Why Ripple™ is against everything Bitcoin

[jamesgarfield]

Pathetic scammer gtfo

[🏰 TradeFortress 🏰]

Pathetic scammer gtfo

They're actually a group.

[jamesgarfield]

The first sentence on the ripple.com "Send money in dollars, euros, yen or Bitcoin. No added work or fees for foreign transactions." However how this works in practice is pretty much unexplained in the ripple.com or at least I could not find it.

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.

The explanation should cover the issues that what is the full set of what ripple-introduced currencies or IOUs are possible to be involved in the process and what choices Alice has to herself how to use the system?

The wiki does not clearly explain what are all the places that have any significance where XRP is used and for what? I heard from someplace that it funds all OpenCoin functions generously, but wiki says OpenCoin only gives them away for free and the only place they are ever used in the whole system is for silly small transaction costs. Somehow I don't think I understand. The same for various IOUs? Does the distributed ledger track all various IOUs or only XRPs? What is a role of user-IOUs? Do such things exist in the system?

What happens to the external currencies? Where does the yen bill end up to? Where do the dollar bills to the merchant come from? How does the gateway business operate in typical moneyflow? I mean what is the typical business of how a gateway connected to a very big merchant operate? How does some gateway that refuses to serve any merchants and only accepts ordinary people that typically want to deposit their paycheck in dollars to buy stuff from some outside rippleshop operate as money-flow in all different kinds of currencies/IOUs that a gateway should handle? For simplicity you could assume only one type of fiat money accepted per each gateway.

What exchange rates are used in each step? What mechanism sets them and where?
Where and by whom is what XRP is worth in dollars determined? How much is an 1USD-BobsGatewayIOU worth in dollars? Where do the gateways get their profit or cover their expenses fulfilling the promise on the first sentence of ripple.com that there are no fees.

What is the complete list of parties that Alice must trust in this example one transaction? Who are the parties that the webshop needs to trust? Who are the parties that either gateway needs to trust? I mean for example which entities could leave Alice with a headache if they do some oddity including suddenly disappearing or claiming they have been hacked and lost all data and funds to thieves? What information Alice has to make judgement about these entities? Is it expected and typical that people are able to make sound decisions based on that amount of information? The answer could include examples from bitcoin-world. Which entities in bitcoin-world are such that there is enough information some random person is able to make an informed decision on and just not guesswork that they seem to have operated for a whole year meaning they must be good? What improvements are planned for ripple? OpenCoin could be in a position to force a minimum standard to all players. For example information about are the gateways financially healthy? Has a gateway been recently sold to a price that is a fraction of the user funds they are storing to some strange person nobody has heard of increasing the chance they are soon experiencing a declaration of a hack and loss of the funds?

These from just the top of my head. I did try to find answers to these but no success so far.

[solex]

In theory you should be able to review the 30 pages of this thread and get some answers to some of your points.
Alternatively, you might find the Voynich Manuscript a less opaque subject.

[QuestionAuthority]

In theory you should be able to review the 30 pages of this thread and get some answers to some of your points.
Alternatively, you might find the Voynich Manuscript a less opaque subject.

LOL - Light reading compared to this thread.

[ktttn]

I shudder. 4chan introduced me to ripple.
Tell me it isnt a scam again. I dare you.
On the bright side, it might assist some folks in making use of their obsolete USD. I hope.

[wumpus]

Alternatively, you might find the Voynich Manuscript a less opaque subject.

At least it is better illustrated.

[JoelKatz]

These from just the top of my head. I did try to find answers to these but no success so far.

I think I answered these the last time you asked them: https://bitcointalk.org/index.php?topic=201794.msg2131884#msg2131884

[🏰 TradeFortress 🏰]

These from just the top of my head. I did try to find answers to these but no success so far.

I think I answered these the last time you asked them: https://bitcointalk.org/index.php?topic=201794.msg2131884#msg2131884

Thanks, now please answer my questions.

