wow. all this negative talk about ripple and passionate people defending it is intriguing. to hate a project intensely, then opencoin must doing something to disrupt the disruptors.
Or maybe there are many people that are frustrated by OpenCoin's opaque front about the underlying failure of the Ripple concept and further irritated that they have claimed to be open source from day one; QED this announcement.
This is the underlying concept and "genius" of the ripple system; Obligations to redeem a token for a currency are functionally equivalent to holding the currency itself, or the equivalent exchange rate of any other currency IOU or asset IOU.
Since all debt is equivalent, debt can be generated through trust relationships (Friends of friends) and then be traded in the system. All intermediaries between the debtor and the lender are called "Liquidity Providers".
There are two UNSOLVABLE problems with this.What has been quickly found out and even demonstrated by TradeFortress, is that debt through liquidity providers is open to immediate abuse. After all, even if there is a trust relationship between A and B, and between B and C, that doesn't mean there is any trust between A and C.
That is one unsolvable problem. It is unsolvable because there is no algorithm known to man that can predict any trust relationship between two strangers based on the relationship between a common person or string of people. (There is also the problem of deciding what the contractual relationship is between all three+ parties, but that's not unsolvable,
persay. Daunting, for sure.)
The second unsolvable problem is predicting the value of debt versus assets immediately at hand. It is clear that IOU's traded should trade at a value above the principal, but what no algorithm can ever do is predict what that value is. It's subjective. Interest rates (which is essentially the same thing.) can only emerge from the calculation of independent actors in a free market.
(This problem is further complicated by the fact that it is dependent on the terms of the IOU. Length held, and risk of irredeemability are factors.)
If I had to sum up the killer of Ripple in one word it would be; Heuristics. The Ripple system demands that an algorithm be created to predict heuristics in a market given only trusted value between proximate individuals.
Has OpenCoin even tried to attack this
daunting impossible task? No. What have they done instead? They ask that NO ONE trust ANYONE except gateways. Which INVALIDATES the entire Ripple concept.
After all, what are we left with when there is no web of trust in Ripple? An open platform for the exchange of resource obligations tied to the necessary XRP of which the majority is owned by handful of individuals.
We already have that, without the private company or the limitations of Ripple. It's called a "Free Market".
The only thing that Ripple would add is the ability to exchange arbitrary IOU's among gateways,
but why would you want to do that?Consider that Bed Bath and Beyond might put Mattresses out on the Ripple system, and they would be a mattress gateway. If a user in Ripple purchases a mattress IOU with USD they could swap out the mattress IOU for an equivalent amount of Rubles.
Now we have a bizarre setup where one gateway holds a Mattress IOU -Likely in Russia- they most assuredly don't want.
Even if you limit Ripple to only currencies, you have the same problem. Gateways do not necessarily want to hold IOU's from other Gateways. Other gateways may (and will) default, leaving other Gateways holding a bag of worthless currency IOU's.
But even if they don't default, Gateways have an incentive to dump as much IOU's in Ripple as they possible can and make redemption as hard they can get away with, because they directly benefit from IOU's that are never redeemed.
It directly perverts competition among business from being fast and efficient, to being as slow and inefficient as they can get away with.
Ripple fails through and through, and cannot be fixed.
TLDRMost people that use Bitcoin hate Ripple because of the dishonesty of labelling themselves "open source" when they clearly aren't, as well as the centralized nature of the XRP currency.
I "hate" Ripple because it doesn't work and can't work, it's a waste of time and resources, and despite many people pointing out the basic economics that destroy Ripple, people are still buying into it and the only response we get from OpenCoin is handwaving.
Edit: Grammar/Wording
