Topic: Why Ripple is a bad idea. - page 2. (Read 10680 times)

The focus of many replies here is based on comparing Ripple to Bitcoin - but shouldn't we really be comparing it to Visa or Paypal?
Currently I have to have a paypal account if I want to send money to another person who has a paypal account.
It seems the point of ripple is that it allows us to pick our own gateway - the gateways do not need to be dependent on each other, we just need to trust our chosen gateway.

Exactly. The IOU game has been around for hundreds of years if not more, 'ripple' is just a new fancy term to describe it. What it is trying to do is to reinvent the entire banking system on top of a block chain. Although a main difference is this is known as free banking (practiced in the US 1837-1862) .

That is what the Brits, the Canucks, the Martians, General Mining Corp, General Retirement Funds, the (galactic) United Nations and the BitNickels folk have been experimenting with all this time in the background. They tried setting up as blockchains because blockchains looked promising, then found out getting people to merged-mine them enough to secure them was looking to be way too much of a problem, especially with all the hostility of bitcoiners toward more blockchains. Currently they are implemented using Open Transactions. Next up to explore the potential suitability of as a platform for such projects is Ripple...

-MarkM-

No. The reason we got into the "mess" is because the government coerces citizens at gunpoint to behave in certain ways. The most egregious being that we are forced to use Federal Reserve Notes as legal tender, and that the production and use of alternatives are punishable.
 

this.  it all smells a little like a ripple bank run.

Here's what I think about ripple. Please correct me if I'm wrong!

1. Trusting a person, a gateway or a bank is too dangerous. Even if they don't default (that's a big if), they can make you illiquid.

Example 1:
A wants to pay B.
B trusts bitstamp.net, but doesn't trust A.
A has "1 BTC IOU from bitstamp.net". That's pretty decent money.
A pays B with "1 BTC IOU from bitstamp.net". Everyone happy!

Example 2:
A wants to pay B.
B trusts bitstamp.net, but doesn't trust A.
A has "1 BTC IOU from bitstamp.net".
A had previuosly extended some trust to C.
C borrows "1 BTC IOU from bitstamp.net" from A and cashes it out from bitstamp.net.
A logs into ripple, hoping to pay B with his good bitstamp.net money...
BOOM! The only thing A now has is "1 BTC IOU from C". The IOU might be valuable IRL, but he's out of money within the Ripple system, because no one trusts A or C.

2. The only entity to trust with USD would be the Fed, the only entity to trust with EUR would be the ECB. Those are the only entities that will always be able to pay back their IOUs. But we don't need ripple for that – that's the current situation in the world!

3. Ripple would make it easy for anyone to become the central bank and issue their own currency (however, I don't see that on ripple.com yet). If ripple enables online community currencies, will they be better money than a global bitcoin-like currency?

Still Ripple through! Nice detail, very nice. This stuff certainly conveys a sense of having been "thought through". Nice work.



Try the other way around, too. This new cryptocurrency is a lot like bitcoin, but has all this extra-confusing currency-exchange and being-a-bank stuff that makes it extra-easy to exchange it for not only bitcoins but any other ecurrency, but even for fiat, apple dumplings, gold. or anything at all if you are gutsy enough, and risk-tolerant enough, to believe people will actually honour their IOUs.

"They" can say all they want that is is not a currency, until they are blue in the face and more, but just its actual functionality whatever the heck anyone calls it makes it work like one and its difference from all others in the system, as the native functionality, the native local currency, it works more like one for practical purposes than the IOUs even though the IOUs are more like 'normal fiat money" than it is. XRP is like "that most useable as a medium of exchange commodity, that naturally comes to be used as currency", the IOUs are all the fiats, that, if they have any value at all, derive their value from someone or some thing's "obligation" to make good on them.

So even if it is "a commodity" not "a currency" it is a "commodity" more like "gold", maybe more like "gold with built in antigravity to make it more convenient to hold and transport", while also being "already stamped into convenient assayed and measured form for convenient assessment".

