CONGRATULATIONS!

Yes, I'd like to participate!

Sabine
Organiser, Forum for Stable Currencies

Thanks for your comment, Sabine.

You will have to follow the link to the Ripple site (ripplepay.com/) and get in contact with them.

Comments by Gene Orrico by email:

Sepp,
The Ripple idea: It sounds good and could work to everyone's advantage, however, the system is predicated on the morality of all those in the system. Just one deadbeat, and the system falls apart .... there are no safeguards.
Gene Orrico

- - -

Gene,
About Ripple, I believe that the bad apples won't be allowed to bring the system down. In the end, it would be their own friends who'd end up paying for them!

Sepp

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Sepp,
I would think that it would work in some closed communities, however, in my business experience the following has become painfully evident due to sustained losses in dealing with the general public a good many business' will not accept cheques
under any circumstances as they have been burned in the past.

However we are into a cashless system with the credit cards and from what I see in financial reports that a good number of the general public has maxed out their cards. In the local vegetable market, the Mexicans are buying their veggies with credit cards. The credit card companies have control to some extent as they've checked out the credit either by investigation or by experience and for the merchant this has been a reliable method of cashless exchange.

It appears that the credit card is going to be basic in a cashless society and may become more stringent during periods of deflation where credit will become more difficult to obtain. Personally I'm a hard money advocate with adequate currency backing. Due to backing by thin air, we are on an inflationary trend as they've just raised the interest rates and rolled the presses.

Your posts on UWSA are thought provoking and you appear to have an overview that we seem to miss out on in this country. This is a nation where public opinion is controlled by the news media.

Best regards,
GenO

- - -

Gene,

let's see how it develops - the system is in beta release to find and iron out bugs.

Good point about credit cards checking out customers, but it's an expensive system. Those people who are maxed out constantly (the majority) pay a hefty price in usurious interest for being in the red.

Ripple, on the other hand, has a closer check on people. Only other ripple users can give you credit, and it's really only your friends, people who know you well. If the bad apple doesn't make good on the debt, the trend would be for him/her to lose their credit. It would be pretty near impossible to get credit without good behavior, as only your friends can give you the credit. Those friends have all the interest to make sure that you "perform" because they will end up paying for you (not being able to recover the credit from you).

Practically, this is an experiment - a test for a payment system that isn't weighed down by interest payments to the banks. The credit is given locally, while payments are bridging the distance between one local pool of users and another local pool which may be quite distant.

Opinion is controlled by the newsmedia, not only in the U.S. It's a world wide phenomenon. Only the internet allows us to kind of find a bit of distance and form an opinion taking in a wider variety of views.

Kind regards
Sepp

- - -

I think you're right, in a closed community, there would be no escape for a deadbeat, but there is also no escape for credit card fraud either. There is no statute of limitation for fraud.
GenO

Very interesting: Ripple can probably be expanded to allow anyone or entity to become a “banker”!

Ripple would then become an opportunity to yank the “usurer” out of the banker – and create a new kind of banker. In other words, anyone can be a banker, but, as banker, he/she must play by the new Ripple banking rules. These rules must guarantee fairness by never providing net advantages to bankers over borrowers.

The problem with banking is not the act of lending or the act of borrowing – it is not even the interest, assuming it is small --, but the flawed “rule of law” that first separates the lender from the borrower, and then, among other things, gives the lender unmerited Darwinistic “net advantages” and “rights” (thus, transforming him/her into a “usurer”).

The current “rule of law” favors lenders even when they make mistakes. Besides manipulating the phases of the business cycle, or destabilizing the economy to such an extent that they “cause” many of the defaults, lenders routinely make 2 kinds of mistakes: they lend to crooks when they should not; and they lend to honest people, who, for reasons beyond their control, become unable to repay the loans. In both cases, the “rule of law” favors the lender over the borrower – when it should not! New Ripple banking rules can change that!

After years of experience and reflection, I have concluded as follows: of all the possible changes, none would benefit the human race more than the total elimination of “usury” -- in the constitution and in the “rule of law.” We can force politicians to change the “rule of law” so that it serves the interests of the people. And we can develop alternative systems, such as Ripple, to better serve the needs of the people. In all the cases the challenge boils down to this: we, the people, need to produce our new laws.