[🏰 TradeFortress 🏰]

Deprived has wrote a nice explanation of why the Ripple liquidity providers is flawed:

For one thing, before we can distinguish between the two sample responses you give we need a defined point in time at which the IOU issuer is obliged to give a response at all (a settlement date).

IOUs (taken as meaning any acknowledgement of debt) don't necessarily EVER have to be redeemed.  For example perpetual bonds are never intended to be redeemed - yet are debt.

Thanks for your valuable arguments. You might be right and I think I understand now why theymos said IOU is not a binding contract. But now I feel totally confused. What is debt then, if it is doesn't ever have to be repaid?

Debt is something that you owe - a claim someone else has against you.  Not all debts are created with the intention of being repaid (e.g. loans that are made for tax reasons without either party to the loan having an intention of there ever being a repayment).  Perpetual bonds are another example of debt that will never be repaid (talking RL ones not the pretend mining ones on here).  The bond issuer borrows money that will never be repaid - paying interest (a dividend) on it regularly.  The only way to get your cash back is to sell it to someone else.

That's why debt/IOUs with no agreed terms is worthless.

Maybe an example will help - for the examples below the assumption to be made is that I WILL honour any commitments I made (in practice all debt should be discounted in value based on your confidence that I'd repay):

If I said I'd owe you 20 BTCs to be settled in a week in return for 10 BTCs from you now then (IF you had total trust in me) you could reasonably value those 20 ripple BTCs at similar value to 20 actual BTCs.

If I said I'd owe you 20 BTCs to be settled in 5 years in return for 10 BTCs from you now then (IF you had total trust in me) you would STILL have to value them at a lot less than 20 actual BTCs (as they'd generate no revenue in the meantime and were illiquid).

In ripple BTCs of each of the above scenarios are treated as being interchangeable (whether its 2 sets from same issuer or from 2 different issuers) - despite the fact they have very different actual value.

Now consider a third scenario (equivalent to perpetual bonds):

I say that if you give me 10 BTC now I'll owe you 10 BTC on ripple.  I will never repay those BTC but on the first of each month I'll send 0.01 BTC for each BTC owed to whoever currently holds them.  Again - to ripple those are just BTC - and swappable with anyone else's BTC (provided someone trusts both me and the other issuer).  These BTC may have more or less value than the other ones - depending on how people value 1% interest/month against liquidity.  But I'll never repay them - and am NOT a scammer for issuing them.

Now the final case.  I say if you give me 10 BTC now I'll owe you 20 BTC on ripple but will only ever repay them if I win the lottery.  What are those BTC worth?  Nearly nothing (even ignoring the fact that I don't play the lottery).

Do you see how the value of a debt/IOU is defined by the TERMS that apply to it - not by its face value?  But ripple treats them all based on face value.

TF's ones were pretty much explicitly worthless.  In the absence of terms the only way to reasonably assess value of something is to look at what consideration was given in return for them - and assume a similar value.  Nothing was given - so their value is gong to be around zero.

[QuestionAuthority]

Deprived has wrote a nice explanation of why the Ripple liquidity providers is flawed:

For one thing, before we can distinguish between the two sample responses you give we need a defined point in time at which the IOU issuer is obliged to give a response at all (a settlement date).

IOUs (taken as meaning any acknowledgement of debt) don't necessarily EVER have to be redeemed.  For example perpetual bonds are never intended to be redeemed - yet are debt.

Thanks for your valuable arguments. You might be right and I think I understand now why theymos said IOU is not a binding contract. But now I feel totally confused. What is debt then, if it is doesn't ever have to be repaid?

Debt is something that you owe - a claim someone else has against you.  Not all debts are created with the intention of being repaid (e.g. loans that are made for tax reasons without either party to the loan having an intention of there ever being a repayment).  Perpetual bonds are another example of debt that will never be repaid (talking RL ones not the pretend mining ones on here).  The bond issuer borrows money that will never be repaid - paying interest (a dividend) on it regularly.  The only way to get your cash back is to sell it to someone else.

