Topic: Ripple explained for Bitcoiners! - page 2. (Read 17724 times)

To clarify my comment, the reason why I think this is because it seems like Ripple is trying to replicate some of the things Bitcoin can do and some of the things it can't.  But in the process of designing it, they ruined everything that made Bitcoin ingenious.  Bitcoin provides everyone, from the top to the bottom, everywhere, reasons and motivations to use it.

Ripple provides no motivations for anyone to use it until it reaches critical mass.  Which it will never do, because people have no reason to start using it to push it to critical mass.

Just like Google wave.  It *was* cool.  It did lots of neat things.  But no one was motivated to use it, at all.  So it died.

You know what Ripple reminds me of?  Google wave.  It was neat, it had lots of potential, it was geeky, the few people who got it were really excited, and it ended up being totally worthless.

Yes there can be a most trusted gateway (i.e. the one that manages to attract the largest total amount of deposits across all currencies). But those deposits can be used to exchange for balances at any other gateway. I'll give you an example, with two hypothetical gateways "Bitstamp" and "Foobit", that each issue both BTC and USD. Bitstamp is the big gateway and Foobit is the tiny one.

First recognize that there are 20 order books in this scenario (!!!):

BTC.Bitstamp -> XRP
BTC.Bitstamp -> USD.Bitstamp
BTC.Bitstamp -> BTC.Foobit
BTC.Bitstamp -> USD.Foobit
BTC.Foobit    -> XRP
BTC.Foobit    -> BTC.Bitstamp
BTC.Foobit    -> USD.Bitstamp
BTC.Foobit    -> USD.Foobit
USD.Bitstamp -> XRP
USD.Bitstamp -> BTC.Bitstamp
USD.Bitstamp -> BTC.Foobit
USD.Bitstamp -> USD.Foobit
USD.Foobit    -> XRP
USD.Foobit    -> BTC.Bitstamp
USD.Foobit    -> USD.Bitstamp
USD.Foobit    -> BTC.Foobit
XRP              -> BTC.Bitstamp
XRP              -> BTC.Foobit
XRP              -> USD.Bitstamp
XRP              -> USD.Foobit

Now imagine that someone places BTC up for sale in the BTC.Foobit -> USD.Foobit order book. How can someone who is holding USD.Bitstamp purchase these bitcoins? First recognize that we want to send Bitstamp USD and receive Bitstamp BTC. Now consider one possible path:

USD.Bitstamp -> USD.Foobit -> BTC.Foobit -> BTC.Bitstamp

Ripple will look at these order books to calculate the depth and price:

USD.Bitstamp -> USD.Foobit
USD.Foobit -> BTC.Foobit
BTC.Foobit -> BTC.Bitstamp

It is unlikely that gateways will maintain walls in these books, because it would expose them to counterparty risk. Instead, liquidity providers (I plan on being one) will use software to keep automated bid and ask walls in the appropriate order books. For example, I will accept Bitstamp USD and give you Foobit USD. I will need to charge a small premium, which I will build into the offer. I might give you 1 Foobit USD for every 1.03 Bitstamp USD that you give me.

Repeat the process for each order book and now Ripple can supply you those Bitstamp BTC in exchange for Bitstamp USD, even though the best prices and depth are in a different issuer's order book.

As you can imagine, the number of combinations of order books across all issuers and currencies will explode in number. An alternative is that liquidity providers can maintain bids and asks for issuers currencies in conversion to XRP. The path in the previous example could also be written this way:

USD.Bitstamp -> XRP -> USD.Foobit -> BTC.Foobit -> XRP -> BTC.Bitstamp

or this way:

USD.Bitstamp -> XRP -> USD.Foobit -> XRP -> BTC.Foobit -> XRP -> BTC.Bitstamp

These examples show how XRP can be used as a "bridge" currency. By the way, this is all in the wiki.


You don't need an account at each issuer. That's the whole point of Ripple. You deal with a gateway that you trust, to handle deposit and withdrawal, and then you can access everything on the Ripple network no matter who the issuer is.

