Why Ripple™ is against everything Bitcoin

[cypherdoc]

Can somebody explain what is the problem with making a pre-mined currency? If it's a common knowledge, I don't see any problem.

1. OpenCoin can manipulate the price by dumping XRPs.
2. It's a centralized feature that goes against the decentralization ethos of the cryptocurrency community. There's a reason that Satoshi didn't do it.
3. It is arguably unfair.
4. If there's this much controversy over it on these forums then your average person will never accept it. They are already wary of cryptocurrency.

With Bitcoin I can say that the coins are given out via lottery. This seems fair to people. With XRP I have to say that the creators gave themselves all 100 billion of it and intend on using most of it for profit. They won't accept that.

sorry, need to add to this list:

5.  based on non-contractual debt
6.  trust based
7.  not only OpenCoin, but gateways, are centralized.

one more:

8.  no proof of work:  think of Bitcoin as a giant 236,035 story skyscraper.  you try and change an internal structural beam on the 2nd floor and you'll effect every floor above it, if not topple the building.  this is a highly proven successful security mechanism that safekeeps everyone's coins.  there is no equivalent in Ripple.

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[Coinseeker]

Can someone explain how Ripple does the automatic currency exchange between Bitcoin and fiat? Wouldn't they need to go through an exchange like MtGox to do that?

Yes, that's the gateway.  

Do they have a MtGox account/bank accounts everywhere or are they going to make an exchange, essentially be a bank?

Sorry, didn't mean "the" like the only one.  The gateway in your scenario.  From my understanding, soon any bank, Paypal, etc. can be gateways as well.  That way you can choose the gateway you trust.  Bitstamp is one of the current gateways.  I think there is a link in this thread somewhere to the current Ripple gateways.

[mmeijeri]

There is an equivalent,  the consensus mechanism. It's much faster, much less energy intensive,  and requires much less hardware than Bitcoin's proof of work. Nobody here really knows which of the two is more reliable. Joel Katz knows most about this, but even he can't be sure either way. Only time will tell.

[QuestionAuthority]

Can someone explain how Ripple does the automatic currency exchange between Bitcoin and fiat? Wouldn't they need to go through an exchange like MtGox to do that?

Yes, that's the gateway.  

Do they have a MtGox account/bank accounts everywhere or are they going to make an exchange, essentially be a bank?

Sorry, didn't mean "the" like the only one.  The gateway in your scenario.  From my understanding, soon any bank, Paypal, etc. can be gateways as well.  That way you can choose the gateway you trust.  Bitstamp is one of the current gateways.  I think there is a link in this thread somewhere to the current Ripple gateways.

Sorry to seem so stupid but who administers the trust gateway/performs the conversion into fiat at a brick n morter?

[JoelKatz]

Sorry to seem so stupid but who administers the trust gateway/performs the conversion into fiat at a brick n morter?

The store and the customer would have each already selected a gateway. The Ripple network atomically performs the transfer of the payer's balance at their gateway to the recipient's balance at their gateway using whatever liquidity is available in the Ripple network through combinations of exchanges and pathways. Essentially, you trade some of your balance at your gateway for a balance at the recipient's gateway which you use to make the payment.

[cypherdoc]

There is an equivalent,  the consensus mechanism. It's much faster, much less energy intensive,  and requires much less hardware than Bitcoin's proof of work. Nobody here really knows which of the two is more reliable. Joel Katz knows most about this, but even he can't be sure either way. Only time will tell.

where is the means for consensus? 

there is no blockchain equivalent for ppl to store on their computers; no means for consensus there.

you said that banks could act as gateways. do you really think banks will willingly open up there books?  no consensus there.

where is it?

[SamS]

Could someone write or draw a complete explanation how the currency exchange feature works. Lets say Alice is newcomer to ripple but she has yen bills in her pocket and wants to buy a computer from a webshop that wants to see no other currency than USD but has previously done business with a ripple gateway.

Alice deposits the Yen bills at a gateway and the gateway issues here a Yen balance in the Ripple system. The webshop selects a USD gateway and configures its Ripple account to accept USD at that gateway. When Alice goes to buy, the Ripple network does pathfinding and matchmaking to find a way to exchange her Yen balance at her gateway for a USD balance at the webshop's gateway. Assuming both gateways are issuing balances that are liquid, a low-cost path should be found and the exchange takes place. Now, Alice's gateway owes her less, the webshop's gateway owes it more, and the webshop considers Alice to have paid them.

