Topic: is ripple a trojan horse that will destroy bitcoin? - page 2. (Read 9832 times)

I wish I could read more but on ripple.com what I see is only "401 Authorization Required"

At least I know in Ripple everyone can issue IOU without any limit, as long as someone else accept. It could be a perfect system for Pirate scheme scam.

Ripple is not about trust in a single person or entity. You should read something more about Ripple before starting an argument in this forum.

Sure. The good news is that only the incompetent people and those that overestimate their judgment skills and trust them will pay the price without affecting the rest of Ripple network.

Trust is a very important aspect in every business relation. Trust makes your business more competitive. On the contrary, the lack of trust is very expensive for both sides in a business relation.

So many people trusted Pirate and invested millions of USD and what happened? Bitcoin has survived the pirate scam because it is trust-free. If it happened on Ripple, the system may have collapsed due to credit contraction. Ripple will also facilitate incompetent people to over-issue credit and end up in bankruptcy.

Ripple is backed by something much stronger than the US government. It is backed by trust between people! The larger gets Ripple network the stronger it gets. Printing money is not really a bailout. It is just postponing the inevitable by making consequences even worse with the single and only hope that time will cover blatantly criminal acts in the financial sector. Point is, nobody needs such 'bailouts' except criminals that are bailed out!

USD survives because it is backed by the US government and its nuke. Ripple is backed by what? Who and how to bailout when there is a crash?

Bitcoin is actually very expensive to run and maintain. You'll see that once bitcoin gets widely adopted and blockchain bloated to unforeseen limits. Even now you have to offer something like Electrum bitcoin client and server to decrease this cost! And that basically means you are introducing certain lever of trust making the tradeoff I've mentioned above!

You are quite right! But why do you fail to recognize that the dollar successfully managed to destroy gold as money for 40 years? Bitcoin doesn't have a 6000 year of history as money like gold. What will happen to bitcoin if it doesn't get widely adopted as money for the next 40 years?

My point is that trust based money ultimately fail if there are no built in mechanisms to check them against reality. However, they are very efficient in a normal economy and can exist for a very large periods of time practically destroying the use of other monetary values!

I agree with this under a physical metal standard...but Bitcoin is the game-changer.  It's a final means of payment but, unlike metals, it has virtually zero carrying costs.  We have never had a hard asset like this in all of human history.

If Ripple had been introduced before Bitcoin, it would have been very appealing as an alternative, evolutionary upgrade to an existing debt-based economy.  Kinda like moving to a nicer house, but still within a bad neighborhood.

But once you taste a debt-free system where you own your money 100%, and no one can take it from you, or cause it to devalue or default...you don't wanna go back to that bad neighborhood.  I never want my savings or buying power to disintegrate due to a default chain originating in the flutter of a butterfly's wings somewhere in Greece.  Bitcoin is like moving to Beverly Hills, but without the costs formerly associated with living there.

So my guess is that Ripple will be used for short-term and small transactions...but cautious/wise people will periodically move their Ripple credit into hard assets like Bitcoin.  The real test of a trust-based system comes when a crisis of confidence hits.  If there's no backstop such as the one which central banks provided in 2008, you could potentially see a rapid contraction of credit down to zero and complete collapse of the entire system as everyone tries to exchange their credit for something tangible.

And so, wrt. the title of this thread, I've come to the conclusion that Ripple cannot destroy Bitcoin anymore than USD has been able to destroy gold.  Even in a hypothetical future where a large portion of commerce could be performed by exchanging Ripple credits, there will always be a need for a final means of payment, an extinguisher of debt, a hard asset with no counterparty risk.

Very well said, kjj. I agree with most of the points you make. However, instead of past-looking and forward looking time vector of monetary systems, I prefer to use trust and distrust based money. If you have gold, silver, or bitcoin you have the ultimate proof that you have already done something useful in the past. This is why there is no need for trust/hope since you already have the proof in place. While money based on debt, like current fiat and ripple, they are based entirely on trust/hope that you will do something useful in future.

The problem with trust based money is that very often this trust is abused. Very complicated systems are used to backup such a trust with something material like real estate. Very often the price of the collateral is changing and needs to be marked to market, inflicting further changes to the reasonable level of trust.

Distrust based money is almost perfect, but almost... The problem is that they are just too expensive to maintain and use every day. They are relatively expensive to trust based monetary systems in a normal economy.

I don't think we are on the verge of making a choice between trust or distrust based money. This is a simple question of efficiency! Economy doesn't care about principles but efficiency. A well balanced monetary system will make use of both trust and distrust based money and will be based on a dynamic trade off. For every day use people will use trust based money since they are cheaper to use and from time to time outstanding credit balances will have to be cleared through distrust based money like gold, silver, or bitcoin that are firmly anchored in the real or digital world.

