Topic: Some thoughts on Ripple (Read 3429 times)

See below, I have both XRP and USD (bitstampUSD) in my ripple wallet. I can choose to send either, it will automatically be traded for BTC on the ripple order books, and sent straight to the bitcoin address.

Of course it does. Ripple is a deposit method on Bitstamp. You can transfer funds on ripple to bitstamp, and buy BTC.

Or you can just do it automatically from the Ripple client. Just click "send", put in a BTC address, and it will use the cheapest bitcoin bridge (usually Bitstamp's) to deliver BTC to the bitcoin address.

I still have no clue how this crap works but if doesn't give me real bitcoins or cash at the end the day he's going to be in trouble

It could still work as a friend to friend network. You could say that everybody acts as a gateway for their direct neighbours in the trust graph. The trust is essential of course, just as it is with non-Ripple Bitcoin exchanges.

Someone I know is heavily involved in Ripple, to the point of trying to set up one of those 'gateway' things as a business. He's a smart guy and I don't think he's gullible enough to fall for an obvious scam, but perhaps the Ripple people are clever as well and have some secret to making money beyond their public declaration that they've 'premined' some ripple for the purposes of bringing in a return as a business (I'm pretty sure they had originally posted that on their web-site, didn't they?).

You are correct, it does not work without gateways. Just like there is no bitcoin trading without a bitcoin exchange. Okay, you can use localbitcoins, but even in that case, the price is agreed base on the price at an exchange. And exchanging through an individual on localbitcoins would be like exchanging through ripple where the "gateway" is an individual rather an a centralized exchange - you still have to trust them to pass you the "real money" as you pass them the coins.

Sure, it's forbidden in some jurisdictions. That doesn't mean it no longer exists in those jurisdictions.


They can trade using their trust graph. If there is a path from A to B, then they can conduct a transaction and their balances as well as those of the individuals in between in the trust graph will be updated. Periodically each party can settle the netted transactions with their direct neighbours. Settling can be done with any payment mechanism, including cash.

The Hawala system is at least in Germany stricly controlled/forbidden:
http://de.wikipedia.org/wiki/Hawala


Can you layout a simple step by step scenario with 2 users (if users are issuers not gateways) who are trading BTC/USD in Ripple?
Just a scenario if I want to sell 1 BTC for 1000 USD and then a few days later sell those 1000 USD to x BTC. I dont understand how that could work without gateways (at the end I want real BTC and real USD not IUOs - if a gateway is needed then lets add it to the scenario with all trust implications). Also I would like to see in every step the trust limits (possible loss).
I tried to find on the wiki page a detailed example, but they are too hi-level and not covering all my questions.

Here is an article about Ripple which meets my opinion very close: http://bitcoinmagazine.com/7275/ripple-is-officially-open-source/

But thanks for the discussion and I would be pleased if you could give me more detailed information about how it really works (above scenario).

It's still a major improvement. And consider Hawala, because Ripple is in part a digital verison of Hawala. Despite their best efforts governments around the world haven't been able to suppress it. And even if just one jurisdiction allows Ripple, everybody with an internet connection can use it. Bitcoin enthusiasts in China can trade in Bitstamp IOUs, even though it might be difficult to exchange them for yuan. As long as they're legal somewhere, they'll keep their value.

I don't understand how people can seriously complain that Ripple isn't perfect if it is a major improvement over what we have now.


The distinction between gateways and individuals issuing IOUs is blurry. Anyone can issue IOUs.


That is the reality of fiat money and exchanges. There's no escaping except by using cryptocurrencies. To get there, we need exchanges. Ripple helps tremendously with that.


The fact that the exchanges aren't part of BTC is a weakness, not a strength, though that may change with coloured coins. XRP isn't any more dependent on IOUs than BTC is. Ripple's interface with the fiat system is far superior to that of Bitcoin. Ripple can do anything Bitcoin can and a lot more (the fiat interface, community credit). And the good thing is that all this good stuff benefits Bitcoin too.