The software for running ripple on a server is now available. There is no possibility as yet to link Ripple networks among each other, and bugs still need to be ironed out. Here is the message from Ryan Fugger:

Date: Tue, 26 Sep 2006 16:31:35 -0700
From: "Ryan Fugger"
Subject: RippleSite software released

Hi to everyone out there who has expressed interest at one time or another in the Ripple project. It's been a slow summer for Ripple development (although a great summer for me). I expect the pace to pick up a bit as the weather cools off, and have an initial P2P version ready before too long. But for those of you who have been champing at the bit to run your own Ripple server, I'm releasing the code behind ripplepay.com as a GPL'd package called ripplesite at sourceforge:

http://sourceforge.net/projects/ripple/

It's a python module that runs on Django 0.91. The installation instructions are in the included readme. I'll be glad to help anyone get their site running -- there's a help forum at the sourceforge project page.

I had been planning on waiting until the distributed protocol stuff was integrated to avoid the proliferation of private Ripple networks that can't link with each other (which is the whole point of the project), but that may take a while. And it's probably better for the project to release early so some of you can start to hack improvements in for a future release (hint, hint), and so the concept can propagate a bit further...

Anyways, thanks for your continued support, especially those of you who have donated your time and money to the project.

Ryan

I have another more ambitions project to renew the Internet, including a money system with similar ideas as Ripple but with no need of a special protocol for money, in order to focus on more useful questions. The first goal is to replace email, solve the spam problem and have P2P identities system (so that people don't need to register again to every site on the web). Someone is working on it but more developers would be welcome. Thanks.

Remark for the webmaster of this site and future commenters : this comments system is not nice, you require people to write their email address that you will offer to spamming robots, while you have so many antispam functions to make it harder for them to post comments: if they don't write their email address, they can't post. Using the Back button and trying again it is refused because posting twice in less than an hour is suspect of spam. My project will solve all spam problems on the web so you should get interested in it.

Thank you for your comment, Sylvain.

You are taking me to task for protecting the blog comments feature from spam. But what is the alternative? There really is none. Your system of P2P identity COULD be an alternative, but only if it was widespread and in general use. Until we have such an identity system, spam protection will have to be used, and I apologize if it makes commenting a bit difficult.

I do not, by the way, make your email available to anyone. The feature of requiring an email is only an attempt to make sure the poster is an actual person, as is the verification number. It is also a thing I like, because maybe I would like to contact you, and your email allows me to do so. In this case, I had to go to your site and find the information.

In any case, I have taken your comment as a stimulus to read both your proposal and that of Ryan Fugger again.

Both are works in progress that miss important parts of the proposed system. But that is not a big problem, the ideas can be further developed, bugs can be ironed out and knowledge gaps filled.

What I regard as a serious problem however, especially in your proposal, is that as long as things are complicated, people will tend to stay away from them, and unfortunately, as long as people stay away, the system does not have a chance to function.

A payment system is only useful if it can be used for a majority of the payments we want to make, or if it at least makes internet payments simple and cheap enough to blow away the commercial competition, which comes both from the banks and from internet based systems, for example e-gold and pay pal. People will pay the fee if a system is easy to use and functions well. They will gladly avoid the fee to use a free system, but they won't have patience with something that doesn't do what they want - make payments without a hassle.

So in order to take off, a system either must be extremely simple - such as the one envisioned by Ryan - which could start small and expand, or it must be extremely popular and attract large numbers of users by some other feature, before being used for payments. You say you want to have a system based on replacing email, solving spam, and instituting a P2P system of identities.

While email has the deplorable feature of allowing spam, it is still such a useful feature of the internet that any system that wants to replace it has to be as simple to use as what we have now. Spam is a problem, it is true, but with filters and some patience we all have learned to deal with it in one way or another. So there is no great urge for the majority of internet users to throw out email for another system, especially if it brings other complications.

