The True Explanation of Ripple for Bitcoiners

[Panoramix]

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.

I've been thinking for weeks about what was bugging me about ripple. You just said it.

[mr_random]

I've long been suspicious of this misterbigg guy in general. He defends Ripple to the death in every thread and so many of his replies are like freaking essays on the subject. I asked him if he was connected to the Ripple project and he said no... but I find it hard to believe he doesn't stand to gain massively from peddling his rubbish through the forum day and night. What else would drive him to do it sooo much?

But I digress.

I dislike Ripple for various reasons - closed source, dentralized, the owners hold too much of the money etc. But my biggest gripe is how so many of the shills present it as an complement to Bitcoin on the forum yet in the media the people behind it openly state they see Ripple as a competitor to Bitcoin.

And the number of times Ripple shills have said oh these XRP aren't primarily meant to be used to pay for things etc yet they say in their interviews XRP becoming valuable is their entire business model.

[cypherdoc]

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.

I've been thinking for weeks about what was bugging me about ripple. You just said it.

Yep

[virtualmaster]

I've long been suspicious of this misterbigg guy in general. He defends Ripple to the death in every thread and so many of his replies are like freaking essays on the subject. I asked him if he was connected to the Ripple project and he said no... but I find it hard to believe he doesn't stand to gain massively from peddling his rubbish through the forum day and night. What else would drive him to do it sooo much?

But I digress.

I dislike Ripple for various reasons - closed source, dentralized, the owners hold too much of the money etc. But my biggest gripe is how so many of the shills present it as an complement to Bitcoin on the forum yet in the media the people behind it openly state they see Ripple as a competitor to Bitcoin.

And the number of times Ripple shills have said oh these XRP aren't primarily meant to be used to pay for things etc yet they say in their interviews XRP becoming valuable is their entire business model.

IT companies in financial or innovative area(if both like Ripple than even more) all asking their workers to keep secret their salary and and other internals. So misterbigg probably may not disclose some details of agreement with the Ripple network. If you ever worked for a financial institute(especially as IT) than you must know that.
I understood from some of his posts in this thread where he spread some hints that he is very well gaining from Ripple.

[solex]

There seems to be an extremely serious technical flaw which goes to the heart of an IOU trading system:

All IOUs for the same real-world instrument (BTC, USD, Gold, Oranges) are regarded as fully fungible 1:1 even though they originate from different people with different circumstances. This means that:

a) there is no accounting for expiry or settlement. IOUs are issued with no agreed redemption date. This means payers are effectively making open-ended gifts.

b) there is no weighting for the creditworthiness of the issuer e.g. an IOU for 100 USD from person X equals an IOU for 100 USD from person Y, even though person X has a million-dollar house and person Y lives in a culvert.

A further problem is social.

1) 1000 years of Contract Law
2) Ripple
3) Bitcoin

Which is the odd one out?
(Hint: two of them attempt to overcome a particular human failing...
Breaches of trust

[justusranvier]

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.

I've been thinking for weeks about what was bugging me about ripple. You just said it.

Yep

Even as it currently exists I think Ripple has some very interesting properties and could be used in a way that would solve certain problems related to liquidity between Bitcoin and legacy currencies.

The properties that I'm interested in do not include the viability of OpenCoin's business model, or XRP price speculation.

[lexxus]

There seems to be an extremely serious technical flaw which goes to the heart of an IOU trading system:

All IOUs for the same real-world instrument (BTC, USD, Gold, Oranges) are regarded as fully fungible 1:1 even though they originate from different people with different circumstances. This means that:

AFAIK This is not true. You can set up a fee so when IOU-BTC-Bitstamp are converted to IOU-BTC-SOMETHING-ELSE through your account, they are not 1:1 anymore. This is called "transfer rate".

[wamatt]

Even as it currently exists I think Ripple has some very interesting properties and could be used in a way that would solve certain problems related to liquidity between Bitcoin and legacy currencies.

The properties that I'm interested in do not include the viability of OpenCoin's business model, or XRP price speculation.

Yeah.. I tend to agree. So maybe we could see something built on top of bitcoin using some of these ideas? IOU/debt thing is interesting, although I don't fully grok Ripple yet. (haven't spent enough time with it)

[Its About Sharing]

There seems to be an extremely serious technical flaw which goes to the heart of an IOU trading system:

All IOUs for the same real-world instrument (BTC, USD, Gold, Oranges) are regarded as fully fungible 1:1 even though they originate from different people with different circumstances. This means that:

a) there is no accounting for expiry or settlement. IOUs are issued with no agreed redemption date. This means payers are effectively making open-ended gifts.

b) there is no weighting for the creditworthiness of the issuer e.g. an IOU for 100 USD from person X equals an IOU for 100 USD from person Y, even though person X has a million-dollar house and person Y lives in a culvert.

A further problem is social.

1) 1000 years of Contract Law
2) Ripple
3) Bitcoin

Which is the odd one out?
(Hint: two of them attempt to overcome a particular human failing...
Breaches of trust

That is a really interesting (and to a point eye opening) explanation. I have my reservations about tying any kind of IOU system to BTC. Further, the whole Ripple project seems really complex and a bit tricky - even for tech guys to get. Sounds almost like a potential Trojan Horse to BTC. I say we approach this carefully, very carefully. Get that thing open sourced and have the experts look into it. The longer it is closed, the more we have to worry.