I agree that that lack is a big problem. But I dont see that Ripple is the solution as it needs gateways which are companies (exchanges, banks,...) which can be shut down.
The only possible solution for a decentralized fiat/crypto exchange I see is to use the single users bank accounts. No government or bank can seize the bank accounts of millions of "average joe" users, but they can easily attack companies like MtGox,...


The system only trade IOUs, to bootstrap that system you need a lot of outside real money or many merchants accepting these IOUs. The only way how to get in Fiat are gateways. So for me that seems to be a major part of the system.
The friend2friend network may be ok. The money is debt idea (IUO) may be ok (even I dont like that). The gateways are for me the critical point. In BTC system the exchanges are not a part of BTC, they are the external environment and hopefully we get soon a better solution. The Ripple gateways are the backers of the IUO currencies (if I understood it correctly). Without a gateway you never get real USD for Ripple USD.

Maybe we rotating in circles as I focus on that part of the system and you on the p2p network...

It takes a while to get used to the system. It looks very simple at first, then it becomes very confusing, and then you get used to it. The basic rule to remember is that if you extend a trust limit for x amount to a person, there's a risk you'll lose precisely x amount if that person defaults. Also bear in mind that your neighbours in the trust graph will make transactions on other people's behalf through rippling, and that this may affect their own balances.

Sure, but that's not what you were saying. Also, fairness doesn't enter into it. Ripple Labs created the software and the initial ledger, and they get to do what they want with the money. No one is under any obligation to buy and Ripple Labs isn't under any obligation either. The question is not whether it is fair, but whether it is in people's best interests to buy XRP. Since the rippling functionality is very useful for buying or selling Bitcoin and since you only need a tiny amount, I was happy to buy a little bit. I've received much more in a handout (~1000 XRP) and I've made ~200 "mining" them at computingforgood.org.


Correct. However, if Ripple is successful that means XRP will become valuable and very useful as a currency. This is how Ripple Labs aims to make a profit on their investment.


It sounds as if you've made up your mind already and are inventing arguments to attack Ripple. The IOU and foreign exchange systems are enormously useful for Bitcoin trading. The lack of distributed exchanges is Bitcoin's Achilles heel at the moment, and Ripple is changing that.


I wouldn't trust any of the gateways to hold my money for long periods, and that includes Bitcoin exchanges too. For short durations and small amounts, it's fine.


Gateways are only there for convenience, the system can operate underground in a fully P2P manner if necessary.


There will be a role for both trusted and trustless services. Ripple offers both.

Just read a bit more about TradeFortress posts. I did not know his threads here in the forum before.
He is for sure a disputable person, but this experiment with Ripples trust system should make people think!
https://bitcointalksearch.org/topic/1-free-ripple-btc-giveaway-ended-see-op-over-455-btc-gaveaway-206948

"What TradeFortress has done is a brilliant example of what Ripple is. There will be a lot of scams going on in Ripple, lot of people will get burnt." (https://bitcointalksearch.org/topic/m.2212945)

I heard about the book but have not read it. I know you can see money that way. But BTC is different to that model. It is like Gold. You can discuss which model is better. I am in the BTC/Gold camp as I have seen too much misuse and bubble with fiat.  Credit does not have to be intermixed with the money system. You can lend money from businesses specialized on that like insurance companies are specialized on insurances. I prefer the seperation.
Ripple could have influence to BTC like Gold ETF to Gold. They help to accellerate bubbles and the following crashes. So all hurts more and happens faster. For speculation its helpful but thats not why I am interested in BTC.

Heard of "Debt - the first 5,000 years" ?

One of the Graeber's points is that credit was throughout the human history more essential than actual money, and that in most societies it existed before money. Money was introduced by rulers in order to feed their armies. Soldiers were paid in fiat, and the normal folks were incentivised to accept fiat from soldiers, in order to be able to pay taxes established by the rulers.

