Topic: Ripple SOUNDS nice but there are some MAJOR problems - page 2. (Read 7025 times)

Why don't I just let them pay me in Bitcoin? If they got an IOU from a gateway I trust then they could have instead just gotten Bitcoins (?)


So are you saying now that XRPs will be scarce and have significant value?

It seems that when asked direct questions you do provide something that comes close to a solid rigorous answer. My question, is why is it that the Satoshi is so concrete, concise, and elegant, while Ripple is vague and poorly defined? Especially considering that both systems were designed by the same person (?)

The proof is trivial if everyone holds IOUs from at least one major gateway, everyone trusts at least one major gateway, and there's a healthy path between any two major gateways. If you don't meet these conditions, it still might work.

Thus:

1) If you expect people to be able to pay you, you should accept IOUs from at least one major gateway in one of its major currencies.

2) If you expect to be able to pay people, you should hold IOUs from a major gateway in one of its major currencies.

3) Any time there isn't a healthy path between two major gateways major currencies, that's a profit opportunity for someone to provide such a path. Note that, by default, anyone who holds IOUs from one gateway and trusts another gateway (in the same currency) is a path between those two gateways. Cross-currency paths have to be explicitly offered by creating exchange offers.

It's very easy for one person to be an outbound island if they don't hold any IOUs that others trust. It's very easy for one person to be an inbound island if they don't accept any major IOUs that others hold. However, it's very hard to create a situation such that someone who is not an outbound island can't pay someone who is not an inbound island. To have two large disconnected groups, you need a case where nobody in that group has any path to any of the people in the other group. If XRP catches on as a bridging currency, of course, it will be all but impossible.

This will be especially true if gateways make it their business to ensure they have good paths to other major gateways. I don't know whether this will happen or not, but it seems like if it is a problem, a gateway would have a strong incentive to solve it.

Easy to say but can you quantify this with a rigorous proof? It's easy to imagine that the degree of connectedness does not reach a critical threshold required for the desired liquidity.

Ripple would make a ton more sense to me if it were not referred to as MONEY.  Further, if Ripple were called something other than money, the "donut hole" problem would disappear, because the "donut hole" problem only exists when people think Ripple balances are money and apply the same assumptions to them that they have learned apply to money.

Ripple is an EXCELLENT "asset ownership tracking system".  Any "in-a-nutshell" description would do well to say that "Ripple itself is never the asset, but the journal that records ownership of the asset in a publicly accessible manner.  Ripple is the online equivalent of the county recorder's office that tracks ownership of real estate, except it's not limited to a county, and it's not limited to real estate, and most importantly, nobody can take an eraser to the books and change history.  It's a worldwide public system for recording transfers and ownership of many kinds of assets, a system that brings unprecedented integrity and transparency to recordkeeping."

Once framed in that context, you can start to create all kinds of legal assets and contracts whose ownership self-describes as an entry in the Ripple system.  The assets could be physical property, shares in companies, debts, you name it.  In other words, instead of Ripple first, legal asset second, it's legal asset first, and the legal asset self-describes its ownership by reference to Ripple second.

Simply changing what Ripple is called is an act of paying proper deference to the rightful authority of a legal system as the final arbiter of property rights.  This will allow Ripple to be far more respected by legal systems, versus a pretense that it's an anonymous money system like Bitcoin that operates without regard for, and arguably circumvents, the law.

The advantage that Ripple brings to the table in such a case is transparency as to whether someone still owns what they say they own, unencumbered, as well as a public way to register that the history of ownership of something is exactly as it is claimed.  Even the oldest of the old-school legal folks can grasp the benefit of this.

tl;dr: stop calling it money, people will misunderstand its true novelty and value!

A dense web of trust is only needed for credit. Otherwise, there just has to be at least one path with enough liquidity for any given transaction.

If you want to setup a local gateway to help your friends get cash into and out of the system, you can. Here's what you can do:

1) You set up your account to trust at least one gateway. Your friends pay you IOUs from any gateway you accept. You hand them cash.

2) Your friends set up their accounts to trust at least one gateway that you do business with. You pay your friends IOUs from any gateway they accept that you support.

The downside of this setup is that it doesn't allow you to grow into more of your own gateway, but it also doesn't require anyone to trust you. If you want more of a growth potential and think people would be willing to trust you, you can do this:

1) You set up your account to trust at least one gateway. You setup 1-to-1 offers between your own IOUs and IOUs at at least one gateway.

2) Your friends give you cash, you pay them with your own IOUs. You require them to trust either you or at least one gateway you support.

3) Your friends can pay you with either your own IOUs or IOUs from any gateway you support.

4) You try to encourage your friends to hold your IOUs rather than the IOUs of an other gateway. You can do this by keeping your transfer fees lower than that of other gateways. You can do this by convincing them that the risk that you, someone they know, will default is low. With your IOUs, they can costlessly switch to the IOUs of any gateway you support (so long as you aren't "out of stock").

You don't need a dense web of trust. All you need is every account to trust at least one major gateway and healthy paths between any two major gateways. And even if you don't have that, unless an account is an island, you'll almost always still be able to find a usable path.

If I understand correctly that use case will only be practical with a dense web of trust, but that's not what they are going to focus on to start with. So that's why I'm confused, since they aren't going to start out with the most interesting feature.

Despite the lack of rigorous papers regarding the Ripple protocol, or any sort of in-depth analysis about the properties of the system, the trusted nexus concept is the one thing that I can easily see having great value. It directly addresses the problem of a decentralized exchange.