I'm open to studying this Ripple thing more though. Bitcoin clearly needs a decentralized form of exchange at some time. I'm just not feeling it is Ripple at this point.

IAS

[justusranvier]

There seems to be an extremely serious technical flaw which goes to the heart of an IOU trading system:

All IOUs for the same real-world instrument (BTC, USD, Gold, Oranges) are regarded as fully fungible 1:1 even though they originate from different people with different circumstances. This means that:

a) there is no accounting for expiry or settlement. IOUs are issued with no agreed redemption date. This means payers are effectively making open-ended gifts.

b) there is no weighting for the creditworthiness of the issuer e.g. an IOU for 100 USD from person X equals an IOU for 100 USD from person Y, even though person X has a million-dollar house and person Y lives in a culvert.

These are real pitfalls that can not be solved from within the Ripple system (which is really just a ledger), but potentially could be addressed by out of band agreements between the participants, assuming those participants fully understand the issues involved and are willing to go to the trouble.

I have my reservations about tying any kind of IOU system to BTC. Further, the whole Ripple project seems really complex and a bit tricky - even for tech guys to get. Sounds almost like a potential Trojan Horse to BTC. I say we approach this carefully, very carefully. Get that thing open sourced and have the experts look into it. The longer it is closed, the more we have to worry.

I'm open to studying this Ripple thing more though. Bitcoin clearly needs a decentralized form of exchange at some time. I'm just not feeling it is Ripple at this point.

It's probably not worth the effort needed to use Ripple safely when you're talking about transfers of BTC, however when you talk about dollars and other legacy currencies the cost/benefit ratio becomes significantly more favorable.

One thing that would assist Bitcoin adoption would be if users could pool their dollar (euro, etc) liquidity while running Localbitcoins exchanges to help new users move into and out of BTC. The easier it becomes to move between BTC and legacy currencies, the more BTC people will be willing to hold. Ripple could help achieve that if it was used for "community credit" instead of relying on gateways.

Basically the best parts of Ripple are exactly the features that OpenCoin isn't focusing on.

[lexxus]

There seems to be an extremely serious technical flaw which goes to the heart of an IOU trading system:

All IOUs for the same real-world instrument (BTC, USD, Gold, Oranges) are regarded as fully fungible 1:1 even though they originate from different people with different circumstances. This means that:

a) there is no accounting for expiry or settlement. IOUs are issued with no agreed redemption date. This means payers are effectively making open-ended gifts.

b) there is no weighting for the creditworthiness of the issuer e.g. an IOU for 100 USD from person X equals an IOU for 100 USD from person Y, even though person X has a million-dollar house and person Y lives in a culvert.

These are real pitfalls that can not be solved from within the Ripple system (which is really just a ledger), but potentially could be addressed by out of band agreements between the participants, assuming those participants fully understand the issues involved and are willing to go to the trouble.

Again, I'll repeat myself.
You can set up a fee so when IOU-BTC-Bitstamp are converted to IOU-BTC-SOMETHING-ELSE through your account, they are not 1:1 anymore. This is called "transfer rate". So there is no problem. You can set this fee to 90%. That mean that you need 1.9 of IOU-BTC-SOMETHING-ELSE to convert it to 1.0 of IOU-BTC-Bitstamp.

[justusranvier]

These are real pitfalls that can not be solved from within the Ripple system (which is really just a ledger), but potentially could be addressed by out of band agreements between the participants, assuming those participants fully understand the issues involved and are willing to go to the trouble.

Again, I'll repeat myself.
You can set up a fee so when IOU-BTC-Bitstamp are converted to IOU-BTC-SOMETHING-ELSE through your account, they are not 1:1 anymore. This is called "transfer rate". So there is no problem. You can set this fee to 90%. That mean that you need 1.9 of IOU-BTC-SOMETHING-ELSE to convert it to 1.0 of IOU-BTC-Bitstamp.

Can Ripple automatically calculate the optimal values of these exchange rates to compensate for default risk, or will setting those require some out of band information?

[Sukrim]

Can Ripple automatically calculate the optimal values of these exchange rates to compensate for default risk, or will setting those require some out of band information?

Default risk can only be perceived externally, as it is an event that is most likely only happening once (e.g. pirateat40 paid consistently every last Bitcent until it all went POOF and then he consistently paid 0 Bitcents any more). Also Web of Trust ratings won't help much (again: pirateat40 had a flawless and highly rated WOT account). There might be some service option similar to rating agencies that might release their opinions in a format that oyu can plug it into your Ripple client automatically, but still knowing the real risk is not something that can be really calculated.

[justusranvier]

Default risk can only be perceived externally, as it is an event that is most likely only happening once (e.g. pirateat40 paid consistently every last Bitcent until it all went POOF and then he consistently paid 0 Bitcents any more). Also Web of Trust ratings won't help much (again: pirateat40 had a flawless and highly rated WOT account). There might be some service option similar to rating agencies that might release their opinions in a format that oyu can plug it into your Ripple client automatically, but still knowing the real risk is not something that can be really calculated.