Credit = IOU. No economy would work or grow without credit. Credit was essential even in most primitive societies as the basic financial instrument. So credit remains crucial in the modern world. [add on after reading k99 repl: of course not to forget regular distructive credit bubbles]

BTC is amazing as fiat, but not sufficient for the financing of the economy. Ripple allows both - fiat as XRP, and credit system for any other IOUs, with XRP help. Plus possibility of most efficient FX markets in history. Plus immediate secure confirmations. Plus poor numerous populations of all continents getting access to the modern international financial system without expensive private intermediaries. E.g. look at India: http://www.cnbc.com/id/101250646 - multiple corporations sensing fat profits for introducing their mobile payment services into such markets.

That's why it is a different dimension than BTC and could evolve independently of BTC, coexist or even facilitate BTC use. Private company maintaining or "regulating" the system as well as stronger possibility of governmental supervision may sound bad to bitcoiners. From an investment consideration point though, these might ultimately be the winning features for widespread adoption throughout the international economy and trade. Herewith I am not making any judgement with regards to the aspired values.

But there is a big difference of XRP to BTC. There is a for-profit company behind it and it owns most of it. I know they say that they will give their XRP away some day and play fair, etc..... but that has to me no value (who knows who will own the company in the future?).

And I think XRP are not intended to be used as money to buy things. They are introduced to make the payment system work and prevent spam.

For me all that sounds much more as a trap to infect BTC with Fiat-like properties. To bring people to the point that they use IOUs for BTC instead of BTC directly (from their own wallets). If its faster, more convinient, maybe adds some small earnings with lending (interests) many people who dont care about the original motivation behind BTC could use it.
Look at the gold ETFs. Many people use them to speculate because they are more convinient to trade and they take the risk that the emitter is lying about the backing of physical gold. At the end the most people using that does not care about the different nature of gold against fiat. They use it to make fast profit. Like gold ETF has not much in common with real gold but very much with fiat, BTC IUOs are much more like fiat then like BTC.

As I said before the finance industry will love Ripple, and if they will not adopting it they will probably come with something similar soon.
Ripple could be a way that they keep control as well as the state. The US based ripple company and the gateways are for me too vulnerable.

I am not completely against the concept of colored coins and a layer which lets them interchange easily.
But that should come for me with the same ideas like the one behind BTC.
No need for trust to companies and states, open source and decentralized.
I think some day we will see applications for exchanging fiat or real world items to crypto with these characteristics.

For one you appear to be missing the fact that the IOU system is an addition to cryptocurrencies, not a replacement for it. In fact, Ripple has its own internal cryptocurrency just like Bitcoin. The IOU system and the foreign exchange system built on top of it can provide an excellent distributed exchange between all kinds of currencies, both cryptocurrencies and state-issued fiat money. This is enormously useful for all cryptocurrencies, including Bitcoin.

You are talking about Fiat money. Fiat is IUO if it is not in form of cash, and even cash is an IUO to the FED (originally it was the promis to be convertable to gold...).
For BTC that does not apply. The money system and the credit system should be seperated. Fiat comes as a merge of them. Ripple has the same nature. BTC is pure money, you cannot lend your BTC directly via the BTC system. I am not against lending. People should be able to do that business, but that should be a seperate business, like insurances, hedgings, bettings, whatever....

Ripplescam.org is TradeFortress's anti-Ripple propaganda site. It's not a reliable source.

Why should they be more worth?

The only reason I see that it can be more worth as its possible to use for lending. If I want to lend my BTC/money I prefer to control that by my own and not by the monetary system. Or try to tell your bank that you dont allow them to use your balance for lending. They simpyl cannot as the whole system is based on that model. You need to put cash in a bank safe to get there. But in countries like Italy or Spain cash tranfer over 1000 EUR (Italy) or 3000 (Spain) EUR is already forbidden and there a pretty high fines if you break that laws.