If you are holding the currency of a gateway that you don't have an account with, Ripple can easily exchange it for something that you would prefer to have by automatically going through order books and "rippling" through people who have extended trust to multiple gateways for the same currency.

This is the distributed exchange Bitcoiners have been dreaming of!

It looks like FellowTraveller is raising funds and developing OT in a more commercial manner at the moment, sounds like there will be some IOS apps a GUI clients etc coming out soon.  Of course this will probably mean closed source apps and proprietary protocols etc if some company is doing the funding and wants a profit..

So out of the 3 projects, all looking for funds we have:

* Bitcoin - Bitcoin foundation begging for donations, potentially skewing the bias of future development towards what the donators want
* Ripple - XRP reserve to fund OpenCoin for continued development
* OpenTransactions - Closed, proprietary add-ons, clients, systems to the free opensource OT library.

Everyone's gotta make a living

Edit: Seems like Satoshi was the only true altruistic developer

Thanks!


And this is exactly why I prefer that Ripple is developed by a for-profit company that can pay developers. They also have a strong financial incentive to ship their product in a complete state instead of having it drag on for years by someone who has to work a full-time job elsewhere to pay bills.

I don't mean this to sound like I'm bashing Open Transactions; There are a lot of really nice innovations and solutions in there. Its just that it didn't put the pieces together the right way.

http://www.reddit.com/r/Bitcoin/comments/1e3s82/anyone_that_has_read_about_opentransactions_got/

See the link to stackexchange and also the discussion by FellowTraveler about half way down the page.

Great thread misterbigg!  You have objectively outlined all the facts about Ripple in a friendly and easy to read manner.  The other Ripple threads are good for a laugh though.


The problem with Open Transaction is that it is confusing as all hell, and the software is nearly impossible to set up and run.  I'm fairly techie and after numerous attempts have still yet been able to install and run OT.  Even when the software loads I cant figure out how it works.

FellowTraveller has stated that he wishes other users to pick up the OT library and develop other software with it, but it really needs an easy to use GUI to showcase its potential ( I think there is even a bounty for it).

I'm very optimistic for the future, with the triple threat of Bitcoin, Ripple and OT we have the toolsets to become the worlds new financial standards.  Its funny with all these pro-bitcoin, pro-ripple threads going on, at the end of the day it doesn't really matter who says what, if Ripple brings a benefit it will flourish just like Bitcoin did in the face of extreme derision.

Okay, got it. You had me excited for a minute.

I don't know Open Transactions very well but my guess is that during Ripple's development, they made different choices at key decision-making points from the ones Open Transactions made. As a result, they were able to produce a viable system whereas Open Transactions still has unsolved problems. This is mostly theory though...I haven't worked with OT much. I just read a few of the papers.

Even though I already knew all this, I forwarded this to reddit because it seemed quite readable and accessible to others.

Standard disclaimer:  mention does not constitute endorsement.    I just believe in widely sharing all knowledge.

 

There are plenty of other places for inflammatory talk and personal attacks - this isn't one of them!

You can come over to my non-censored (no self-moderation) thread, cypher: https://bitcointalksearch.org/topic/the-true-explanation-of-ripple-for-bitcoiners-211596

Is there a Compare/Contrast between Ripple and OpenTransactions? They seem to be doing the same thing.

Well, we hope that one day a bank will operate as a gateway. Hasn't happened yet.

How is this possible? Where do you open a Ripple-enabled checking account?

Thank you for your time to answer my questions as it has helped and I'll watch the progression of ripple for a bit.

In terms of my thoughts of corporations; yes I'm not fond of them.  However, I do limit this to say fortune 500; or specifically the 200 identified @ 97%.  If these 200 were the final gateways, whew!
So just corporations with minimum cash "influence" thresholds.

with with the 50 xrp for funding and drop transaction cost.  It would seem this 50 startup would last quite a long time then, if I understand.

I note at the lower end you mention "If we can get rid of all the Bitcoin exchanges and still have a well functioning economy....."