This was informative but I'm still confused. Ignoring the trust issues for a moment, can you clarify the following:

1. Does Alice's Gateway maintain a balance in Yen, XRP's, or could it be either once her deposit is made?
2. I'm gathering from the fact that you have both pathfinding and matchmaking as part of the system that it's possible to have Gateways that just do conversions and are just a link in the pathfinding chain, yes?

If I understand correctly, the proper analogy might be the equivalent of a currency bazaar where a large number of vendors(Gateways) offer currency conversion, currency storage, currency pathfinding, or all of these -- for a fee of course. The advantage of Ripple is that it theoretically creates a highly competitive market -- assuming it's not coopted -- where routing is optimized to create the lowest possible transaction cost from point to point. I'm not saying that I think this would work in practice mind you, but is that the basic idea at least?

Next, is it possible to store funds in XRP's or are they simply transaction tokens with a fee attached?

Also, it seems that the business model for OpenCoin currently depends on the value of XRP's -- which I currently understand to be the cost to process a transaction. So, the equilibrium point for OpenCoin will be transaction price vs transaction volume in terms of its ability to sell out it's coins over time -- which is basically a variable annuity if I'm following this through. I'm also ignoring the idea that there is a fee to be a Gateway -- but hey the credit card companies charge terminal fees on top of transaction fees so it's certainly viable.

Thanks for any answers you can offer up and thanks for continuing to respond in the face of massive snarkiness.

[Rampion]

Sorry to seem so stupid but who administers the trust gateway/performs the conversion into fiat at a brick n morter?

The store and the customer would have each already selected a gateway. The Ripple network atomically performs the transfer of the payer's balance at their gateway to the recipient's balance at their gateway using whatever liquidity is available in the Ripple network through combinations of exchanges and pathways. Essentially, you trade some of your balance at your gateway for a balance at the recipient's gateway which you use to make the payment.

Well, that is just how the old banking system works.

[JoelKatz]

Where is the means for consensus?  

there is no blockchain equivalent for ppl to store on their computers; no means for consensus there.

Consensus is established on candidate transaction sets which are then applied deterministically to the ledger to produce the next ledger. This is Ripple's solution to the double spend problem without requiring a central authority.

https://ripple.com/wiki/Consensus

you said that banks could act as gateways. do you really think banks will willingly open up there books?  no consensus there.

Gateways can't hide which accounts hold their balances inside the Ripple network. We've had a number of issues raised by financial institutions considering being gateways and this has never come up.

[JoelKatz]

Sorry to seem so stupid but who administers the trust gateway/performs the conversion into fiat at a brick n morter?

The store and the customer would have each already selected a gateway. The Ripple network atomically performs the transfer of the payer's balance at their gateway to the recipient's balance at their gateway using whatever liquidity is available in the Ripple network through combinations of exchanges and pathways. Essentially, you trade some of your balance at your gateway for a balance at the recipient's gateway which you use to make the payment.

Well, that is just how the old banking system works.

Yep, that's exactly right. This aspect of Ripple is a lot more like checks, credit cards, or PayPal than it is like Bitcoin.

Ripple works internally much like Bitcoin. Transactions and balances are public. No central authority is needed to resolve double spends. Transactions are cryptographically signed. And so on.

But it uses these techniques to *do* something completely different -- something very much like what conventional payment systems do.

[QuestionAuthority]

Sorry to seem so stupid but who administers the trust gateway/performs the conversion into fiat at a brick n morter?

The store and the customer would have each already selected a gateway. The Ripple network atomically performs the transfer of the payer's balance at their gateway to the recipient's balance at their gateway using whatever liquidity is available in the Ripple network through combinations of exchanges and pathways. Essentially, you trade some of your balance at your gateway for a balance at the recipient's gateway which you use to make the payment.

Well, that is just how the old banking system works.

Yep, that's exactly right. This aspect of Ripple is a lot more like checks, credit cards, or PayPal than it is like Bitcoin.

Ripple works internally much like Bitcoin. Transactions and balances are public. No central authority is needed to resolve double spends. Transactions are cryptographically signed. And so on.

But it uses these techniques to *do* something completely different -- something very much like what conventional payment systems do.

Thank you, that's what I was looking for. It's a value transfer system similar to systems already in place with the exception of the ability to track that transfer and view all transfers on an open network. Correct?

[anti-scam]

There is an equivalent,  the consensus mechanism. It's much faster, much less energy intensive,  and requires much less hardware than Bitcoin's proof of work. Nobody here really knows which of the two is more reliable. Joel Katz knows most about this, but even he can't be sure either way. Only time will tell.

Proof of work has sustained two widely used currencies and many smaller ones for years. Ripple's consensus idea is untested. It may not be broken but let's not act like it's equivalent to proof of work.

Well, that is just how the old banking system works.