Right now there's no reliable way to convert physical fiat (i.e. cash / paper bills) into Bitcoins except perhaps by going to localbitcoins.com or whatever. But Ripple offers the possibility to go into business as a one man local exchange. I certainly plan on doing this in my area (Los Angeles). In addition to fiat exchange, a nexus could also offer conversion to and from precious metals, bypassing the traditional financial system for such transactions.

If you try to go through customs with 250 ounces worth of gold coins, some men in suits with earpieces are probably going to ask you to come with them to a secured room. With Ripple, you could meet your local nexus guy and physically exchange your gold coins for Bitcoins. This is a really good way to do the transaction because no trust is involved. The nexus has the opportunity to observe the coins, and you can verify from your Bitcoin client that you received the payment. Then you take your international flight with no problem, Bitcoins safely stored in the brain wallet.

When you arrive at your destination you consult a local nexus dealer and convert the Bitcoins back into gold coins, without the requirement of trust.

This is just one of many use-case scenarios that the nexus concept enables.

That's why I only hold bitcoins in addresses whose private key I control.

There is nothing preventing anyone from using bitcoin as a fiat system. There is no way to be sure Mt Gox has full BTC reserves backing all the user balances. In the same way banks issuing paper backed by gold may not have all the gold sitting in the vault but instead will lend out 10 times their reserve.

It isn't anymore fiat than bitcoin is?

Ripple as a currency is doomed because it is just another fiat currency.

It may be an interesting experiment, but it won't last very long.

So when will ripple give away ripples? I mean when will the system be usable?

Yes but if the government cannot trust someone to co-operate in curbing terrorism how comfortable will someone be in trusting that same someone with their money? I guess if you are part of the same bunch of terrorists, maybe, but what if your gang splits up on some ideological grounds leaving some of the "branches" or "gateways" that were part of your gang suddenly in effect a rival gang wanting to seize your money because you don't agree with their variation of your previously common ideology?

A lot of folks just won't trust terrorists, and thats okay, a lot of terrorists probably don't trust them either.

(Lets bear in mind too that some gangs some refer to or treat as governments, or are governed by, might well be terrorists, in at least some folks' eyes.)

-MarkM-

 ripple seems to be a distributed Mt Gox where you dont have to send anyone your passport just to exchange one currency to another.

http://www.currencyfair.com/  is a site that seems to be a similar thing.

If you can exchange massive amounts of currency p2p without needing KYC or AML paperwork it could cause some interesting friction with governments because of "terrorism" and "money laundering" laws.

The Ripple system's rules control the flow of IOUs. You don't have to extend trust to someone to take gateway IOUs from them. You can use gateway IOUs like Bitcoins, handing them around with no concern for the fact that the gateway has withdraw on demand agreements with some people. You can pretend the IOUs just have value because people value them. You don't have to extent trust to anyone but the gateway since you're only exchanging the gateway's IOUs.

Basically, a reliable gateway's USD IOUs act much like Bitcoins except they track the value of the dollar so long as the gateway remains reliable.

(A gateway has the option to restrict who can hold its IOUs to its customers. So you still might need to open an account with the gateway, choose a gateway that hasn't enabled this feature, or use an account "in front of" a gateway that offers 1-to-1 exchange for the gateway's IOUs. This only restricts who can *hold* the gateway's IOUs, it doesn't restrict who can use the gateway in a payment path.)

The connection is between decentralization and exchanges. Companies in the Bitcoin space aren't always allowed to provide services their customers want because of AML and similar restrictions make providing them uneconomical or illegal. Systems like localbitcoins.com aren't as hampered in some ways either because the transactions fall below legal thresholds or are so numerous and distributed that the regulations are impractical to enforce.

If the focus of Ripple is going to be on gateways instead of personal credit I don't see how you won't run into the same problem of transactions being technically possible, but legally blocked.

As XRP are destroyed, those remaining increase in value. That makes transactions cost less in terms of XRP. Like bitcoins, Ripples are infinitely divisible (theoretically, with protocol updates), so smaller and smaller fractions can be used indefinitely.

After initial distribution, market forces will determine the unit value. This will prevent excessive transaction dusting.

I may be mistaken.

Why do you say that?

That shouldn't be possible. Should XRP become scarcer, the XRP cost of a transaction can be reduced by consensus. If need be, the divisibility can be increased. (Currently, XRP are divisible into millionths called 'drops'.)

When the network is flooded, it raises transaction fees automatically. So anyone who wants to keep the network flooded will have to continue to supply greater amounts of ripples to do it.

Say the network can handle 50 transactions per second. And say you have a very important transaction that you need to get through. To lock you out of the system, an attacker would have to flood the network with 50 transactions per second, each consuming a transaction fee equal to the most you're willing to pay to get your transaction in. Essentially, Ripples serve as something scarce that can be used to auction off transaction slots when the network is busy, whether due to legitimate load or due to abuse.

Then this sounds like more like a scam... so what happens when all billion XRP run out since thay are destroyed upon every transaction? Also how does giving free XRP prevent flooding the system with bogus 0.00000000000001XXX transactions?

OpenCoin will be giving away at least half of the XRP as the system is deployed and scaled. For now, you can post your Ripple address on the Ripple forums, here, in #ripple on Freenode (I think it is) or any number of other places. There are a few people watching for them (I'm not one of them).