How would the pricing for BTC be determined then?  By the gateway's correct?

Thanks again for the help with my questions.  I DO agree  nice system is needed to facilitate easy utilization and transactions of BTC via multiple methods.  Guess I'm still on the side of BTC = commodity, but open as times goes by.

The number of units doesn't really matter, as long as there are enough of them. I think they choose 100 billion because it fits into a 64-bit integer (100,000,000,000,000,000 including the fractional part)


Not really Right now it takes 50 xrp to fund an account. One Ripple is made up of 1,000,000 "drops". A transaction costs 10 drops to send. The 50 xrp that funds your account is sequestered. You can only use it to pay for transaction costs. If you had more than 50 xrp you could send the remainder elsewhere. For example if you had 70 xrp you could send 20 of it to a friend.


Its not a trick in the "trick or treat" sense. What I mean, is that it is not a simple task. Getting other people to trust you requires effort. You need to show them that you can be trusted, and that there is a legal recourse if you don't honor your agreements. That's why anonymous gateways should be avoided at all costs.


It sounds like you're saying that all corporations are bad. That's certainly not the case. MtGox is a corporation, are they bad?


The "IOU" is a cryptographic token that can be passed around the Ripple network. In the current banking system there is no convenient way to transfer a balance out of your bank account to someone else. These are your choices:

1) Write them a check (physical, takes a few days, can't be automated)
2) Wire the money (takes a few days, expensive, can't be automated)
3) Withdraw cash and hand them the money (requires face to face, can't be automated)
4) ACH Transfer (one end has to be a business, costs a lot of money for regulatory compliance)

Unlike your bank balance, a Ripple balance can be sent through the decentralized peer to peer Ripple network in flexible ways. Ripple transactions take 2 to 20 seconds to "confirm." They are incredibly fast compared to bank methods. And they can be automated.


No. There are different kinds of "debt." When you deposit money at MtGox they "owe" you dollars, or bitcoins if you buy from their exchange. This is not a derivative - its a different form of IOU. Is a MtGox balance the same as a mortgage or collateralized debt obligation? I hope you don't think so!


Imagine if you could deposit your money at MtGox, but then send some of your USD balance to a friend. They could take that USD balance and buy Litecoins from BTC-e. Then they take those Litecoins and use them to pay a guy in China, who receives it as CNY (Yuan, China's native currency). This is what is possible with Ripple.

Here's another scenario: you open a Ripple-enabled checking account. Using your bank's online banking web page, you withdraw the dollars into the Ripple network and use it to purchase bitcoins at multiple gateways for the lowest price. Then you redeem the bitcoins into your bitcoin wallet. Or, you keep your bitcoins as a balance in your checking account and when you use your debit card, it sells just enough at market rates to pay for the charge.


Sort of. MtGox could be considered a middle man. Any time you want to sell your coins you need to trust someone, unless its a face to face exchange (and even then you have to make sure that they don't rob you).


Like bitcoin, anonymity is not the default but it can be achieved to varying degrees of success with work.


That's right. In theory, you could lose some or all of the entire amount that you are trusting to the gateway. This is why Ripple will not replace Bitcoin! When you need to reduce your counterparty risk to zero, you will use bitcoins. When you need to pay a bill in fiat, you can use Ripple to pay for it with your bitcoins. Ripple complements Bitcoin.

Until most people can live their lives paying all bills and receiving all income with Bitcoin exclusively, it will be necessary to interface with the traditional financial system. MtGox must interact with the fiat world, and most people need to interact with MtGox. Even Bit-Pay depends on MtGox, as well as most other Bitcoin payment processors. If you only buy things using Bitcoins, you are indirectly dependent on MtGox if your payment processor requires access to their liquidity.

For as long as Bitcoin exchanges are needed, Ripple will be a superior solution. If we can get rid of all the Bitcoin exchanges and still have a well functioning economy, then it might be possible to live completely without the need for trust. I don't see this happening in the forseeable future though.