A P2P identities system is interesting, and might be useful, but it also has to follow the dictates of the market, i.e. it has to be of sufficient use to justify the effort needed to register and maintain one's presence. If the only use is to not have to register on websites that require registration, that is a weak incentive. If it could be used to make payments more simple and immediate, it might fly. But again, it must be simple enough for the effort not to outweigh the good it brings, AND it must be widely implemented to be of any use at all.

However, once a system is widely implemented, other problems appear, and it seems that these have not been well considered. The major problem that I see and that has not been considered is that a payment system at a certain point becomes a currency - subject to he same problems as national currencies. At that point we have to choose whether to make provision for some of the features that have plagued national currencies, such as interest and inflation/deflation, or whether to break with the "banking tradition" and go new ways.

Neither you nor Ryan for instance have proposed a mechanism that would keep the amount of available credit in an "optimal range", where payments can be made without hindrance, but where yet there is no inflationary pressure by too much credit floating around. This definitely needs more thought.

Also, if the primary motivation for a peer-to-peer payment system is to avoid bank and government money and the associated, often hidden, costs, the new system should not fall prey to the same costs, for instance by allowing interest and accumulation of capital. The proposals of Silvio Gesell (for a popularly owned, interest-free currency) could show a way forward here.

For a thorough introduction into these ideas, see Gesell's Natural Economic Order.

"You are taking me to task for protecting the blog comments feature from spam. But what is the alternative? There really is none."

It is true that my system is not ready yet. I just meant that it aims to bring solution in the future so it is worth attention. When it will be ready, I think it will soon become widespread.

It is okay that you have antispam functions but the precise ones you have are, in my opinion, a bit excessive. Well, reading again other comments I see their email addresses are not published, I don't know why I feared about it, maybe because there is Ryan's email there, but it is not as an author of a comment. At least you should indicate in front of email entry: "(won't be published)".

"What I regard as a serious problem however, especially in your proposal, is that as long as things are complicated, people will tend to stay away from them, and unfortunately, as long as people stay away, the system does not have a chance to function."

Please do not mistake 2 problems:
- the complication from the viewpoint of the programmer
- the complication from the viewpoint of the user.

My description is written addressed to the potential programmers, because now, the problem is to get programmers to implement it. So it may look complicated, but this does not mean it will look complicated for users.

"but they won't have patience with something that doesn't do what they want - make payments without a hassle."

That's precisely my goal: to make a system that will do what the people need.

"extremely simple - such as the one envisioned by Ryan"

I think my money system will be at least as simple as Ryan's for the same purpose; moreover I will offer more extended and convenient options and operation types.
I think my forums system will bring no complication as compared to email, but it will add more interesting features to it and for other aspects of internet.
Of course a little learning will be necessary to be able to use it, just like people had to learn the use of email, but the advantages that will come from it will be much worth the change.

The spam problem now is an endless cat-and-mouse game: for every spam protection you find, spammers will find ways to circumvent it. Real spam protection in the present context makes users' life so hard (for example always asking them to write displayed code...). Hosting companies must always spend money improving antispam technologies again and again. False positives bring risks...

I am victim of spam not only in the forum of my site, but also in the web statistics: as I am curious of which sites point to mine, some spamming robots pretend to be users clicking from many other sites which are spammers'sites. There is currently no antispam solution to this.

My system will provide a final end to the spam problem in all its forms.
And not only this problem, but other problems too.

I know the problem of interest and inflation is a real problem. I have some ideas towards a solution. It will have to be worked more to bring a usable system. But I know it is possible, and the way to it.

You write: "would keep the amount of available credit in an "optimal range", where payments can be made without hindrance, but where yet there is no inflationary pressure by too much credit floating around. This definitely needs more thought."

I consider there is no such thing as an optimal range of available credit.
In the present money systems, there is a mechanism of controlling amount of credit for ensuring the money stability, just because there is yet no better implemented mechanism to ensure money stablity. What has to be done is to develop a new mechanism of money stability, that will not be based on control of available credit. Then, available credit will just be what it naturally is, according to the trust between users, with no trouble to money stability.
Anyway, control of available credit is more and more a nonsense idea in the information age: it is now very easy to make payments disregarding the credit limits of banks.