The distinction is subtle.  Debt and credit (savings) are different sides of the same coin, but which side you think is the head, and which is the tail, changes who you are.

With gold and bitcoin, it is:  give -> money -> receive
With dollars and ripple, it is: receive -> money -> give

They are really both part of a tangled knot of cycles and epicycles, but with any cycle, you have to pick a point to be the beginning/end, and that choice, as arbitrary as it seems, makes a world of difference in how you understand the cycle.

Time only flows in one direction, future consumption comes from current production, and current production comes from past investment.  These are essentially definitions of the words; it can be no other way.  But for a long time now, we've been willing to pretend that we can consume today and invest tomorrow.  And the difference is a just a matter of how we choose to see it, at first, but when we start to really believe it, we are no longer the same people.

For currencies based on a commodity or a central issuer, if they are functioning as currencies, any given unit of currency will change hands so many times during its life that how it was originally introduced into commerce is basically irrelevant. You can ignore the very first use of a particular unit of currency because it's drastically outweighed by all the re-uses of that same currency unit. That's not to say it's not important how new units of a currency are introduced -- scarcity is a significant factor in determining a currency's value and if new units can be introduced easily, the currency will be a lousy store of value. But it doesn't meaningfully affect the operation or meaning of the currency.

For the US dollar, all the physical currency in existence equals about 1/12,000th of the total value of all dollar transactions in a single year.

I'm not sure the distinction you are trying to make holds up to scrutiny.

"one party has received something of value, and the other party is hoping that they will do something of similar value in the future" describes any currency transaction. The customer who pays for a meal with currency has received something of value, and the restaurant owner hopes to receive a product or services of similar value in the future. It doesn't matter whether the customer pays with gold, dollars, bitcoins, or ripple. How the customer originally received the currency isn't particularly relevant to the present transaction because what's being traded for is future production. If for some reason that future production never happens it won't matter what form of currency was used.

Apologies in advance, I've rewritten this post three times now trying to shorten it.  Sadly, each attempt has caused it to grow by at least a paragraph.  Just be thankful that I cut out the detour through the historic origins of debt and money.

Bitcoin and ripple are both attempts to make new electronic systems that more closely approach the abstract ideal of "money", but they do so in totally different ways.

Certain things have properties that make them more or less useful as money, but in the abstract sense, money is a means of splitting a barter transaction into two parts that can happen at different times, in different places, and between different people.

Essentially, if you buy a product or service from someone, you are getting wealth from them, and in return you give them money, which is (again, in the abstract sense) an IOU for wealth of similar value in the future.  They can then take that IOU and give it to someone else in exchange for a product or service.  In effect, they are performing a barter where they exchange one thing of value for another thing of value, with the money just as an intermediate step.  In the time that they are holding the money, they have given, but not yet received; they are owed a debt, not by one particular person, but by society in general.

Ripple is an attempt to transfer this abstract debt relationship into the electronic world, making something closer to the abstract ideal of "money" than the ledger and paper/coin system we use now.  The ripple system just helps turn your personal IOU that you give as payment into a general IOU, which is the same job that money does in a transaction.  In the end, both systems require a functional society willing and able to pay back those IOUs, and both systems can be open ended and (more or less) eternal.

All money, including bitcoin, ripple, dollars and even gold, are based on debt.  Holding gold means (more or less) that you have done something worth that gold's value, and you hope that in the future you'll be able to exchange that gold for something of similar value.  Dollars and ripple are the same, with a couple of subtle differences.  In dollars, certain players can create new debt (new dollars) at will, limited only by the willingness of people to accept them.  When you get a bank loan (or a credit card or whatever) that bank has created new dollars out of thin air by magic, limited only by their assessment of your ability to repay.  In ripple, everyone is a bank, and everyone can create money through magic, just by finding someone willing to accept it.

Gold and bitcoin, though based on debt/hope just dollars and ripple, have the advantage that no one can conjure them at will.  Gold and bitcoin are both past-looking, where holding gold or bitcoin is prima facie evidence that a party has already in the past done something of value for society.  Dollars and ripple are more forward looking, where one party has received something of value, and the other party is hoping that they will do something of similar value in the future to redeem that particular debt.

The forward looking version of money didn't grow up by accident.  It is a good system, and it works.  It has produced the amazing world we all live in today.  But it has also brought us horrifying tragedy, with new horrors brewing on the not-so-distant horizon.  I think that we are perched on a turning point in world history.  We will pick either the advantages and disadvantages of future-oriented systems like dollars and ripple, or we will pick the advantages and disadvantages of past-oriented systems like gold and bitcoin.  It isn't a one-sided choice, we are both gaining and losing either way.