Yep, I understand where you are coming from. Given the current global economic situation, it is totally legitimate to be concerned when hearing the words "trust", "debt", "IOUs", and "licensed, regulated gateways" in Ripple's description. Ripple doesn't prevent the problem of government seizing funds at a gateway. But it is an improvement over the current banking system. And it enhances the value of Bitcoin.

Hmm...no. A gateway is an entity that self-issues currencies in the Ripple system.


No. Schwartz explained this elsewhere really well. Even if there is someone somewhere in the chain that you don't trust, all Ripple payments are atomic. They either go through completely, or fail. If it goes through, you get exactly the balance you asked for (or better). If it fails, no balances are changed.

Uhhh, reading your post brings up a few questions.  As I am not overly familiar with ripple;  glad I looked.


Ok so here XRP is a currency.  I see 100 billion to start.
-that's the highest number of units for any currency (at start) in history correct?
-divisible by many decimals, would then be the most inflatable in history too, correct?
-I require this currency - to spend currency - and once used it's sequestered.  Isn't there an unnecessary extra step in here?



First here, LOL
- Why would you call it a "trick" to get someone to accept this IOU?
- Gateways are corporations (e.g. banks and too big to fails);  EG same as the current monetary system, check.
- Gateways hold my funds, right, same as banks currently.......but why do I get an IOU instead of money like I can do now with current banking system?
- This sounds remarkably similar to the sales pitch used with derivatives that caused the housing market collapse, correct? 
(e.g a high value gateway (like AAA bank) could take on junk IOUS (like junk house mortgage) and all is well until .....)  <

Quote from: misterbigg on May 20, 2013, 12:10:44 PM

Quote

How do I sell 1 btc for USD?  Is this possible with ripple?

                                                                             
Yes it is possible:
                                                                                                      COMPARISON TO CURRENT SYSTEM
                              RIPPLE                                                                                             BITCOIN
1) Open an account at a gateway (Bitstamp.net for example)                        1) Open a Mt Gox account
2) Deposit your BTC at the gateway                                                          2) Deposit BTC to Mt Gox
3) Withdraw the BTC as a BTC IOU in Ripple                                                3) Purchase USD with BTC order
4) In the Ripple client send a payment to yourself in USD                               4) Withdraw to bank account
    The client will show you the price, you can accept it or cancel
5) Deposit the USD back into the gateway
6) Withdraw the USD from the gateway to your bank account

Quote

It seems way too complex and not needed in any way.

Complex yes. And very much needed!

(comparison with current method above in red)

Yes I would agree complex and brings more questions.
- Why would I use a Gateway and Ripple middle man, making 2 more steps in this process?
- Doesn't this remove the "highly touted"  No-Middle-Man concept of BTC?
- This removes any "hightly touted" anonymity belong to BTC as well, correct?
- For attack vectors with ripple we have step 1,3,4,5,6  with current method we have step 2,4
- For Tracking points with ripple we have step 1,2,3,4,5,6 with current method we have step 2,4
- For seizure points with ripple we have step 2,3,5,6 with current method we have 2,4
I'm missing how this is improved.

Finally then, since all currencies are held by these gateways;  no individual actually owns anything correct?  EG at 100% market integration - 100% of the global value would be in the legal possession of these "corporation gateways", correct?

*If the goal would be to consolidate all buying power(currency physically owned) into corporations and remove all consumer buying power (while maintaining no legal recourse for recollection of this currency); then I guess I have no questions and DO understand.  In which case the above can be disregarded.

I may be off base with some of these questions; but these are what comes to my mind from reading your description. Sorry to be long, but I think that covers them all.
Thanks

Well, trusting more than one issuer for the same currency turns yourself into a gateway.

I was thinking about a path like [trusted person] <-> [trusted person] <-> [trusted person] <-> [toxic villain], where the first person seems to have a trustful network from his point of view. It doesn't matter how many people there are who you trust, even if those trust a trustful person, who trusts a trustful person, who trusts a ..., ... if it only takes one untrustful person, to compromise the complete trustline/network?