Topic: Ripple: A pre-mine? Does it matter? - page 2. (Read 14032 times)

This whole Ripple thing has a horrible stink to it.

I made a post in another thread that is relevant to this one. I'll just make a partial quote here:
As an illustration, here's an example of these stamps.

The Norwegian Postal Service sells one book of "A Verden" (first class air mail international) stamps for 150 NOK. But they will continue to honor them as long as they are in "business". Unlike traditional stamps which have are denominated in a currency like NOK, this is a bit like a Ripple XRP.
Of course, unlike stamps, there are no "rare" or "special" XRPs - it's fungible and divisible. Also it's more likely that Ripple will collapse than that the Postal Service will collapse. They have some partial monopoly protections in some countries after all.

Edit:
This remains to be seen. Bitcoiners prefer XRP over IOUs just like gold bugs would prefer platinum over dollars, but if Ripple is to become successful, it has to attract users who will use IOUs for transactions. To use the analogy above, the postal service can't be successful if the only ones it attracts is stamp collectors.

And even if the user Opencoin claims that XRP is a currency, I don't accept it as a real currency even if it has an acronym. It's more like stamps or frequent flier miles.

Of course bitcoin would have not existed without PoW because bitcoin relies on it for its security.
A PoW chain doesn't need to distribute the initial supply through PoW though.
Making xrp mine-able is not difficult, as I said in the thread where this issuing mechanism is proposed for xrp, it's just not economical: it's a waste of resources.

There is a reason Bitcoin is mined: proof-of-work technology is what made Bitcoin possible, because it made it possible for the units to be acquired through the same method by anyone. Without proof-of-work, Bitcoin couldn't have come into existence; the same holds for any allocation of virtual currency. The only way to make Ripple work is to do away with XRP or find a way to make them "mine-able."

As I said before, it is technically true that there is no mining but the term "pre-mine" in this community has become generally accepted to mean a cryptocurrency where issuance or distribution is partly or wholly under the control of the authors.

There's no pre or post mining: there's no mining.

pre-mined and post-mined, just like what Federal Reserve can do to USD.

That makes absolutely no sense. Either the scheme is profitable beyond the raw value of the XRP or it's not. If it is, then it makes sense to buy up XRP to do it. If it isn't, then it makes no sense to do it regardless of how you got the XRP.

Being able to mine BTC and LTC is one of the main reasons I am interested in them and invest in their economies.

I have absolutely no interest in Ripple or any other premined ecurrency.

Seems to me that one by one technical questions are being answered, mostly by referring to the as yet under specified and not yet peer reviewed consensus mechanism.

Let's do the following thought experiment to address the 50% of XRPs being controlled by OpenCoin and its founders (effectively the same locus of control) :

Imagine that over the next year, The Fed or some other very rich or "printing" entity patiently accumulates 10.5 million BTCs thereby effectively recreating the concentration that will be present in the ripple network after the distribution even if it costs them, say, $100 billion in freshly printed fiat.

Can this new overlord of Bitcoin suppress the price of Bitcoin from that moment on ? No, because in a non-fractional reserve crypto currency system ( as long as they can't introduce a "paper bitcoin" substitute similar to today's paper gold or silver. Ironically, Ripple if successful, can make highly leveraged fractional reserve BTC IOUs viable, watch out !!! ) with a hard upper bound on total possible number of units that can ever exist, the only way to keep the ceiling on the exchange rate would be to continue selling at whatever rate they chose to be the ceiling, but doing that keeps draining their bounded hoard, therefore that attempt will fail and in this resect ripple would be the same as Bitcoin in this imaginary capture scenario where 50% of all possible coins have been hoarded by The Fed.

Perhaps we should give it a name: "50% of total possible money supply capture attack"

Therefore, in the long run, the non-distributed 50% of XRPs will either stay sequestered off the market or will be drained away through sales ... Either way, that concentration and its perceived Systemic Risk will either remain theoretical or will inevitably dissipate if actually attempted in practice.

There is absolutely no way someone could buy up enough XRP to do this in an economically viable fashion. However, someone who started with 50 billion XRP could do it easily.

Someone who holds a large number of XRP can temporarily raise the cost of transactions. But to keep the cost of a transaction over, say, 10 cents, they'd have to be willing to put ten cents worth of XRP behind every transaction that they make. Presumably, the volume of their transactions will exceed the volume of legitimate transactions at that price, otherwise substantially the same thing would happen without them. So they'd be losing more XRP than the total value of all legitimate transactions that might occur. It's hard to imagine how this could possibly be done at a profit.


This has nothing do with XRP distribution. Provided they can be freely exchanged, the same problem would occur with any distribution. How you got your XRP in the first place has no effect on what you can most profitably do with them once you have them. If this attack worked, someone who bought up XRP could perform precisely the same attack with precisely the same effects. If it was profitable, people would be motivated to buy up XRP to attempt this.

Here's an attack vector: someone who holds 50 billion XRP can easily flood the network with transactions, force everyone to raise the fees and then sell some of the XRP off at a higher price.

Well I have to admit that when technical questions are asked, they usually get an acceptable answer. Which is why I did state my assumption in the original post that the system will eventually be rigorously proven to be secure.

The glaring problem is the XRP distribution.