Back before banks discovered they could just dump their losses on the taxpayers and depositors, they developed a series of techniques for estimating default risk that work reasonably well, and people who want to use Ripple successfully would need to use similar techniques in order to estimate the amount of trust they should assign.

That means borrowers should disclose their balance sheets to creditors, develop rational methods for assigning value to their assets (reserves), and pay attention to debt to asset ratios as well as debt service to income ratios.

None of those things happen within Ripple; they have to be done manually, out of band.

You could, of course, just assign trust based on other factors without taking any of the above into account but that would be exactly like throwing money at pirateat40.

[cypherdoc]

There seems to be an extremely serious technical flaw which goes to the heart of an IOU trading system:

All IOUs for the same real-world instrument (BTC, USD, Gold, Oranges) are regarded as fully fungible 1:1 even though they originate from different people with different circumstances. This means that:

a) there is no accounting for expiry or settlement. IOUs are issued with no agreed redemption date. This means payers are effectively making open-ended gifts.

b) there is no weighting for the creditworthiness of the issuer e.g. an IOU for 100 USD from person X equals an IOU for 100 USD from person Y, even though person X has a million-dollar house and person Y lives in a culvert.

These are real pitfalls that can not be solved from within the Ripple system (which is really just a ledger), but potentially could be addressed by out of band agreements between the participants, assuming those participants fully understand the issues involved and are willing to go to the trouble.

Again, I'll repeat myself.
You can set up a fee so when IOU-BTC-Bitstamp are converted to IOU-BTC-SOMETHING-ELSE through your account, they are not 1:1 anymore. This is called "transfer rate". So there is no problem. You can set this fee to 90%. That mean that you need 1.9 of IOU-BTC-SOMETHING-ELSE to convert it to 1.0 of IOU-BTC-Bitstamp.

listen to what justusranvier just said about how "real" banks do due diligence.  anything anyone does with fees within Ripple will just be a guess.  especially since it will be a primarily small tx network.

this will lead to chaos.

[cypherdoc]

There seems to be an extremely serious technical flaw which goes to the heart of an IOU trading system:

All IOUs for the same real-world instrument (BTC, USD, Gold, Oranges) are regarded as fully fungible 1:1 even though they originate from different people with different circumstances. This means that:

a) there is no accounting for expiry or settlement. IOUs are issued with no agreed redemption date. This means payers are effectively making open-ended gifts.

b) there is no weighting for the creditworthiness of the issuer e.g. an IOU for 100 USD from person X equals an IOU for 100 USD from person Y, even though person X has a million-dollar house and person Y lives in a culvert.

A further problem is social.

1) 1000 years of Contract Law
2) Ripple
3) Bitcoin

Which is the odd one out?
(Hint: two of them attempt to overcome a particular human failing...
Breaches of trust

i think you just gave us the 30 sec elevator speech for Ripple.

[colour]

And the number of times Ripple shills have said oh these XRP aren't primarily meant to be used to pay for things etc yet they say in their interviews XRP becoming valuable is their entire business model.

There are some discussions about Ripple(s) going on right now on /r/bitcoin.
The Ripple supporters alternate back and forth between
"XRP are as good as worthless and will totally never be used as a currency, guaranteed"
and
"XRP do have worth and will be used to pay Opencoin for their efforts in creating Ripple, which is totally fair and not a problem at all, even when they premined 100% of the XRP themselves and are a for-profit organization that will most likely try to maximize their profits in any way possible".

I would probably be a great supporter of the Ripple system, if the way Opencoin designed it didn't seem to me like the (potentially) biggest premine-scam ever pulled off.

[mobile4ever]

The fact that Ripple is centralized, in direct opposition to bitcoin, made me doubt it. Putting it like this:

Services like Ripple are destined to go the way of any service which proposes to establish Bitcoin functionally within the existing Fiat frameworks. Bitcoin is not meant to live alongside Fiat. It is meant to kill it. With extreme prejudice.

(Link:)
https://bitcointalk.org/index.php?topic=207764.msg2175819#msg2175819


I have never gotten a very valid answer as to how many people control Ripple.


If it is under the control of a few people, it is against the whole bitcoin idea.


...and nevermind that it is closed-source.  

[boonies4u]

Why would someone think trying to sell the ability to create IOUs to bitcoiners would give them anything but shit and drama? Debt Stinks... I should know 

[bitbitcoincoin]

I said it in another thread and I'll say it again here.

Ripple is the corporate/banking world's attempted co-op of the crypto-currency movement.

It says, "Hey you know that crypto currency idea?  Well it sounds great, but why don't we centralize it so we can make a huge profit instead of allowing the common people to create added wealth on their own."

The main thing to focus on here is CONTROL, ripple gives control back to a small group of individuals which flies completely in the face of the philosophy of cryptocurrency's "forefathers".  Im very concerned greed and stupidity(along with PR firms hitting the airwaves and brainwashing the gullible masses) will win out and people will slowly start backing ripple over bitcoin.