But I suspect that the brewing storm will steer the next few centuries towards bitcoin (or something like it).

sir, you ask too much.

Ripple is a terrible idea and you know it. You can quit trying to troll now.

ripple apparently has its own virtual currency.

I believe you are 100% right, and I believe that this negates about 98% of the "revolutionary" value of the Ripple concept.

Acme, Bobtech, and Corpco eliminate all of that complication today just by dealing with an evil bank.  You know, banks are actually quite nice to business customers who have lots of money.  They don't make their richest customers wait in line for a teller, they assign a "personal banker" who will come to you, whose full-time job it is is to be nothing but the "personal banker" of a handful of big clients and their job is to make you happy, to bring you things on a silver platter if you ask.  And these banks come with one neat benefit - they're too big to fail - the banks can't lose your money, because the Federal Reserve will just add any losses to the public tab.  With service like that, anyone in their right mind would be nuts to turn their business banking over to some beta software written by a startup and designed around friends of friends issuing lunch debt.  The banks won't even put in the effort to laugh.  At least Bitcoin is something the smartest of them already take seriously.

Keep in mind, I'm responding within the context of the subject line of the OP, which is: "is ripple a trojan horse that will destroy bitcoin?"... my essential point is, "of course not!  look at how complicated it has to get - legally - for it to have any value beyond settling up lunch, a complication that simply doesn't exist with bitcoin."

I really am eager for Ripple to be released and for me to be shown that I've jumped to conclusions.  This happens with Bitcoin every day as the "hah- that will never work" crowd gets converted, one by one, so I'm not closed minded to the possibility.

In a system like Ripple there are several ways you can deal with such a risk. One of the best IMO is in addition to absolute IOU limit to introduce relative IOU limits between persons/entities in a given group. Thus, it'll be meaningless to hack individual accounts because to increase the individual IOU 'credit line' you have to hack every individual account within that group.

If you were expecting to need to redeem your IOUs with the original issuer at some point, you'd probably want to make sure that they'd take them from you.  That might entail forming a contract, creating an account with that business, etc.  If you were expecting that you'd be able to spend them with someone else then you might not worry about it.  IOUs, like gift certificates, might come with terms and if you blindly accept IOUs from entities you don't have agreements with, at full face value then you're taking some risk.  I don't see many businesses being able to get away with issuing IOUs.  I might accept a Citibank (or other too-big-to-fail bank) IOU from you at its full face value, as I would a cashiers check because I have an account with them and they've told me that they'll buy it back from me at any time.  You put your money on deposit with a trusted financial institution, they give you IOUs for it, you can trade those IOUs freely outside of their system and anyone with an account at that institution can redeem the IOUs at any time.  Anyone without an account at that institution can still safely hold and trade the IOUs--they could even sell them for cash on an IOU exchange.. they just might not be able to redeem them directly with Citibank.


Unless Corpco had an agreement with Acme to redeem the IOUs, Corpco might be out of luck.  Acme might openly state that they do not buy IOUs from anyone but their regular vendors.  Corpco agreed with Bobtech that Acme IOUs would satisfy its debt and Bobtech paid the Acme IOUs.  What Corpco does with them after that is up to Corpco.  Maybe Corpco can find someone who Acme does have an agreement with to buy the IOUs.  I think the IOU system is valuable among social groups where personal relationships mean something, and with highly trusted, insured financial institutions who are in the business of managing money/IOUs.  I don't think you'd ever want to take IOUs from random small businesses, maybe not even big businesses like Google unless you knew you could spend them right away.


Sure, this is a pretty big risk.. even Citibank could have their Ripple account hacked and issue some guy a billion dollars worth of IOUs, all of which he spends before they can revoke it.  Citibank can either pay up and honor the IOUs or not and forfeit their reputation, leaving the bag with everyone who was unfortunate enough to accept their IOUs.  IOUs are not cash.  If you're not comfortable with the risk, get USD or Bitcoin or get a big discount to compensate for it.


Ideally, you'd have a contract with everyone you trust.  With social groups, the terms are probably implicit, verbal at best.  With businesses, they may have terms or a public statement ensuring that their IOUs are redeemable and tradeable, like any usual gift certificate.  Don't make assumptions though--they may not be worried about not being invited to your Thanksgiving dinner next year.  If you want complete protection, you may have to seek regulation.  Ripple is still a powerful system--just don't take IOUs from strangers, and look both ways before crossing.

If Acme is a defunct company, then there is no recourse. Acme is punished by not being able to deal in ripple. Bobtech is punished by being a bad lender.

But how did it get to that point? If Acme sells pizzas for $10, you can buy a pizza by paying Corpco, but at what price would Corpco charge for a $10 Acme Pizza?

I don't think it's nearly attractive or destructive enough for that.

If it were a horse: