The True Explanation of Ripple for Bitcoiners

[N12]

Ah, I see the problem of my example.

When I send currency from Bitstamp into the Ripple system, it vanishes from my Bitstamp balance and appears in Ripple. To reappear, I have to send it from Ripple to Bitstamp. Forgot about that. So, if the Ripple account balances work fine, this is not an issue.

I'll have to think about the ramifications.

once again, licensed money transmitters or banks are the only ones that are going to be allowed to perform these activities.  these are critical for the Ripple system to work.

Why, how is it different from the licenses required for exchanges like MtGox? Do you mean that the people who do market arbitrage via the Ripple system need such a license?

absent that, its inferior to Bitcoin as it won't even be able to function as it depends on trust.

You forget that XRPs require no trust.

[misterbigg]

When I send currency from Bitstamp into the Ripple system, it vanishes from my Bitstamp balance and appears in Ripple. To reappear, I have to send it from Ripple to Bitstamp. Forgot about that. So, if the Ripple account balances work fine, this is not an issue.

This is all correct.

Do you mean that the people who do market arbitrage via the Ripple system need such a license?

I don't think they need a license. And anyone in any country could provide the liquidity service. You could even operate anonymously.

[🏰 TradeFortress 🏰]

Ah, I see the problem of my example.

When I send currency from Bitstamp into the Ripple system, it vanishes from my Bitstamp balance and appears in Ripple. To reappear, I have to send it from Ripple to Bitstamp. Forgot about that. So, if the Ripple account balances work fine, this is not an issue.

I'll have to think about the ramifications.

once again, licensed money transmitters or banks are the only ones that are going to be allowed to perform these activities.  these are critical for the Ripple system to work.

Why, how is it different from the licenses required for exchanges like MtGox? Do you mean that the people who do market arbitrage via the Ripple system need such a license?

absent that, its inferior to Bitcoin as it won't even be able to function as it depends on trust.

You forget that XRPs require no trust.

The issue is USD.Bitstamp are bearer instruments. You can no longer trade Mt Gox IOUs for a reason.

XRPs do require trust (the ledger system is based on trust).

[cypherdoc]

Ah, I see the problem of my example.

When I send currency from Bitstamp into the Ripple system, it vanishes from my Bitstamp balance and appears in Ripple. To reappear, I have to send it from Ripple to Bitstamp. Forgot about that. So, if the Ripple account balances work fine, this is not an issue.

I'll have to think about the ramifications.

once again, licensed money transmitters or banks are the only ones that are going to be allowed to perform these activities.  these are critical for the Ripple system to work.

Why, how is it different from the licenses required for exchanges like MtGox? Do you mean that the people who do market arbitrage via the Ripple system need such a license?

absent that, its inferior to Bitcoin as it won't even be able to function as it depends on trust.

You forget that XRPs require no trust.

misterbigg has been quoted as stating that gateways will probably need to be banks with the appropriate licensing to provide large enough trust centers to facilitate enough liquidity throughout the system.  i think he's right about this need but fear it represents points of centralization.

he's also criticized Bitcoin as not having an unlicensed bridge from BTC to fiat.  well, neither does Ripple.  but the negative consequences for Ripple are much greater.

[🏰 TradeFortress 🏰]

@cyperdoc: bearer instruments. Mt Gox stopped allowing generation of USD, etc codes for a reason.

[Maged]

The misrepresentation of Ripple has been most annoying to me in the 1 MB max block size debates. People just say that people could just use off-chain transactions through Ripple, because Ripple complements Bitcoin. Honestly, this has been one of the greatest issues I've had with how Ripple is being marketed.

[JaredR26]

Ah, I see the problem of my example.

When I send currency from Bitstamp into the Ripple system, it vanishes from my Bitstamp balance and appears in Ripple. To reappear, I have to send it from Ripple to Bitstamp. Forgot about that. So, if the Ripple account balances work fine, this is not an issue.

I'll have to think about the ramifications.

once again, licensed money transmitters or banks are the only ones that are going to be allowed to perform these activities.  these are critical for the Ripple system to work.

Why, how is it different from the licenses required for exchanges like MtGox? Do you mean that the people who do market arbitrage via the Ripple system need such a license?

absent that, its inferior to Bitcoin as it won't even be able to function as it depends on trust.