That's why debt/IOUs with no agreed terms is worthless.

Maybe an example will help - for the examples below the assumption to be made is that I WILL honour any commitments I made (in practice all debt should be discounted in value based on your confidence that I'd repay):

If I said I'd owe you 20 BTCs to be settled in a week in return for 10 BTCs from you now then (IF you had total trust in me) you could reasonably value those 20 ripple BTCs at similar value to 20 actual BTCs.

If I said I'd owe you 20 BTCs to be settled in 5 years in return for 10 BTCs from you now then (IF you had total trust in me) you would STILL have to value them at a lot less than 20 actual BTCs (as they'd generate no revenue in the meantime and were illiquid).

In ripple BTCs of each of the above scenarios are treated as being interchangeable (whether its 2 sets from same issuer or from 2 different issuers) - despite the fact they have very different actual value.

Now consider a third scenario (equivalent to perpetual bonds):

I say that if you give me 10 BTC now I'll owe you 10 BTC on ripple.  I will never repay those BTC but on the first of each month I'll send 0.01 BTC for each BTC owed to whoever currently holds them.  Again - to ripple those are just BTC - and swappable with anyone else's BTC (provided someone trusts both me and the other issuer).  These BTC may have more or less value than the other ones - depending on how people value 1% interest/month against liquidity.  But I'll never repay them - and am NOT a scammer for issuing them.

Now the final case.  I say if you give me 10 BTC now I'll owe you 20 BTC on ripple but will only ever repay them if I win the lottery.  What are those BTC worth?  Nearly nothing (even ignoring the fact that I don't play the lottery).

Do you see how the value of a debt/IOU is defined by the TERMS that apply to it - not by its face value?  But ripple treats them all based on face value.

TF's ones were pretty much explicitly worthless.  In the absence of terms the only way to reasonably assess value of something is to look at what consideration was given in return for them - and assume a similar value.  Nothing was given - so their value is gong to be around zero.

Thanks for reposting. I think I now understand something about ripple. It's going to fail rather quickly. I won't even make a large loan to family without a written promissory note with explicit terms (maturity, simple interest, penalties for default) and expect to ever get money back out of them. There is no moderate to long term debt that will ever exist as fixed value debt because the world doesn't live in stasis and fixed rate debt needs to be carefully calculated against CPI to avoid loss and be contractually binding. Who is ever going to be stupid enough to act as a liquidity provider for a flawed system? If I had $50mil to burn I think I'd just set it on fire before trying to live off of the float created by being a gateway liquidity provider.

[arsenische]

Deprived has wrote a nice explanation of why the Ripple liquidity providers is flawed:

For one thing, before we can distinguish between the two sample responses you give we need a defined point in time at which the IOU issuer is obliged to give a response at all (a settlement date).

IOUs (taken as meaning any acknowledgement of debt) don't necessarily EVER have to be redeemed.  For example perpetual bonds are never intended to be redeemed - yet are debt.

Thanks for your valuable arguments. You might be right and I think I understand now why theymos said IOU is not a binding contract. But now I feel totally confused. What is debt then, if it is doesn't ever have to be repaid?

Debt is something that you owe - a claim someone else has against you.  Not all debts are created with the intention of being repaid (e.g. loans that are made for tax reasons without either party to the loan having an intention of there ever being a repayment).  Perpetual bonds are another example of debt that will never be repaid (talking RL ones not the pretend mining ones on here).  The bond issuer borrows money that will never be repaid - paying interest (a dividend) on it regularly.  The only way to get your cash back is to sell it to someone else.

That's why debt/IOUs with no agreed terms is worthless.

Maybe an example will help - for the examples below the assumption to be made is that I WILL honour any commitments I made (in practice all debt should be discounted in value based on your confidence that I'd repay):

If I said I'd owe you 20 BTCs to be settled in a week in return for 10 BTCs from you now then (IF you had total trust in me) you could reasonably value those 20 ripple BTCs at similar value to 20 actual BTCs.

If I said I'd owe you 20 BTCs to be settled in 5 years in return for 10 BTCs from you now then (IF you had total trust in me) you would STILL have to value them at a lot less than 20 actual BTCs (as they'd generate no revenue in the meantime and were illiquid).

In ripple BTCs of each of the above scenarios are treated as being interchangeable (whether its 2 sets from same issuer or from 2 different issuers) - despite the fact they have very different actual value.

Now consider a third scenario (equivalent to perpetual bonds):

I say that if you give me 10 BTC now I'll owe you 10 BTC on ripple.  I will never repay those BTC but on the first of each month I'll send 0.01 BTC for each BTC owed to whoever currently holds them.  Again - to ripple those are just BTC - and swappable with anyone else's BTC (provided someone trusts both me and the other issuer).  These BTC may have more or less value than the other ones - depending on how people value 1% interest/month against liquidity.  But I'll never repay them - and am NOT a scammer for issuing them.

Now the final case.  I say if you give me 10 BTC now I'll owe you 20 BTC on ripple but will only ever repay them if I win the lottery.  What are those BTC worth?  Nearly nothing (even ignoring the fact that I don't play the lottery).

Do you see how the value of a debt/IOU is defined by the TERMS that apply to it - not by its face value?  But ripple treats them all based on face value.

TF's ones were pretty much explicitly worthless.  In the absence of terms the only way to reasonably assess value of something is to look at what consideration was given in return for them - and assume a similar value.  Nothing was given - so their value is gong to be around zero.

Thanks for reposting. I think I now understand something about ripple. It's going to fail rather quickly. I won't even make a large loan to family without a written promissory note with explicit terms (maturity, simple interest, penalties for default) and expect to ever get money back out of them. There is no moderate to long term debt that will ever exist as fixed value debt because the world doesn't live in stasis and fixed rate debt needs to be carefully calculated against CPI to avoid loss and be contractually binding. Who is ever going to be stupid enough to act as a liquidity provider for a flawed system? If I had $50mil to burn I think I'd just set it on fire before trying to live off of the float created by being a gateway liquidity provider.

Thanks for explanation, but I think this is solvable. Ripple can probably either attach contracts to IOUs (the ones that grant trust would accept their terms), or there could be just some default contract for builtin IOUs (e. g. for BTC: redeemable upon request within 5 business days).

[mmeijeri]

I think it is going to be a long time before Ripple will be used for real loans, if at all. I think the interesting use case is small reciprocal lines of trade credit with trusted associates in order to facilitate cash payments over a P2P network. This would provide us with liquid, (almost?) irrepressable distributed exchanges between fiat and crypto, which would only require small, secret and periodic cash settlements between trusted associates.

[🏰 TradeFortress 🏰]

Thanks for explanation, but I think this is solvable. Ripple can probably either attach contracts to IOUs (the ones that grant trust would accept their terms), or there could be just some default contract for builtin IOUs (e. g. for BTC: redeemable upon request within 5 business days).

The issue is:

1) without liquidity providers, the ripple IOU market will be very illiquid and sending IOUs will be very difficult to find paths
2) with liquidity providers, it is impossible for an algorithm to calculate the value of something, even with advanced contracts. everything has a different value to everyone depending on circumstances
3) with liquidity providers but allowing to user to specify the value, it's going to require too much micromanagement, and the default settings will still lead to either 1 or 2.

[jubalix]

what i dont get about ripple is when some one doesn't want to pay up...then what, and they were your trusted gate way...

am I understanding it correctly that you need to find another buyer for your XRP and thus need liquidity....but then the way I see it at the moment is you btc's/xrp's are only good with the issuer...eg bitstamp


this stuff makes your head spin!!!

[🏰 TradeFortress 🏰]

what i dont get about ripple is when some one doesn't want to pay up...then what, and they were your trusted gate way...

am I understanding it correctly that you need to find another buyer for your XRP and thus need liquidity....but then the way I see it at the moment is you btc's/xrp's are only good with the issuer...eg bitstamp


this stuff makes your head spin!!!

