Topic: Why Ripple™ is against everything Bitcoin - page 32. (Read 45626 times)

One of the things I find attractive in Ripple is that it might survive even in the face of dictatorial government repression, with fiat payments rippling through the trust graph, thereby still allowing the exchange between fiat and crypto to occur.

Don't you think that merely having a distributed exchange that can act as a bridge between fiat and crypto is already a very good thing, probably a crucial one? Ripple isn't quite there yet, but the concept seems sound. And even if OpenCoin doesn't deliver, surely someone else will.

First of all, Ripple/OpenCoin is NOT a scam. It is a legitimate business enterprise and it will be determined by the market whether it is a good currency (XRP) and payment system. The team behind it is great, and if Ripple takes off then I'm happy they'll all get rich. Capitalism is healthy. Now, there are plenty of good arguments why Ripple is inferior to Bitcoin, but the scam argument isn't one of them. People need to stop throwing that damn word around every time they dislike something.

Ripple is not a scam, but my contentions with Ripple are the following:

1) It is closed source. Yes it might open in the future, but until then, my contention stands. The point of cryptocurrencies is that you don't have to trust any single person or group. Right now, everyone using Ripple has to trust the team at OpenCoin.

2) It is centralized.  Yes it may become decentralized in the future, but until then, my contention stands. It is not trust of the OpenCoin team which worries me here, it is the fact that they are the single point of failure. They could be shut down tomorrow a la egold. If Bitcoin had been as centralized as OpenCoin when it was getting started, the Government would've arrested and shut down the project long ago.

3) Ripple does not allow users to send "every kind of currency." Ripple is marketed as better than Bitcoin because it can "send any kind of currency." This is not true. It sends IOU's around, which are created out of thin air. The asset - the currency unit itself - is not transferred via Ripple. Sure you can sell a Bitcoin on Ripple for a USD, but then do you have the USD? No, it rests with a gateway somewhere. To actually get it, you're back in the normal banking system just as if you had traded BTC for USD on an exchange. Ripple can only transfer one asset - XRP's - everything else is a debt that must be fulfilled and transferred by someone else. There are numerous liability/risk issues with a payment system that relies on trust, in this case you need to trust "gateways" with the currency units that Ripple claims you own.

4) Issuance of XRP's is left to the whims of men. I do not care that OpenCoin will keep X number of XRP and thus get wealthy if it takes off. That's fine. My problem is that the XRP's which are supposed to be distributed have no planned distribution model. It's basically "we'll give it to our friends" approach. The problem here is that when and where they will be given is unknown, which causes considerable economic supply concerns. We all know how many Bitcoins there are in the wild, we have no idea with Ripple. 100 billion were created, and some number between several million and 99 billion is currently in circulation. To the extent that OpenCoin can issue, at whim, tranches of new XRP's into the market, it is no more attractive to me as a money system than any central bank.

5) The security model of Ripple is untested. This isn't OpenCoin's fault... it just means that Ripple has not been exposed to the wild in the same way that Bitcoin has for four years. Ripple needs to earn credibility with time in the wild. A number of people I've spoken with have grave concerns about the security model of Ripple, but we'll just have to wait and see. There's nothing wrong with experimentation.

In my opinion, Ripple is a pretty clever way to take the allure of the successful cryptocurrency system and leverage it into a proprietary project that will make the creators of the project rich. And that's fine, rich is good. But, I don't see that Ripple has any significant advantage over Bitcoin from a monetary perspective, and that's what will ultimately decide the success of the two projects.

Ripple's competitive advantage rests on the tenuous assertion that it transfers standard currencies, when it reality it doesn't do this. Ripple only really transfers XRP's, and in this way it is no better than Bitcoin, which transfers BTC's... yet Bitcoin is far more proven, widespread, and decentralized.

Ultimately, competition in cryptocurrency land is good. I have great respect for the OpenCoin developers, and Ripple is certainly not a scam, but I remain unconvinced of the system's ultimate merit.

They created the pocket out of thin air.

This is a good example of why I say I am only 10% of the way there -- and ironically I actually had read this post of yours previously. What you are saying in your example is that the key in my wallet that represents Bitcoins is not fungible with other brokers (like a USD would be) as the transactions are really internal to Mt. Gox's account? Essentially, you are saying that the funds are held in the equivalent of the "Street's name." Is this the correct understanding? If so, I guess I really hadn't understood the broker side of this equation. I had assumed that they were merely a matching engine like NASDAQ. To put it in the vernacular -- this blows.

Once they release the code, there can be no abuse. They can sell their XRP to the highest bidder, which is fair since they created them. If someone else builds a competing ecosystem around the Ripple code it seems unlikely they'll get a lot of money for it.