You forget that XRPs require no trust.

misterbigg has been quoted as stating that gateways will probably need to be banks with the appropriate licensing to provide large enough trust centers to facilitate enough liquidity throughout the system.  i think he's right about this need but fear it represents points of centralization.

he's also criticized Bitcoin as not having an unlicensed bridge from BTC to fiat.  well, neither does Ripple.  but the negative consequences for Ripple are much greater.

Adding what I said in the other thread:

Ripple reminds me of Google wave.  It was neat, it had lots of potential, it was geeky, the few people who got it were really excited, and it ended up being totally worthless.

[N12]

Now what this means is that there is an ability to trade currency IOUs with each other. However, one exchange will still have far more currency than another, and so, the IOUs should be limited if 1:1. It does not change the true bottleneck that is transferring national currency from one exchange to another on a macro scale, and so I think natural monopolies will still emerge. It's great for arbitrage though.

For example, if people wanted to switch from MtGox to Bitstamp via Ripple (if MtGox functioned within Ripple), this would of course not be possible, and so even if the valuation was 1:1 on the USD, the ratio would reflect the ratio of the USD on both exchanges. This makes sense of course if people really thought MtGox insolvent, since even 0.2 would be a good deal then.

So all in all, it's nice for price arbitrage and for taking advantage of an existing order book for IOU vs. IOU if one of its issuer goes insolvent.

@cypher; TF

Interesting, so the gateways will need even more expensive regulation to comply with than existing Bitcoin currency exchanges? That would be a massive hurdle. And of course it would make for even bigger monopolies than already exist on the Bitcoin market (MtGox). Everyone would be shut down until the first exchanger arrives that deals with all the regulatory issues.

[oakpacific]

Ah, I see the problem of my example.

When I send currency from Bitstamp into the Ripple system, it vanishes from my Bitstamp balance and appears in Ripple. To reappear, I have to send it from Ripple to Bitstamp. Forgot about that. So, if the Ripple account balances work fine, this is not an issue.

I'll have to think about the ramifications.

once again, licensed money transmitters or banks are the only ones that are going to be allowed to perform these activities.  these are critical for the Ripple system to work.

Why, how is it different from the licenses required for exchanges like MtGox? Do you mean that the people who do market arbitrage via the Ripple system need such a license?

absent that, its inferior to Bitcoin as it won't even be able to function as it depends on trust.

You forget that XRPs require no trust.

misterbigg has been quoted as stating that gateways will probably need to be banks with the appropriate licensing to provide large enough trust centers to facilitate enough liquidity throughout the system.  i think he's right about this need but fear it represents points of centralization.

he's also criticized Bitcoin as not having an unlicensed bridge from BTC to fiat.  well, neither does Ripple.  but the negative consequences for Ripple are much greater.

Adding what I said in the other thread:

Ripple reminds me of Google wave.  It was neat, it had lots of potential, it was geeky, the few people who got it were really excited, and it ended up being totally worthless.

I see it as a bunch of ad-hoc solutions hacked together, with no brilliancy at all.

In fact, you can just modify the Bticoin code slightly to come up with something very similar to Ripple.

[oakpacific]

Ah, I see the problem of my example.

When I send currency from Bitstamp into the Ripple system, it vanishes from my Bitstamp balance and appears in Ripple. To reappear, I have to send it from Ripple to Bitstamp. Forgot about that. So, if the Ripple account balances work fine, this is not an issue.

I'll have to think about the ramifications.

once again, licensed money transmitters or banks are the only ones that are going to be allowed to perform these activities.  these are critical for the Ripple system to work.

Why, how is it different from the licenses required for exchanges like MtGox? Do you mean that the people who do market arbitrage via the Ripple system need such a license?

absent that, its inferior to Bitcoin as it won't even be able to function as it depends on trust.

You forget that XRPs require no trust.

misterbigg has been quoted as stating that gateways will probably need to be banks with the appropriate licensing to provide large enough trust centers to facilitate enough liquidity throughout the system.  i think he's right about this need but fear it represents points of centralization.

he's also criticized Bitcoin as not having an unlicensed bridge from BTC to fiat.  well, neither does Ripple.  but the negative consequences for Ripple are much greater.

"As long as my investment goes up in value, let us allow the banksters to fuck us a few times over, no big deal."? 