In short if its not a currency, its something even better than currency that does the same job but better.

Oh wait, isn't there a word for that?

Oh yes, there is! It is "another type of bitcoin", a "proof of work -less bitcoin"!
 
-MarkM-

Yes, I think this is the key.  With Ripple we can each be like banks before banking regulation, e.g. you can deposit your "gold" (e.g. BTC) in my bank in exchange for my banknotes (IOUs).  That's what trust really is in this context.  When we make a deposit in a bank, we are trusting the bank not to close in three months and run away with our money.  So ripple essentially lets each of us be a bank.  So if you trust me, e.g. deposit money in my bank, you risk me "failing."

I am a newb and may be totally off, but this is a lot like what it sounds like reading the wiki and the various threads.  What makes it extra confusing is the parallel currency that is used to "pay" for our IOU transactions.

So basically anyone who takes on my IOUs, its their responsibility to check the redemption agreement first and find out that the redemption is only valid for 3 months.

If someone doesn't bother to check that redemption agreement first then any financial loss is their fault for not doing their research?

Harsh, but makes sense.  You certainly have to be careful in this new Ripple world

You could set a flag on your account to only allow people who you approve to hold your IOUs. That would avoid the scenario entirely. You could have a simple click through people go to in order to agree to your terms and gain the right to hold your IOUs. (Your IOUs can still ripple through people who aren't allowed to hold them.)

But in the scenario you explained, you're not really leaving anyone holding any bag. You have no obligation to someone who holds your IOU other than those imposed by the system, which you can't prevent.

They will be harmed by the likely drop in value of the IOU, but that's the risk they chose to take when they agreed to accept your IOUs without a redemption agreement. Absent a redemption agreement, you have no guarantee that an IOU won't decrease in value or become worthless. This is a decision you must make intelligently when you extend trust. You can't tell if someone is trustworthy or untrustworthy inside the Ripple system, you have to look at the real world.

Ok, to narrow the focus of my question a little.. I start up a gateway and pre warn everyone that signs up that I will only be open for business for 3 months.. I dont want to sell the business, just to close it down.  I get 100 users and send them IOUs.  Those 100 users trade the IOUs onto another 1000 users..

When it comes time to close down, the original 100 who signed up are well aware that they need to redeem their IOUs before the closing deadline, but the other 1000 users have no idea, and I have no way to contact them or to force them to give back the IOUs.

So even though I would like to close up shop with zero IOUs outstanding I have no way to get them back.. I have no option but to walk away leaving some people holding the bag??

Lets have a try at re-wording, or re-imagining, or re-casting that story...



Here's a question. If I have launched a small business, and it is trusted in various currencies by various people, and a time comes when I can see that running that business myself is not really going to fit in with other things going on in my life or other opportunities I feel I would rather pursue... How can I find someone worth of being entrusted to take over that business without basically screwing over the people who have extended trust to it; in particular those who currently happen to be its creditors?



Maybe thinking along those kinds of lines - it is a Ripple account with an existing trust network and existing creditors - instead of being married to it being somehow you, your actual self, going forward... That might make it sound like less of a catastrophe and more of an opportunity?

Or, of course, maybe that just sounds like trying to wiggle out of personal trust relationships that thought they were trusting you, not some abstract entity being cultivated for sale to gosh knows what brand of villian?

I have seen before, on the internet, times when a personal site, a personal project, with users there primarily out of personal loyalty/trust to a person, a person trusted never to sell thier personal information, suddenly found that new owners to whom athe site had been sold had implicitly been sold their personal information! Wow, what a betrayal! Yet the magic of "abstract persons" can in some cases somehow pretend that the personal information of the users was not sold, their privavy not vialited, because baitandswitch.com, the former and current owner of that personal information, still owned that information,  and had not sold it at all! It itself had been sold, but that did not constitute sale of the inforation in its possession!