I tried to read the book "Natural Economic Order" but it is too long.
Anyway I have my ideas on how to solve the problem of money stability, and I consider that I don't need other references, especially not old ones.
The only problem that remains to be solved to get the final solution, is some problem of mathematical formalisation, some new system that needs mathematics to be expressed.
I don't see any special mathematics in this book you mention, so I think it won't help. Anyway, the theory I need to develop is something "very abstract" that cannot be seriously considered before the information age.

Hello Sepp,

thanks for the mail about Ripple. If I have the time I will compare it with the South Africa New Economics initiative CES (and New Economics Foundation UK) at http://www.ces.org.za/ .

Paul

free download :
http://www.jamesrobertson.com/book/creatingnewmoney.pdf

Thank you Paul,

if you do make such a comparison, please be sure to link it here.

Sepp

Well, yes, and no regarding a debt-based system. Those who owe can be asked to do "favors" to the owner of the debt.The problem with it is that debts can be transferred via this system to single persons or groups seeking to use it to gain a collection of favors to pay of their singular debts that together form an action which if the debtors doing the favors knew the result would be, they'd never have agreed in the first place. "Innocent favors" to pay off debts of the favor givers can actually end up in concert, to act against them.
My own tendency would be to have a system as Lincoln used because the private bankers he first went to, whom the government at the time had previously chosen to use for its money source, to help finance the Union Military in the US, outrageous interest on that money that would have indebted the entire country indefinitely afterward (sound familiar? It should, especially presently). John Kennedy also tried to implement with his U.S. Treasury dollars that were immediately recalled after his assassination, and the Island of Guernsey has been using government issued money for well over 100 years quite successfully. The Congress (government itself - not private bankers who charge interest and operate for profit, and not the benefit of the citizens) can issue paper money through the Treasury, which loans the money at ZERO INTEREST. Private banks, now issue debt-only- based paper money globally and charge interest that ends up burdening citizens worldwide with larger and larger debt that is paid by taxation, putting the public of each country worldwide in debt to them via taxes, are simply not necessary for the money the worldwide public uses. I thus think the history of the "greenbacks" Lincoln used shows a better system than any debt-based means of exchange because such a system can make people indebted to someone they wouldn't want to become indebted to. The idea that "friends and family" debt exchanges can work is based on the ideal, but I have several relatives and "friends" who have ultimately taken a lot of money and items from me without repaying, and any debt-based exchange can amplify such situations, because of whomever ends up owning the debt for whatever reason. There has to be a truly fair authority in any such system of exchange.

I'd also like to add some reality to the debt-based money of today in terms of the con game banks and credit unions (actually the whole system) use every day with their customers. The "line of credit" they give customers, and credit cards, are NOT based on credit, but DEBT. A "line of credit" is in reality a line of potential debt which the institution will allow you to go into with them. Credit cards are not for credit - they are for indebtedness. They should be called debt cards, because credit implies assets, and there are none. Another one is the word "homeowner," and these days it is very clear who owns those homes that are being taken from "homeowners" who couldn't keep their payments current on their home loans. They aren't "home owners" at all - the loaning institutions own the homes - not the "homeowners," and anyone making payments on a home need only stop making them to find out who really owns their home. Why are people making house payments called "homeowners?" Shall we call it a means of giving buyers a sense of false security from the same "institutions" who seize the homes and keep all the years of payments made on them if the payments aren't met?

This is an excellent article. It is very easy to read and understand. Great job Sepp, many thanks for the URL. Excellent job Ryan for your creation and advancement of this OS payment system that anyone and all of us can use. I understand how much work this was for you and how thankless it can be.

I have a friend name Patrick who developed the Loom
Software, which is similar in operation to the RipplePay (Loom is much simpler), as....both are book entry software programs of value transfer. However, his background is in digital currency DGC and he has been able to create a slightly more advanced, commercially 'usable' version. The biggest problem I see with Ripple, is addressed in Sepp's article:

"It is important to know that you can't just enter Ripple without also bringing in [at least some of] your friends. For the system to be able to process payments, there need to be paths of trust. Ripple links and extends these paths of trust to make a payment go from one endpoint to the other, always going through an unbroken chain of direct personal links. That is why you need to be linked with as many people as possible. You need to have given credit to and received credit from your friends, otherwise your way into the payment system is not guaranteed."