You lost your coins. Yes, they are only good as your issuer, hence why it's not as good as bitcoin, or heck, USD.

With Bitcoin, 1 BTC is 1 BTC. They're accepted in every BTC accepting site.

With USD, 1 USD is 1 USD. They're accepted in every USD accepting site.

With Ripple, 1 BTC-Bitstamp is 1 BTC-Bitstamp. You lose them when Bitstamp [gets hacked | by owners | raided by DHS].

[mmeijeri]

what i dont get about ripple is when some one doesn't want to pay up...then what, and they were your trusted gate way...

This is not a problem if the amounts you grant in trust aren't excessive (that is you can afford to lose them) and if you only grant trust to people you trust in the real world. Gateways are just special users that are trusted by many people, like banks. Well, not many people here might trust banks and I would argue they should trust gateways even less.

Within Ripple, whenever you trade anything besides XRP, you have counterpart risk and vice versa. This is because Ripple can only do bookkeeping, and the "official ledgers" for fiat currencies are not stored in the Ripple system. This would be an argument for using XRP. On the other hand, you don't have exchange rate risk if you are trading in fiat.

For fiat payments, Ripple is "just" a distributed system for keeping track of who owes what to whom.

For example, if A trusts B for $10 and B trusts C for $10, then C could pay A through B. C's balance with B would be decreased by $10, meaning that C now owes B $10 more than before, or B owes C $10 less than before. Simultaneously B's balance with A would also be decreased by $10.

Assuming all balances started at zero, A would now be owed $10 by B instead of by C, which is an improvement because he didn't trust C, but does trust B. Similarly, C now owes $10 to B, which is also an improvement, because C can now expect shipment of whatever goods he was promised because A does trust B. B's total balance hasn't changed, because previously he had two zero balances, whereas now he has one for +$10 with C and one for -$10 with A. For B this is not immediately an advantage, because he doesn't gain from the transaction but does have to do work for it. However, in practice you would expect B to be on either end of some transactions too, and then someone would return him the favour.

All three parties will want to settle the open amounts to take care of the credit risk. They could do so immediately, or they could wait a while until more transactions have passed through the network and have partially canceled out. This would mean less work.

[justusranvier]

This is not a problem if the amounts you grant in trust aren't excessive (that is you can afford to lose them) and if you only grant trust to people you trust in the real world. Gateways are just special users that are trusted by many people, like banks. Well, not many people here might trust banks and I would argue they should trust gateways even less.

Within Ripple, whenever you trade anything besides XRP, you have counterpart risk and vice versa. This is because Ripple can only do bookkeeping, and the "official ledgers" for fiat currencies are not stored in the Ripple system. This would be an argument for using XRP. On the other hand, you don't have exchange rate risk if you are trading in fiat.

I think this is the key. People are evaluating Ripple as if it is a new currency when in reality it's just a new accounting system.

An accounting system by itself doesn't do anything; Ripple can be most useful as a way for people to benefit from their existing business and trust relationships in a new way. Those that do not have either of those things already are not going to magically gain them just because Ripple exists.

[pekv2]

With Ripple, 1 BTC-Bitstamp is 1 BTC-Bitstamp. You lose them when Bitstamp [gets hacked | by owners | raided by DHS].

Most important, people should know.

[mmeijeri]

Well, actually it is both a payment system and a currency. XRP can be traded much like BTC, with zero counterparty risk. The great advantage over Bitcoin is that XRP is fully integrated with the Ripple fiat payment system and can therefore interface with the fiat world far more easily. Once crypto is established, that won't matter anymore, because then fiat currencies may go the way of the dodo, but it will be very useful, perhaps even necessary, to get there. Personally, I'm worried that Bitcoin may be doomed without Ripple or something like it. Of course, something like Ripple could also be built on top of BTC rather than XRP. That would be a good thing, because competition keeps everybody honest.