So a whole lot of this comes down to whether you feel you were totally upfront and clear as to whether the trust relationships the account was being entered into by its trust line partners was them trusting you, personally, regardless of what account or accounts you might or might not from time to time maintain in various places real or virtual, or was to be taken as, and entered into from the get-go, as trust in a particular Ripple account that only happened at the time they chose to enter into the relationship to be under your administration / have you at the helm / be using you as its data entry clerk to have its instructions to ripple typed into ripple?

The whole imaginary / virtual "entities" concept can get very strange sometimes...

-MarkM-

Here's a question.. if I start a gateway and send out a bunch of IOUs in various currencies and then after 3 months decide that I dont want to continue.. I dont know who has the IOUs and how far they have travelled throughout the network..  I want to be honest and payback everyone what is owed, but how do I force them to repay the IOUs?

I could advertise that IOU holders have 2 weeks remaining to claim back their IOUs before they become worthless.. but maybe not all IOU holders get the message.. doesn't seem fair.

It is probably addressed somewhere within your jurisdiction's existing body of law in which case your lawyer might well be able to help you zoom in on the relevant parts and advise you as to how best to proceed from there... and if not, then possibly precedent might cast some light on the subject, and, who knows, maybe it could turn out there is room for new precedents to be established...

-MarkM-

Bitcoin does not operate on the BitTorrent network; they are completely different P2P systems.

I would guess that Ripple's killer feature would be the ability to pay people by rippling value through a long trust chain. Alternately, it can function as a decentralized exchange for IOUs for currency held at the gateways. And alternately to that, it's just a straightforward, easy-to-use, automated version of the clearinghouse-type systems that big banks use, meaning individuals now get to do what only banks were logistically able to manage previously.

Now, I suspect that operating an unlicensed and unregulated bank transacting in "real money" is a good way to get into trouble with your local government, but nobody seems to have brought this up as a reason not to use Ripple, so I guess it must have been addressed somewhere.

I still don't get it. At least Bitcoin is a proven technology using a torrent network with a distributed ledger file. What technology makes Ripple unique?

Absolutely. We have lots of ideas for how we think people will use the system, but we try not to limit how people might use the system. We collect use cases so that if they're at all plausible, even if we don't think they're likely, we can try to make them possible. Because you never know.

Bitcoin behaves just like fiat in the Ripple system. Gateways can hold them the same way they hold fiat so you can transact them on the Ripple network. The same goes for gold.

We use the term "debt" very flexibly. When you have $1,000 in a bank account, the bank owes you $1,000. The bank offers the service of owing you money. Ripple "debts" can also be viewed as someone holding someone else's money.

Could there be more than one type/kind/flavour (or some such) of gateways, so that fiat gateways might always hold fiat that they owe to someone but other gateways (gateways other than fiat gateways) might owe things other than fiat, might owe no fiat to anyone, in fact might be as far as the fiat world is concerned fully funded debt-free entities?

If so then maybe, farther/further, might there be some way some how some such gateways might not be able to divest themselves of the call options they issued by merely tendering some species of fiat in liue of the actual contracted item, commodity, substance, or service?

("Sorry, you owe me one bitcoin. If you think one bitcoin has some correspondence to any kind of fiat, prove it by tendering one actual bitcoin, I don't accept fiat..")

(Maybe needing to avoid the term "debt", maybe also the term "owe", so maybe "Sorry, the contract says you will deliver/tender unto me one actual bitcoin. I'm not sure what that so called fiat is or imagines itself to be but it sure as heck is not an actual bitcoin...")

-MarkM-

You would have to find a gateway you trusted sufficiently. Ideally, we'd have gateways that were regulated financial institutions insured by governments. Since gateways always hold fiat that they owe to someone, this should be possible because it fits an existing regulatory model.

You do have to manage risk with Ripple. That's the tradeoff for being able to use fiat currencies in Bitcoin-like ways.

From the Ripple wiki:

"If you hold someone else's IOUs and they default, you are out that amount of value.
Even the most trustworthy people may default due to death, family emergency, or other circumstances beyond their control."

So how is this gonna work for bigger amounts?! I can safely buy an appartment with BTC, but I woudn't risk doing this with Ripple.