The Loom system circumvents this problem from the start, for e-commerce, that is the popular units being used have a globally recognized value already, a gram of gold, so no one has offered credit and the unit value can at any future time be easily converted into national currency, in any country in the world. So if the bird flu strikes :-) and 99% of the Loom users are killed, your units still have the same value...participation by your friends and family network is not required to maintain liquidity. This is vital for any e-commerce acceptance. Without the liquid real value behind a unit, you won't get wide merchant participation and continued growth and usage. The concept of everyone using the same unit and everyone agreeing it holds value, friends, strangers, social networks, is brilliant..but not workable for any scale of commerce beyond that local community. This being the WWW, its a big global community you need a unit recognized by all as valuable and immediately liquid to satisfy merchants. No one in India, Russia, or the UK is going to accept the local units in exchange for real value. Can you buy an ounce of gold or silver using RipplePay units? Why not? Can you buy gold or silver with Loom units? yes...Ultimately, there must also be a single large third party agent, or network of agents to provide liquidity for the units. The Loom operator does not.
Loom users have also already built an iPhone interface for commercial use so its moving along in the e-commerce direction.
Mark
DGCmagazine

Sepp,

thanks for this user-friendly explanation.

Michael Hannon,

interesting comments, a new term has propped up as a result of the housing bust: Loanowner. its a play on homeowner, and it appears you get the joke.

Thanks for your comment, Mark.

I have a few remarks in reply to what you say.

It appears that a certain lack of clearly understandable basic information is a common feature to a majority of these new alternative currency systems. Questions like "What is this all about? How can I use it? What can I use it for?" are important for the prospective user to have answered. So I'm happy you thought my exposition of the Ripple idea was clear and understandable.

It really is just a first try at (myself) understanding what Ripple really is, and passing this on to anyone else for discussion and clarification. So there are things I don't know myself, and others missing that I did not think to put in a first introduction. No one would want to wade through pages and pages of explanation.

I went to check out Loom, and found out that it is a system that can transfer, electronically, any unit of value. But search as I may, I could not find a simple page of information on what Loom can be used for in the real world, or how it works. What I was missing in my short exploratory search, was any indication of how I could really transfer value to someone I know, let's say I have a bank account with Euro or I have some ounces of gold, how do I connect these up with Loom? And how does Loom then transfer those Euros or that gold to my friend who sits in the US while I sit in Italy? I find that without that kind of basic information, I can't really conceive approaching Loom with an idea of how to make use of it.

But let me come back to Ripplepay, and the information I didn't put into my introduction of it.

You say, the biggest problem is (quoting my paragraph explaining this) that you need to have connections of personal trust and credit for it to work. This might be seen as a problem, but it is also a central and defining feature of Ripple. Since it is based on personal trust, Ripple is an inherently secure system. All the program does is establish the routes of payment, crediting and debiting accounts along the way.

As far as I can determine, Loom depends on external "suppliers" of currency that link into the Loom system, and users can acquire those externally supplied currencies by paying money for them and then using them as they would a bank transfer, just through the Loom system instead of the bank. Please correct me if I am wrong here.

Also, Loom only allows payments between people who both know each other, and who already have agreed to use the same type of currency for their transaction. What escapes me is how Loom actually transfers the value if, as is said in the introduction articles, Loom does not care what kind of currency you are transferring. In other words, I don't get how the money actually gets from point A to point B, other than in the mind of the two people doing the virtual transaction.

Ripple, as we said, is based on credit. When giving credit, Ripple users can choose what currency they give their friends credit in. Currently acceptable are Euro - US Dollars - Australian Dollars - British Pounds - Canadian Dollars - Ounce of gold - Ounce of silver - Hungarian Forint - Indian Rupee - Japanese Yen - New Zealand Dollars - South Corean Won - Swiss Franks - and Yootles. Potentially, any currency can be traded through Ripple, even local currencies. If a payment is made from someone who has Euro Credits to someone who prefers US Dollars, the system will convert from one currency to the other, based on the day's official exchange rate.