[JaredR26]

Adding what I said in the other thread:

Ripple reminds me of Google wave.  It was neat, it had lots of potential, it was geeky, the few people who got it were really excited, and it ended up being totally worthless.

I see it as a bunch of ad-hoc solutions hacked together, with no brilliancy at all.

In fact, you can just modify the Bticoin code slightly to come up with something very similar to Ripple.

The network effect of transfers, and the trust aspects of it are actually pretty clever.  It has potential.

But in being clever, they ruined everything that makes Bitcoin brilliant.  Bitcoin is brilliant because it is the perfect game theory play.  It motivates everyone to use it, intrinsically.  Ripple motivates no one except OpenCoin.

[oakpacific]

Adding what I said in the other thread:

Ripple reminds me of Google wave.  It was neat, it had lots of potential, it was geeky, the few people who got it were really excited, and it ended up being totally worthless.

I see it as a bunch of ad-hoc solutions hacked together, with no brilliancy at all.

In fact, you can just modify the Bticoin code slightly to come up with something very similar to Ripple.

The network effect of transfers, and the trust aspects of it are actually pretty clever.  It has potential.

But in being clever, they ruined everything that makes Bitcoin brilliant.  Bitcoin is brilliant because it is the perfect game theory play.  It motivates everyone to use it, intrinsically.  Ripple motivates no one except OpenCoin.

The "trust aspect" is what I would call "ad-hoc", by trying to reconciliate with the status quo, not that it's entirely unnecessary, but the established do it much better than them.(As corrupt as the banksters can be, certified financial professionals can still handle debt matters much better than one random sucker on the internet), there is no reason for people to justify the cost of transition. Other than that, I agree with you.

[smoothie]

Thanks for that post, I didn't realize exchanging IOUs was possible. Now things get complicated and I have to think.

Say I exchange my USD.Bitstamp for USD.Foobit. Now the appropriate balances on my Ripple account and the Ripple accounts of my counterparties have changed. How do Bitstamp and Foobit reflect this on their account balances? I assume they would be saying I own 1 USD.Foobit and 0 USD.Bitstamp. Then, I go to Bitstamp and send my USD.Bitstamp from my Ripple address to theirs and they update my balance to 1 USD.Bitstamp.

For this system to work, the balances at Gateways need to be linked to the balances on Ripple, and the sync time must be smaller than the time it takes to make a withdrawal from the exchange interface, or otherwise they lose money. Is that the case with Bitstamp today?

This happens when you try to send 100 USD.Bitstamp to someone who only trusts USD.Foobit. Ripple will find someone who trusts both (or trusts one and trusts someone else who trusts the other one, et cetra), and the person you sent to gets USD.Foobit.

This also means that some random Ripple user has just got his 100 USD.Foobit converted into 100 USD.Bitstamp or 100 USD.OtherTrusted, which may be a bad idea especially if it was just announced that Bitstamp got their bitcoin wallets seized. Or if USD.Bitstamp is actually a bond issued by Bitstamp that won't be repaid until four months later.

Quoting Deprived again:

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.

This is an interesting thing to note ^.

[smoothie]

Adding what I said in the other thread:

Ripple reminds me of Google wave.  It was neat, it had lots of potential, it was geeky, the few people who got it were really excited, and it ended up being totally worthless.

I see it as a bunch of ad-hoc solutions hacked together, with no brilliancy at all.

In fact, you can just modify the Bticoin code slightly to come up with something very similar to Ripple.

The network effect of transfers, and the trust aspects of it are actually pretty clever.  It has potential.

But in being clever, they ruined everything that makes Bitcoin brilliant.  Bitcoin is brilliant because it is the perfect game theory play.  It motivates everyone to use it, intrinsically.  Ripple motivates no one except OpenCoin.

Profit = Motivation. Hence why scammers exist alongside businesses.

[Protagonus]

Hey, there's so many recent threads debating ripple I don't know where to put this.  Also I don't want to make another thread.


Did anyone see the speech on the NetSuite system for business etc?  https://www.youtube.com/watch?v=Vx7-R11_DDw   (from digitalmagus7 series 2013 conference)

Having had a small business myself in the early net days.  I used software for sales inventory etc.  Had a credit card system to swipe cards to accept those.  You know typical small business.