That's a good point. The original idea for Ripple focused on transferring money between actual people. The new Ripple focuses more on gateways which are basically just banks. Ripple isn't much different than any old bank payment network. I'm really surprised that Ryan Fugger signed on to all of this.

Thank you, that's what I was looking for. It's a value transfer system similar to systems already in place with the exception of the ability to track that transfer and view all transfers on an open network. Correct?

You have to pay mandatory transaction fees and reserve requirements in a 100% pre-mined currency to participate in that value transfer system. Let's not forget that.

[mmeijeri]

where is the means for consensus?  

there is no blockchain equivalent for ppl to store on their computers; no means for consensus there.

you said that banks could act as gateways. do you really think banks will willingly open up there books?  no consensus there.

where is it?

Consensus means the consensus algorithm, as decribed on the Ripple website.

https://ripple.com/wiki/Consensus_Graphic
https://ripple.com/wiki/Consensus
https://www.youtube.com/watch?v=pj1QVb1vlC0

The consensus algorithm hasn't been analysed and tested as much as Bitcoin's block chain, which is why I said that no one here can really know which of the two is more reliable. There's also no reason to jump to conclusions as to whether Ripple's algorithm is good enough or not, regardless of whether it is superior or inferior to Bitcoin in that regard. It looks plausible, and right now that's all I can say. Joel Katz can say a lot more, and maybe he will.

[cypherdoc]

Ripple works internally much like Bitcoin. Transactions and balances are public. No central authority is needed to resolve double spends. Transactions are cryptographically signed. And so on.

Joel, sorry but we can't let you get away with just "and so on".  

please explain how Ripple is like Bitcoin, other than just cryptographical signatures, which mimic what has been done in the past with other digital currencies which have failed (digicash, hashcash, etc) b/c of centralization issues.

[cypherdoc]

where is the means for consensus?  

there is no blockchain equivalent for ppl to store on their computers; no means for consensus there.

you said that banks could act as gateways. do you really think banks will willingly open up there books?  no consensus there.

where is it?

Consensus means the consensus algorithm, as decribed on the Ripple website.

https://ripple.com/wiki/Consensus_Graphic
https://ripple.com/wiki/Consensus
https://www.youtube.com/watch?v=pj1QVb1vlC0

The consensus algorithm hasn't been analysed and tested as much as Bitcoin's block chain, which is why I said no one here can really know which of the two is more reliable. There's also no reason to jump to conclusions whether Ripple's algorithm is good enough or not, regardless of whether it is superior or inferior to Bitcoin in that regard. It looks plausible, and right now that's all I can say. Joel Katz can say a lot more, and maybe he will.

i can't let you get away with just pointing me to the wiki.

i want you to explain it since you claimed it.

[mmeijeri]

Instead of acting as if Joel owes you an explanation, maybe you could first read the documentation that has already been provided, so that you might ask more intelligent and more informed questions.

[QuestionAuthority]

There is an equivalent,  the consensus mechanism. It's much faster, much less energy intensive,  and requires much less hardware than Bitcoin's proof of work. Nobody here really knows which of the two is more reliable. Joel Katz knows most about this, but even he can't be sure either way. Only time will tell.

Proof of work has sustained two widely used currencies and many smaller ones for years. Ripple's consensus idea is untested. It may not be broken but let's not act like it's equivalent to proof of work.

Well, that is just how the old banking system works.

That's a good point. The original idea for Ripple focused on transferring money between actual people. The new Ripple focuses more on gateways which are basically just banks. Ripple isn't much different than any old bank payment network. I'm really surprised that Ryan Fugger signed on to all of this.

Thank you, that's what I was looking for. It's a value transfer system similar to systems already in place with the exception of the ability to track that transfer and view all transfers on an open network. Correct?

You have to be pay mandatory transaction fees and reserve requirements in a 100% pre-mined currency to participate in that value transfer system. Let's not forget that.

Disregarding the transaction mechanics Ripple will be less anonymous than Bitcoin and work inside a flawed already broken system. I think I'll stick with Bitcoin.

[mmeijeri]

i want you to explain it since you claimed it.

What claim exactly do you want me to substantiate?

[mmeijeri]

Sheesh, the anti-Ripple crusaders come out of the woodwork more quickly than I can add them to my ignore list.

[mmeijeri]

Just want to point out that this is a brand new nugget of official OpenCoin information (and quite a juicy one at that):

The code would automatically become open source if that happens. Developers have that in their contract and any number of people have the source code and understand these terms. I've discussed the contingency plans for that case several times, I think at least once in this very thread.

Very good news, and a very important piece of information indeed.