Even if you trust people you know in life, if they trust people who either trusted someone that defaults, or trusts someone that either trusts someone who defaults or trusts someone that either [..]
This is completely wrong.If you owe money on a mortgage do you think they give a shit if your friend didn't pay back money you lent them? Do they give a shit if you lost your job. No you still owe the debt. If A owes B; and B owes C; and A refuses to pay that's B's fault. C doesn't care, B still owes them. If B welches on their debt to C then B is an asshole and no one will trust him anymore. In particular if I'm C and I know B in "real life" then I'll make their life difficult.
So thanks for telling everyone that you won't pay your debts if someone ever defaults on a debt to you. I hope everyone realizes that means they can't trust you.
If you have 95% of your money stored in a bank, and the bank (gateway) defaults [because a lot of people they loaned to defaults], are you going to be able to pay your debt to your friend with money you don't have? And if your friend can't get any money from his web of debt, how are they going to pay back their creditors? They won't, and the whole web of debt system collapses with a enough big default.
It's not about "would someone pay back if someone defaults on them", it is about could.
If EVERYONE defaults on me - my bank, my assets, my employer, and the bitcoin network defaults on me, where the fuck do you think I'm going to pay out? This isn't going to happen in real life, because unlike ripple my bitcoin exists in the blockchain instead of in the form of interest free debt that is absolutely always worth less than face value, and my banks are insured by Australia.