Of course the best person to ask technical details would be Ripple's creator, Ryan

(Sepp) I went to check out Loom, and found out that it is a system that can transfer, electronically, any unit of value. But search as I may, I could not find a simple page of information on what Loom can be used for in the real world, or how it works.

(mark) You are correct, right now, today, you might not find too much because it is a much newer system, only about one year into use. It has an API and if other developers catch on, they can build onto it, like Bill has created an iPhone interface. In the 'real world' there already online businesses which accept loom assets, you just have to find them and understand how to use the system. See: Loom I'm sure this list will expand in months and years ahead, these guys are all heavy digital currency DGC users for years and years. That is e-gold, pecunix etc.

(Sepp) What I was missing in my short exploratory search, was any indication of how I could really transfer value to someone I know, let's say I have a bank account with Euro or I have some ounces of gold, how do I connect these up with Loom?

(mark) Ok, with all pure digital currency or digital gold currency, you cannot buy units from the issuers. With all DGC, like e-gold, you cannot buy digital units e-metals from e-gold Ltd, they only maintain the currency. No direct transactions with the public, rules out any risks of money transactions. There is one larger independent third party, who is the only entity allows by charter to exchange national currency for digital units. In the case of e-gold, this is Omnipay (or was Omnipay before their USgov trouble) So the Trust, or the issue mints digital units, in exchange for national currency through their single large agent. Here is an article on it: http://www.americanchronicle.com/articles/52985

Ok, so to answer your question, if you have gold or national currency and wish to use the Loom system, you must find a third party agent who has in their possession digital units of the Loom assets you wish to use. Example is GoldNowBanc GoldGrams from www.goldnow.st (goldnow is the agent for GoldNowBanc) This is the third party agent you send national currency to and receive in your Loom folder digital gold grams. Just like e-gold, you will be buying your Loom assets from an third party agent, since loom is new there are not many yet. Once you send him your national currency, you own Loom GoldNow Grams in your folder. At that point you can invite associates to transact business with you, friends can receive your assets or you can pay bills using the gold grams. Your assets have value the moment they enter your folder. If next month you decide you want national currency, you exchange your goldnow grams to a participating agent and get national currency. The agents maintain liquidity in the assets. If I was a merchant, selling books, I could say, "I now accept Loom GoldNow grams" and price my merchandise accordingly. With the Loom API, I can integrate Loom right into my shopping cart with little effort. Buying a book? At checkout, you would not select Visa, you would select Loom GGs and the API would automatically route you through to pay.

My whole point here.....if you create a RipplePay currency, and as a merchant (book seller) I agree to accept RipplePay and ship out physical merchandise I paid cash for....how would I then recoup my investment in national currency and profit, when it comes time to restock my books? Non of my suppliers accept RipplePay? With Loom assets, and all DGCs, a third party agent will exchange the digital units for cash so you can continue business.

(sepp) And how does Loom then transfer those Euros or that gold to my friend who sits in the US while I sit in Italy? I find that without that kind of basic information, I can't really conceive approaching Loom with an idea of how to make use of it.

(mark) I agree its confusing, but so are all digital currencies when you get started. Your only concern, because this is an Internet payment system you can be anywhere using it, your focus with Loom is on how the third party agent is going to transfer national currency to me when I want out of my loom assets and into cash. There are hundreds of exchange agents who will, for a small fee, exchange your digital to national. Webmoney Transfer, the world's largest digital currency has over 35,000 locations including walk up ATMs where you can exchange national to digital. But you can never exchange directly with the issuer. As long as there exists a liquid agent secondary market, merchants the world over will accept your digital currency.

Otherwise, what you have is a great software program that will transfer units back and forth to friendly participants. Now that may be the greatest system in the world today, OS, free, big community...but if you have no way for merchants to restock their shelves after a sale, accepting your currency is just a novelty for them. With any alternative currency or payment system, for global success, there needs to exist this exchange between the digital unit and the local national currency for users to accept it daily for use.

(Sepp) You say, the biggest problem is (quoting my paragraph explaining this) that you need to have connections of personal trust and credit for it to work. This might be seen as a problem, but it is also a central and defining feature of Ripple.

