Ripple is not a scam - and you may be making yourself vulnerable to actual scams

[mmeijeri]

Ripple is an ill-conceived system useful for trading unenforceable promises.  Its success depends on people mistakenly believing that a Ripple promise denominated as 1 USD is the same thing as 1 USD.

No it does not. Precisely because it depends on trust, you have to specify who you trust and for how much. If you store your money at a bank, you decide you trust them and for how much. If you deposit money at an exchange, you do exactly the same. A promise from an anonymous person on the internet is worth hardly anything, a promise from a close associate has real value.

Ripple serves to insulate its users from the world's legal systems, the very same systems the users would depend upon to enforce any promises on the network.  

It's not just the legal system, it's pre-existing social relationships as well. But let's stick to legal systems: the same is true of exchanges around the world. If you deposit money with an exchange, in the end you are dependent on legal systems to get your money back.

It's broken by design - like a screendoor submarine.

I don't think you really understand the design. Ripple consists of three layers, the underlying cryptocurrency which is comparable to BTC, the fiat trading system which is like coloured coins, and a distributed exchange. The nice thing is that all three are integrated into one distributed protocol.

[mmeijeri]

What happens if I "receive" something in Ripple and I want to exchange it for the real asset but the person who owes it to me (from the view of Ripple) doesn't want, or isn't able, to pay?  This is what I see as Ripple's achilles heel.

Then you're out of luck, just as those who entrusted their coins to TradeFortress were, or those who kept their money in Cypriot banks. Unless you are trading a cryptocurrency inside its own system, there's always counterparty risk. Ripple lets you manage that risk explicitly. Until we get to a point where everybody uses cryptocurrencies, we'll have to deal with counterparty risk on the fiat side. Ripple (and several proposed rivals) could help us get closer to the all crypto scenario and more quickly.

[ckomega]

99.5% of all ripple is still held by Developers of Ripple.

Sounds pretty centralized to me.

XRP is an infrastructure component. A small amount is destroyed with every transaction, to mitigate issues like DDOS attacks. It will be given away by Ripple Labs to spur adoption.

It is a single (and vital) component of the Ripple system, that supports the decentralized network---and allows for distributed transactions with all other currencies. XRP != Ripple. Ripple's decentralized benefits are (partially) enabled through it.

Note: while XRP cannot be mined, Ripple has undertaken an initiative to support the World Community Grid---similar to CureCoin and GridCoin:

https://www.computingforgood.org/

Ripple Labs is highly focused on distributing XRP, and has found a way to promote a great cause in turn.

if so , why othre exchange site can not exchange XRP, only your site can do this??
i do not see how you distribute these XRP, there are just people buy/sell this XRP.

[aggster]

this is the ultimate premined scam. why would you let somebody control 90% of the currency, this is the cryto version of the federal reserve

[mmeijeri]

if so , why othre exchange site can not exchange XRP, only your site can do this??
i do not see how you distribute these XRP, there are just people buy/sell this XRP.

Anyone can buy or sell XRP.

[Sukrim]

What happens if I "receive" something in Ripple and I want to exchange it for the real asset but the person who owes it to me (from the view of Ripple) doesn't want, or isn't able, to pay?  This is what I see as Ripple's achilles heel.

What happens if I "receive" a Casascius coin in RL and I want to exchange it for the real asset but the person who made it already took the money from it - or worse: runs a hidden node that will double-spend with a high fee any coin that I try tro move off a Casascious coin so I have no way other than trust to spend the BTC?

The problem you describe happened already dozens of times in Bitcoinland and it always ended in tears and "hacks": mybitcoin webwallets, pirateat40's BTCS&T, GLBSE, Bitcoin-24, Tradehill, inputs.io...
Ripple is NOT designed to save you from your own stupidity (of trusting someone with your funds who doesn't deserve it), just like with BTC you can build insured systems on top of it, but the basis is still that you need a trusted counterparty to keep your assets, just like any centralized exchange that you use (or physical coin manufacturer...).

The problem Ripple solves is that to actually use Bitcoin in most cases, you need to exchange BTC for something else. Ripple has a use case far closer to BitPay than Bitcoin, on Bitcoin you can ONLY receive BTC while on Ripple you can receive both XRP and anything you trust to be redeemable. Yes, the latter can be exploited (just as it has been in bitcoinland for years) however it can also be put to good use, as you see from the amount of great enthusiasm people have towards Coinbase and BitPay, who are in the end centralized closed source services that need to be trusted by both merchants and users to keep their payment data safe (BitPay would be THE ideal honeypot for CIA/NSA/GCHQ!) and to actually process transactions and pay out as advertised.
Ripple takes this concept one step further by decoupling merchants, asset holders (=gateways) and payers by introducing open markets for different assets and introducing market makers (the "traders" on Bitcoin exchanges BitPay sells their coins to).