I don't think it much matters because you can't easily get a human's attention. Most likely, nobody is going to look at those fields. We've tried to keep the design so that you can't easily compel another person's attention.

If models do arise, I think probably the best solution would simply be for the client not to report it to the user. For example, if someone not on your list of known accounts sends you a microscopic amount of XRP, you probably just don't want to get notified. If we do things like integrated messaging, they'll have anti-spam features built in such as requiring permission first.

We are not really expecting the transaction fee to protect against that kind of spam. It may to some extent do so "accidentally", but that's not what we mean when we say it protects against spam -- we mean pointless transactions aimed at clogging out legitimate transactions.

What about areas where parts of transactions are displayed to humans? For example, the name of a self issued currency ("BIGDIK" in my example). What about phone numbers, URLs, or other messages (e.g. "Litecoin is crap") appearing in description fields?

That's really up to them. I would say pretty much the only criterion is that transaction fees not be so high that they are a barrier to use and, ideally, not so low that they frequently need to be raised to control spam.

You don't need to try to figure out if specific transactions are spammy or not. You just have to look at whether the total volume of transactions is within what the system can handle and also whether the cost of a transaction isn't unreasonably low when compared to the actual costs associated with processing a transaction.

If the fee is so high that transactions are discouraged that the system could handle, it should be changed. If the fee is so low that the network is consistently overloaded and has to raise the fee dynamically, it should be changed.

Transaction spam is not like email spam. It doesn't annoy human beings directly. But it does cost bandwidth and reduce the remaining capacity of the network. The criteria is basically to make sure that transactions that cost more money to process (in terms of bandwidth and storage) than they are worth are discouraged without having to resort to dynamic changes in the transaction fee (because that makes fee and transaction clearing times less predictable).

Right. We have good pseudo-code for "how" the fee is changed. But no examples for what criteria are used to calculate "what they think the transaction fee should be." For example, how does a gateway implement this function:


Do they raise the fee if "too many" transactions go through? Or do they raise if a lot of spam is coming through? For that matter, how do you identify a transaction as spam? The rationale given for the necessity of XRP is that it is "to prevent spam." I agree that spam is an issue. The first thing I would want to do is create a thousand self issued currencies called "BIGDIK" with an incrementing numbed appended to the end. How do we prevent this? How does a gateway recognize this as spam? Is it a manual process performed by the gateway operator poring over server logs? Is there a community website that gateway operators visit to hear the latest and greatest on how to combat spam?

A lot of talk has been given on the consensus model and the need for XRPs to prevent spam but nothing has been said on the exact methodology that a gateway will use to determine what an appropriate transaction fee will be, or even if the fee needs to change.


Are you saying that bandwidth is the sole criteria for determining the fees? I don't see how that prevents spam at all.

50 billion XRP will be given away by Opencoin. But it still doesn't matter. So long as there are enough XRP in circulation to perform transactions, XRP still won't limit the ability of people to perform transactions. Over a quadrillion drops have already been given away, and consensus can change the base transaction fee to less than a drop.

The primary criterion will be what they believe the transaction fee should be. The secondary criterion will be what they believe they can get a consensus on.

I believe I explained the mechanism in more detail in another thread, but here's a summary:

1) Validators add to specific validations an indicator of what they think the transaction fee should be.

2) Validators look at other validations to see whether there's a sufficient consensus for moving the transaction fee up or down.

3) Validators then add pseudo-transactions to change the fee.

4) If a pseudo-transaction gets voted into the consensus transaction set, fees change as of the next ledger.

A similar mechanism is used to make logic changes, except nodes won't themselves vote yes on a change unless they see it has a supermajority or if they are specifically configured to treat the change is urgent.

There is no specific check for spammy transactions. If it has the correct fee, it will be processed. If the network is overloaded, slow nodes will bow out of the consensus process and the transaction fee will rise to maintain stability.

Your example is flawed. You say that the transaction fee will be only 1/10 of a penny. What happens if Ripple grows and new XRPs are not handed out in the system? The value of XRPs will go up without bound. Especially because, once an account is funded the XRPs are "locked in." From an analysis perspective they are effectively destroyed since they can't leave the account. That means that the rate of deflation is many orders of magnitude greater than the rate of XRP destruction due to transaction fees. "Implausible in the extreme" is only true if no one controls the bulk of the XRP supply.


I keep hearing about how easy it is to change the transaction fee through the consensus mechanism. But no one has explained exactly what criteria a gateway will use to determine if the fee needs to be adjusted. How do you implement these functions:


For that matter, how do we implement this function:


But I think this is a discussion best left in another thread. The bigger issue is the XRP distribution.

I have to admit that this is a concern that never occurred to me. But it seems implausible in the extreme. There are a hundred billion XRP, or a hundred quadrillion drops. Let's say 1/10th of a penny per transaction is small enough that nobody need be concerned about it being a limiting factor. For one drop to be worth 1/10th of a penny, the total value of all XRP would have to be one trillion dollars.

If that ever did happen though, the divisibility of XRP could be changed by consensus. Alternatively, we could use a scheme where you prepay for a number of transactions and then can perform transactions without a fee until the account's "transaction credits" drop to zero. The number of transaction credits you got for one drop could be adjusted by consensus.