Wouldn't this software accomplish everything ripple is saying by just having the software (and of course compliance to regs)?

A company like new egg could use this software and deal in worldwide currencies instantly right?  Isn't a system like this, then, a good option for mass-utilization of BTC without centralization or Ripple?

Am I missing something?
Thanks, sorry if in wrong drop of ripple threads xD

[DeathAndTaxes]

Why is this not in alt-coins forum?

[smoothie]

Why is this not in alt-coins forum?

+1 I wanna know too. We have like 3-5 threads about ripple here.

[🏰 TradeFortress 🏰]

Hey, there's so many recent threads debating ripple I don't know where to put this.  Also I don't want to make another thread.


Did anyone see the speech on the NetSuite system for business etc?  https://www.youtube.com/watch?v=Vx7-R11_DDw   (from digitalmagus7 series 2013 conference)

Having had a small business myself in the early net days.  I used software for sales inventory etc.  Had a credit card system to swipe cards to accept those.  You know typical small business.

Wouldn't this software accomplish everything ripple is saying by just having the software (and of course compliance to regs)?

A company like new egg could use this software and deal in worldwide currencies instantly right?  Isn't a system like this, then, a good option for mass-utilization of BTC without centralization or Ripple?

Am I missing something?
Thanks, sorry if in wrong drop of ripple threads xD

No, it wouldn't. It would be a better idea to grasp what ripple is: a flawed debt marketplace and a premined currency.

[Rampion]

I believe we are overreacting to Ripple.

I will ask you a question: when you first heard about Bitcoin, why did you fall in love with it?

Maybe because is decentralized. Or because the inflation is built into the system to pay miners, who secure the network. Or because you do not need to trust any third party.

We all know Ripple has nothing in common with Bitcoin, except that it uses cryptography too. Ripple is a debt based system, you hold and trade IOU's, and in fact Ripple takes to a distributed level all the flaws of the banking and financial system that we bitcoiners dislike.

I would say this is not a Ripple fault - it deals with fiat currencies, and the flaws of a trust and debt based system are inherent to fiat currencies.

Then, Ripple has his own crypto, but it's 100% premined and controlled by a private company. I think everybody interested in cryptos will agree that this fact is a huge drawback, and quite the opposite of the cryptocurrency philosophy founded by Bitcoin. I myself would be very worried about transferring significant value to a currency with XRP's characteristics, as a single player has too much power from the very beginning. We could say that is the "get rich tool" of a handful of individuals who control the immense majority of it, this is its purpose, and everybody can see it.

Last but not least, I have security concerns with Ripple. I still do not get what is the incentive of validators to run the nodes. Mining in bitcoin has a very clear purpose and a very clear reward everybody understands almost immediately - and everybody would have the motivation to mine under the correct circumstances. But what about validation nodes in Ripple? Their security model is still unclear to me - maybe mrbigggg can shed some light?

Making a long story short: I can understand the accusation of Ripple wanting to "profit" from Bitcoins appeal, but I do not think they will be able to harm it. At least I hope XRP's won't be able to harm Bitcoin, because as a crypto currency Bitcoin is superior in so many ways and everybody can see it.

[Frozenlock]

I'll just quote yourself:

These OpenCoin guys are geniuses. They create a system that reproduces the old banking system in a distributed way - you do not hold any real asset, only debt, with all the negative incentives that this produces (and which Bitcoin was designed to address).

Then, they launch their own cryptocurrency, which is the only real asset you can hold inside the Ripple system - so the logical step for users is to value Ripples more, as it is "real" money and not "paper money" or debt.

Anyhow, I see many flaws in Ripple. Its complicated, and gateways will for sure abuse the trust they were given. People will think this is Facebook, they will start to trust each other, and as soon as they realize they can create money out of thin air... Well, you can imagine what will happen. And we all know that debt based systems collapse.

Again: Ripple is everything Bitcoin is against. Bitcoin was designed to make you free and independent. With Ripple your money is still in the hands of your "trusted gateways" and their fractional reserverve.

So why some are "overreacting" to Ripple?
Perhaps because this is a Bitcoin forum and yet it seems to be the main Ripple publicity platform?

Edit: In fact "Bitcoin" seems to be their biggest publicity platform. Weren't they at the Bitcoin conference?