I don't get how people don't understand this after 1-2 hours of reading and still claim that Ripple is so complex, impossible to understand or anything like that, on the other hand it might be a large intellectual feat of realizing that any service that you use in bitcoinland that does NOT allow you to privately sign transactions with your own local key offline that you choose yourself is something that is a trusted service and could also work as Ripple gateway with the added benefit that balances would not be locked in on that platform.

[mmeijeri]

I don't get how people don't understand this after 1-2 hours of reading and still claim that Ripple is so complex,

Especially if those people do understand the complexities of Bitcoin...

[morgaine]

I don't get how people don't understand this after 1-2 hours of reading and still claim that Ripple is so complex, impossible to understand or anything like that

I think there is no denying that if the theorems behind money are not something your brain is trained to think about, understanding Ripple *is* hard. Sure, everyone gets what an IOU you is, but that still leaves you with a dozen questions about how everything comes together in this particular system. What are the implications of paying with IOUs, what does it mean for me when I use Ripple?

It certainly took me a while to get it. The fact that the Ripple site is focussed on promoting an XRP giveaway and touting high-level enduser benefits probably isn't helping.

In fact, even after I had a good understanding of Ripple itself, I needed to listen to this interview with David Schwartz to get me excited about the "rippling through accounts" feature as something to facilitate private lending ("money as a social resource" is the phrase he used).

http://letstalkbitcoin.tumblr.com/post/50482657399/lets-talk-bitcoin-episode-007-ripple-the

[casascius]

What happens if I "receive" something in Ripple and I want to exchange it for the real asset but the person who owes it to me (from the view of Ripple) doesn't want, or isn't able, to pay?  This is what I see as Ripple's achilles heel.

What happens if I "receive" a Casascius coin in RL and I want to exchange it for the real asset but the person who made it already took the money from it - or worse: runs a hidden node that will double-spend with a high fee any coin that I try tro move off a Casascious coin so I have no way other than trust to spend the BTC?

Then you have the benefit of legal recourse against Casascius who has made public representations guaranteeing he has not kept the keys which you relied upon before accepting a Casascius Coin, and any sweep like that would be evidence to the contrary which would be a tortious and likely criminal fraud that caused you a loss.  There is also a big difference - for me to commit a theft like this (assuming I still had keys and actually could), this would require affirmative steps taken to commit the theft, unlike a Ripple counterparty who merely needs to do nothing to default on someone.  Since I've made clear my real life identity and plenty of people have confirmed it, and have publicly stated my intentions to remain subject to the law, I think it's not apt as a comparison.

Ripple, on the other hand, can fail spectacularly with as few as three people.  Alice "owes" Bob and Bob "sells" that debt to Charlie, as Charlie trusts Alice.  Despite that trust, Alice doesn't feel like paying Charlie, or claims that she never actually owed "Bob", but rather, a hacker made the original transfer and so the debt never existed in the first place.  Charlie is pretty much SOL and can't sue to recover from Alice because legally Alice doesn't owe Charlie anything.  His sole remedy is to let Bob know what a jerk of a friend he has.  This is no big deal if we're talking lunch money, but when it's $10k or $50k, we're talking bigger amounts than most people's social capital really makes sense to leverage.

Meanwhile, Ripple aside, if Alice "owes" Bob and they have a written agreement, and Bob "assigns" that debt to Charlie with a written assignment agreement... the whole thing is magically enforceable in a court of law (happens every day with debt collectors).  Amazingly, a mere piece of paper (or equivalent signed electronic communication) has just trumped all of Ripple in terms of enforceability, and even works with larger amounts like $50k.  (Now for lunch money, Ripple's probably got it beat for convenience...but then again...so has cash, paypal, or your favorite bank payment app)

[compwindsor]

Ripple is misunderstood.

Centralization is a threat to Bitcoin and most Alts. Ripple is a complementary system for all currencies. It battles against centralization, and in entirely different ways than most cryptos. It targets eradicating centralization issues at different levels, with its own unique decentralization model. Yet, most people are unaware, misinformed---or have vested interested in attacking Ripple.

MasterCoin, NXT, eMunie, and Monetas are all systems attempting to solve similar issues. They are all worth taking the time to evaluate and understand. I do not claim any one system solves all major threats we are facing today.

Why are so many misinformed?

http://ripplescam.org/ (inaccurate and outdated)

In almost any discussion this site comes up, despite it offering no real value. Understanding why Ripple is important means understanding major issues threatening most crypto currencies today.

When you trade on almost any exchange, you are embracing centralization. Likewise, the same is true for most Bitcoin payment systems. Ripple is derided for its decentralized IOU system, yet it is designed specifically to mitigate the threat posed by centralized exchanges and payment systems. In using those systems, you are embracing closed IOU systems. All of the value of crypto transactions is gone at that point. Many have been bitten by the scams that this has allowed, and the fallout from ineptitude of the operators of many of these services.

https://inputs.io/ is the poster child of these threats. Scam or hack? Ripple is attacked, in part, because it threatens the business model of closed centralized exchanges and payment systems. It is important to note that the author of ripplescam.org is, in fact, the same person responsible for inputs.io, along with centralized systems that have wreaked havoc on the community. TradeFortress is the perpetrator:

https://www.google.com/search?q=tradefortress

Why would he attack?

He had major interested in detracting from Ripple. Its model conflicts with his (and all other) closed centralized payment systems. In driving people away from Ripple to his centralized system, he cost trusting users dearly. An angry community is looking for him. His specific whereabouts are currently unknown. It is worth carefully evaluating all he has had to say about Ripple.

Everyone should read this conversation clarifying lower level misconceptions of the Ripple system:

https://news.ycombinator.com/item?id=6867324

Ripple is, in fact, open source:

https://github.com/ripple

It is leading radical new concepts that may be beneficial for all new currencies to consider:

https://ripple.com/wiki/Contracts

Ripple may or may not be the future---but it brings vital concepts to the table. They need to be considered for their individual merit. Decentralized payment and exchange systems are vital to the future of crypto currencies. Ripple does not need to replace any currency. Its system complements all currencies. It is not about Ripple vs. Bitcoin vs. your favorite crypto currency.

If you do not believe in Ripple, or Ripple Labs, then by all means fork the code. Create a system that aligns with your ideals. Create a new code base altogether---as Ripple alternatives like MasteCoin, NXT, Monetas, and eMunie are attempting. Dismissing Ripple and all concepts tied to Ripple disservices the future of crypto currencies.

Many of those who attack have vested interest, to drive their centralized alternatives. It hurts the community.

Scammers with vested interest in centralized systems abound.

Support decentralization.

TL;DR

It's a scam, and so is NXT and Mastercoin.

Got it.

Thanks.

[mmeijeri]

This is no big deal if we're talking lunch money, but when it's $10k or $50k, we're talking bigger amounts than most people's social capital really makes sense to leverage.

Sure, in which case you'd probably use a gateway with whom you have a written contract.

Amazingly, a mere piece of paper (or equivalent signed electronic communication) has just trumped all of Ripple in terms of enforceability, and even works with larger amounts like $50k.

If you want enforceability, write things down. That's straightforward enough. It's orthogonal to the use of Ripple though.

[morgaine]

Ripple, on the other hand, can fail spectacularly with as few as three people.  Alice "owes" Bob and Bob "sells" that debt to Charlie, as Charlie trusts Alice.  Despite that trust, Alice doesn't feel like paying Charlie, or claims that she never actually owed "Bob", but rather, a hacker made the original transfer and so it never truly existed in the first place.

Its important to make people understand that this is how Ripple works. Charlie made a mistake in trusting Alice, and you making the right decisions about whom to trust is exactly what Ripple is based on. If you have a problem with that, Ripple may not be for you. But understand that this is is not fundamentally different from other trust concerns that are commonplace everywhere ein our lives.

Trust Alice for lunch money, trust Bank of America for your paycheck, maybe trust that Bitcoin won't die a silent death for your retirement fund.

This is particularly true in light of the fact that this:

Charlie is pretty much SOL and can't sue to recover from Alice because legally Alice doesn't owe Charlie anything.  His sole remedy is to let Bob know what a jerk of a friend he has.

is just conjecture. A court of law may well decide that a Ripple IOU shall be an enforcable contract. That would be a distinct possibility today, and it will be more likely if people increasingly decide they want to use Ripple.

[mmeijeri]

is just conjecture. A court of law may well decide that a Ripple IOU shall be an enforcable contract. That would be a distinct possibility today, and it will be more likely if people increasingly decide they want to use Ripple.

If you want certainty, write a contract to that effect, agreeing to rely on Ripple's impartial ledger as evidence. You may also want purchase orders and invoices. All this is business 101 and has absolutely nothing to do with Ripple itself.

[Sukrim]

I don't get how people don't understand this after 1-2 hours of reading and still claim that Ripple is so complex,

Especially if those people do understand the complexities of Bitcoin...

Yeah, just like with Bitcoin, there are certainly different levels of understanding (I rarely try to go beyond "it's both digital money, depending on your perception of what money actually is you'll see it as currency or asset" with BTC for example), the basic "Ripple = distributed exchange and marketplace" part shouldn't be THAT hard to get though.

Most Bitcoiners seem to have a hard time ignoring XRP as native asset, maybe since all they are used to so far are systems that only exist for this single asset and you need to jump through hoops to actually trade it?

What happens if I "receive" a Casascius coin in RL and I want to exchange it for the real asset but the person who made it already took the money from it - or worse: runs a hidden node that will double-spend with a high fee any coin that I try tro move off a Casascious coin so I have no way other than trust to spend the BTC?

Then you have the benefit of recourse against Casascius who has made public representations guaranteeing he has not kept the keys which you relied upon before accepting a Casascius Coin, and any sweep like that would be evidence to the contrary which would be a tortious and likely criminal fraud that caused you a loss.  There is also a big difference - for me to commit a theft like this (assuming I still had keys and actually could), this would require affirmative steps taken to commit the theft, unlike a Ripple counterparty who merely needs to do nothing to default on someone.  Since I've made clear my real life identity and plenty of people have confirmed it, and have publicly stated my intentions to remain subject to the law, I think it's not apt as a comparison.

I can think of several ways how you could commit theft even more passively (e.g. issuing several coins with the same private key or also just getting "hacked", being "sorry" and move on like TradeFortress)
Still in the end one has to trust you (that you keep your promises) as well as the legal system (if you don't keep your promises) to use your coins. This is not different to Ripple, where the only difference is that you simply declare and encode that trust in a special type of transaction instead of just implying it by using your service(s).

Ripple, on the other hand, can fail spectacularly with as few as three people.  Alice "owes" Bob and Bob "sells" that debt to Charlie, as Charlie trusts Alice.  Despite that trust, Alice doesn't feel like paying Charlie, or claims that she never actually owed "Bob", but rather, a hacker made the original transfer and so it never truly existed in the first place.  Charlie is pretty much SOL and can't sue to recover from Alice because legally Alice doesn't owe Charlie anything.  His sole remedy is to let Bob know what a jerk of a friend he has.  This is no big deal if we're talking lunch money, but when it's $10k or $50k, we're talking bigger amounts than most people's social capital really makes sense to leverage.

So you mean the following network (A,B,C are Alice, Bob and Charlie) for example (using 100 USD amounts):
B trusts A for 1000 USD and has currently 100 USD deposited with A.
C trusts A for 1000 USD and has currently 0 USD deposited with A.
B sends 100 USD.A to C and gets something in return for that outside of Ripple (e.g. a nice massage).

A now claims that the 100 USD B has deposited were used up because she felt like shopping, the 100 USD were charged back by PayPal, or that only B would be allowed to redeem anyways.

What A did is most likely illegal under EU directive 2009/110/EC (http://ec.europa.eu/internal_market/payments/emoney/) and probably also in most other jurisdictions worldwide too. C has every legal right to sue her and these laws governing this are in place far longer than e.g. Bitcoin existing, not very abstract, complex or exotic at all and he would have a very easy time finding an eager lawer to represent this easy case.

Also C did something not very smart by not checking beforehand with A that he is actually allowed to withdraw (e.g. C is based in Cuba, A in the US...), so there might be situations where A legitimately can not send the actual assets to someone who wants to redeem them (e.g. one of your customers enters a invalid payment address).

Meanwhile, Ripple aside, if Alice "owes" Bob and they have a written agreement, and Bob "assigns" that debt to Charlie with a written assignment agreement... the whole thing is magically enforceable in a court of law (happens every day with debt collectors).  Amazingly, a mere piece of paper (or equivalent signed electronic communication) has just trumped all of Ripple in terms of usefulness, and even works with larger amounts like $50k.  (Now for lunch money, Ripple's probably got it beat for convenience...but then again...so has cash, paypal, or your favorite bank payment app)

Ripple in its current form is not really any more this "community credit" system that you describe, A most likely is a registered MSP in B's and C's jurisdiction, publishes regular audits and deals with amouts far beyond 50k USD (Bitstamp alone has a few millions of USD issued on Ripple right now, not even counting BTC or other currencies). Ripple transactions are digitally signed, cannot be faked without having the private key and so on. This is even easier to proof than e.g. a Bitcoin payment to a merchant service like BitPay where you first need to provide proof that the address you sent to was actually from them (and not e.g. displayed by a trojan on your system), the only chance for that being to contact them and ask for a custom text signed witht he private key of that address or doing blockchain analysis.

