there are 10,000 people in front of you in the queue, and your best option is just to buy XRPs somewhere? And how much does it cost to tell your shills just to create hundreds of sockpuppets and play the trick of "moving money from left hand to right" and create the false appearance that price goes up due to the demand? OK, let me make it clear, I may sound like a crazy paranoid but I am not doubting the integrity of Ripple developers and Opencoin here, but trying to demonstrate how vulnerable a honest investor in XRP can possibly be in the worst case scenario under the kind of secretive approach they are taking. Especially consider that there is nothing stopping a malicious organization from cloning the Ripple network and create a XRP competitor which they can manipulate to a considerably high price without even being discovered. If that happens what would happen to the XRP's value is anybody's guess.

[mmeijeri]

OK, the predictable rate of BTC production vs the unpredictable release of XRP could be an advantage. The total number of both is fixed however. And if OpenCoin controls the release, they are also in a position to stabilise the exchange rate, which has clearly been a problem for BTC, so it's not universally disadvantageous for them to have this power. Then again, there are no guarantees they will actually do this. Maybe they could release a script that verifiably stabilises the USD/XRP exchange rate to within certain limits on daily, weekly and monthly swings until its XRP supply runs out?

[oakpacific]

OK, the predictable rate of BTC production vs the unpredictable release of XRP could be an advantage. The total number of both is fixed however. And if OpenCoin controls the release, they are also in a position to stabilise the exchange rate, which has clearly been a problem for BTC, so it's not universally disadvantageous for them to have this power. Then again, there are no guarantees they will actually do this. Maybe they could release a script that verifiably stabilises the USD/XRP exchange rate to within certain limits on daily, weekly and monthly swings until its XRP supply runs out?

You should read my last sentence, I do not worry about Opencoin manipulating the XRP market. What I worry about is some other organizations(like a botnet for example) creating a Ripple clone(if they release the source code then why not), and tries to outdo Ripple(by both manipulating their own currency and working honestly), all because they want the currency they create in the XRP way to appreciate, like what Jed openly admitted. And since they are a botnet, they can create thousands of validating nodes and ask them to be all cooperative and helpful when it comes to validating the transactions and run it like a good network, after all, it's Ripple's goal to make the validations costless, right?

Whether Ripple will  become a good model for a payment network remains to be seen, what I am convinced however, is that XRP is a bad investment.

[mmeijeri]

You should read my last sentence, I do not worry about Opencoin manipulating the XRP market. What I worry about is some other organizations(like a botnet for example) creating a Ripple clone(if they release the source code then why not), and tries to outdo Ripple, all because they want the currency they create in the XRP way to appreciate, like what Jed openly admitted.

That would not be a problem with Ripple or XRP, but with the competing system and currency. If you stay away from that competing system, you should be fine.

Whether Ripple will  become a good model for a payment network remains to be seen, what I am convinced however, is that XRP is a bad investment.

Then don't invest in it.