In which case the world will still have a great distributed system for exchanging BTC for fiat money, which is exactly what Bitcoin needs right now. Envy is an ugly, ugly emotion.

They have VC backing. But selling XRP and spending it counts as taking it out of their own pocket.

This. And as stated in the OP, Ripple is everything Bitcoin is against to.

It's for sure a brilliant idea, in the sense that has the potential to make their creators rich... But it's just another layer of shit above the rotten financial system based on debt money.

I wholeheartedly hope it fails hard.

Paying transaction fees in XRP will be forked away. They will be worthless.

Would an analogy to this be building a fiat system on top of a hard currency standard? BTC=Gold XRP=Dollar? Without the threat of physical violence to enforce the monopoly, what free market mechanism would need to be corrupted to maintain it?

OpenCoin is, in a way, similar to a private central bank. It issues XRPs but it lacks an official policy which guarantees the stability of its value. For example, central banks in countries may target inflation, maximize growth or peg their currency to a foreign currency. There is no clear policy in OpenCoin on this particular, and human life is short, so OpenCoin stakeholders may have an incentive to cash in and go for short-term profit. It is true, that XRPs are no IOU, but that is just by definition. If you want to trade goods in a different network, XRPs will be IOUs of that new network.

History tells us that even central banks in a position of monopoly have sooner or later abused their power. In my opinion, the situation for OpenCoin is even bleaker, because once the source code is published, the competition with other Ripple clones will be fierce, and the future of XRPs will be tied to the future of OpenCoin in a very competitive environment. It is true there is a maximum cap of 100 billion XPRs, not unlimited, but I somehow feel XRPs may just be used to pay transaction costs, and be avoided as store of value.

Satoshi somehow managed to create a large, complex piece of software which he released as open source immediately without a pre-mine. How did he do it? It sounds like he needs to take his investing advice from OpenCoin from now on. Their pre-mine is 100%. Will they be putting in 100% of the effort into making Ripple a successfully currency?


They are a 100% pre-mined currency that you are forced to use and hold if you want to participate in the Ripple network. The reason is to make OpenCoin rich. That's all.

So what are they? Why users are not allowed to create their own IOUs?

Right now there are only a few gateways in the Gateway List.

I think the idea is that traditional banking institutions will become gateways. Note that no action is required on your part for this to happen, thanks to the Federation Protocol. You already trust your bank now. Maybe you get a paycheck with direct deposit. You probably pay your bills out of it.

Imagine a Ripple enabled bank account. You could buy Bitcoins directly, using the money in your checking account, without the need for doing a wire transfer or ACH payment. You could deposit Bitcoins at a gateway, sell them in the Ripple order books, and receive the U.S. dollars directly into your checking account again without having to wire or do an ACH payment.

If you don't trust the bank, you could always withdraw your money as Bitcoins or XRPs and hold cryptocurrency instead. You could keep your bank account, and periodically  liquidate small amounts from your cryptocurrency stash into U.S. dollars held in your bank account to do things like pay bills.


I'm not sure I follow. OpenCoin isn't creating any IOUs (XRPs are not debt). Gateways should only issue IOUs in amount equal to what they have on deposit. I imagine that as Ripple gains acceptance, one of the ways that a gateway will establish trust is to use open-accounting systems to prove that they have not over-issued IOUs. With Bitcoin it's easy to audit a public address in the block chain.

Because OpenCoin is creating a large, complex piece of software which will be released as open source. So in exchange for the large "premine" they are creating significant value.
The additional value that SolidCoins could offer was very little in comparison to that.

Have to agree with your point, but... why previously create such a huge amount of IOUs? Why not let gateways create them after receiving the real funds? I don't get it.

ah, how interesting.

mmeijeri, i thought you said they were taking money out of their own pocket to fund development?

Here's another Ripple mystery. On Ripple's site, I have only found one page where the distribution of XRP is fully explained.


If XRP's distribution is a good feature or even not a bad feature, why do they try so hard to hide it away on a page that very few people will read? Why not put it directly in the FAQ or Ripple introduction page? Why not put it on the front page of their site? "Professional: Since OpenCoin owns most of the XRPs in existence, we'll always be able pay for the development and improvement of the Ripple protocol."

You can't hide things from people forever. There was also the whole debacle where the Ripple developers originally tried their hardest to convince everyone that XRP was not a currency. Anyone who thinks that they're not engaged in a blatant campaign of disinformation is delusional.

Interesting point. Escrow would help with the case of ordering a product, but in general you do need trust, that's true. And lending is an important economic function, and that involves a great amount of trust as well as due diligence to make sure that trust is warranted, collateral etc. But that said, cryptocurrencies eliminate some counterparty risk, which is a good thing, and an advantage over systems that require more trust.

just who would be these mysterious gateways that i can trust?