[casascius]

Charlie is pretty much SOL and can't sue to recover from Alice because legally Alice doesn't owe Charlie anything.  His sole remedy is to let Bob know what a jerk of a friend he has.

is just conjecture. A court of law may well decide that a Ripple IOU shall be an enforcable contract. That would be a distinct possibility today, and it will be more likely if people increasingly decide they want to use Ripple.

It's informed conjecture.  A court of law may well decide that a Ripple IOU is not an enforceable contract, for reasons well established in law.  The burden of proof is on the person attempting to the contract, and "the ripple ledger says so" is not going to overcome an alleged debtor's claim they've been hacked and never entered into any contract in the first place.  As soon as Ripple has its first "allinvain" moment, and the ripple community asserts that that moment is an "irreversible" one, the legal community will quickly disagree and the world will understand why "the ripple ledger says so" means pretty much nothing legally, and that's when everyone will realize the screen door submarine is capable of no other destination than the seabed.

[AmazonStuff]

Ripple is not a scam, it's just full of trading options which most of you obviously don't understand. Identifying Ripple network with one of this options is not a good representation of the real situation.

For example trust... All of you think that you have to trust someone in order to use Ripple, non-sense.

Bitstamp is exchange in Bitcoin world and is gateway in Ripple world. If you know how to use Bitstamp in Bitcoin world, you will know how to use Bitstamp gateway in Ripple world. I'm using Ripple for about 6 months and only trust line I have set is towards Bitstamp and I only set that trust line when I deposit BTC from Bitstamp gateway to Ripple. After I complete the deposit, I exchange BTC to XRP and I set trust line toward Bitstamp gateway to zero, so I don't trust anyone in Ripple and I'm trading all the time in the Ripple integrated order book. If you still after reading this say that it's needed to trust someone inside Ripple in order to trade, you have to learn basics about Ripple. Best way to learn is to try, don't base your opinion on theory.

Cheers

[mmeijeri]

The burden of proof is on the person attempting to the contract, and "the ripple ledger says so" is not going to overcome an alleged debtor's claim they've been hacked and never entered into any contract in the first place.

And exactly the same thing is true with Bitcoin payments, so it has nothing to do with Ripple. If you're dealing with large amounts of money, write things down. Use purchase orders and invoices, perhaps in electronic form, perhaps written down on paper, perhaps both. If all you want to use Ripple for is as a distributed Bitcoin exchange, then enter into a written contract with a reputable Ripple gateway. Bitstamp is one of the more popular Bitcoin exchanges, and it's also a Ripple gateway. That's just one written contract with one registered business.

[jbrock11]

I think anybody saying how Ripple or any cryptocurrency will fare, really has no basis for it. The facts are there are both positive and negatives about Ripple. The same can really be said about any cryptocurrency though. I personally think given the price ( $.027 ) it's as good an alt investment as there is out there.

[mmeijeri]

I think anybody saying how Ripple or any cryptocurrency will fare, really has no basis for it. The facts are there are both positive and negatives about Ripple. The same can really be said about any cryptocurrency though. I personally think it's as good an alt investment as there is out there.

I agree, but more importantly it is an excellent exchange between fiat and crypto. It will also be great as a way to stimulate use of cryptocurrencies in general, since that's what's used behind the scenes if you use Ripple for exchanging between various fiat currencies. If Ripple captures a significant portion of fiat remittance payments, it will give a huge boost to cryptocurrencies in general and XRP in particular.

[casascius]

Best way to learn is to try, don't base your opinion on theory.

Sure, meanwhile, I've never been scammed selling BTC for PayPal, but would never recommend people learn this for themselves by trying.

I agree Ripple is technologically marvelous and works when everyone's honest and making good on their agreements to pay and nobody's saying they're getting hacked.  It's just that I expect it to fail spectacularly when any of these change, because none of these common real-life scenarios seem to be considered anywhere in the design.  Ripple's core flaw isn't a technological one, it's a societal/legal one.