(mark) Call me Hillary, I misspoke....the biggest problem with making any of these digital payment system more mainstream in today's world is that liquidity between national currency and digital. In your group of users all decide NOT to participate, your assets then become worthless, there is no central bank to 'cash you out' to real money. With all other digital currencies such as Loom, the asset has real value and there is always a main third party agent of last resort who can exchange back to national currency, if not many agents. If there were agents, accepting Ripple currency back and forth to national currency, stores online and merchants could 'restock' spending converted national money.

(Sepp) Also, Loom only allows payments between people who both know each other, and who already have agreed to use the same type of currency for their transaction.

(mark) No that is not true at all, anyone can pay anyone with Loom assets, and there are not even names on the accounts, they are folders and have nicknames or numbers only...ya, its a different kind of privacy. Yes, you must agreed to accept the currency, but you can always exchange out to national money.

(Sepp) What escapes me is how Loom actually transfers the value if, as is said in the introduction articles, Loom does not care what kind of currency you are transferring. In other words, I don't get how the money actually gets from point A to point B, other than in the mind of the two people doing the virtual transaction. Ripple users can choose what currency they give their friends credit in. Ripple, as we said, is based on credit. When giving credit, Ripple users can choose what currency they give their friends credit in. Currently acceptable are Euro - US Dollars - Australian Dollars - British Pounds - Canadian Dollars - Ounce of gold - Ounce of silver - Hungarian Forint - Indian Rupee - Japanese Yen - New Zealand Dollars - South Corean Won - Swiss Franks - and Yootles. Potentially, any currency can be traded through Ripple, even local currencies. If a payment is made from someone who has Euro Credits to someone who prefers US Dollars, the system will convert from one currency to the other, based on the day's official exchange rate.

(mark) Yes, this is very nice, and indeed all digital gold currency systems work like this, that is the best way to do global biz.

Ripple is a very sexy system, but help me with this topic, how do I use Ripple to pay for my monthly web hosting, or buy a book online from a merchant, or anything commercial. Could be I've just missed the point with Ripple, help me out how will you get retail sellers of merchandise to accept Ripple for the sale of physical goods? Where can I buy an iPod with Ripple?

Thanks, great conversation here.
Mark

PS I have a 5 minute Loom video tutorial in my files I'll fish it out.

Ryan Fugger adds some thoughts (email):

On 4/8/08, Sepp Hasslberger wrote:
You say, the biggest problem is (quoting my paragraph explaining this) that you need to have connections of personal trust and credit for it to work. This might be seen as a problem, but it is also a central and defining feature of Ripple. Since it is based on personal trust, Ripple is an inherently secure system. All the program does is establish the routes of payment, crediting and debiting accounts along the way.

I would only add that Ripple isn't based only on personal trust, but on any kind of trust -- two corporations can be connected by Ripple for example. The underlying principle is no different than the way the regular banking system works. A bank account is a bank obligation, and you have to trust that it will fulfill it. Ripple's innovation is purely in the routing system that can find paths of multiple hops through the trust network in real-time, where the conventional banking system relies on pre-defined paths that are generally quite short. So Ripple could actually be used in the banking system, and the more I research, the more I think that it ought to be.

To use a monetary system, you have to trust something, be it your bank, a national regulator, government fiat currency, that other people will still want gold tomorrow, whatever. Ripple just organizes the routing so you have ultimate flexibility in where you can place that trust -- the only limitation (and it is a huge one at the start) being that the other party must use Ripple as well. It's my own personal conviction that trust is best placed in other human beings, but every participant is free to decide for themselves what their values are and where to place their trust.

The documentation at http://ripple.sf.net/ (the project homepage) is gradually being updated to disentangle my own personal biases from the description of the concepts behind the system. But since the ripplepay.com site is my own implementation of those concepts, it naturally carries my biases. It should not be thought to represent the project as a whole though.

The efforts of the project now are directed towards figuring out how to assemble a critical mass of Ripple participants, be they individuals or corporate entities.

Ryan

Ripple sounds great. Maybe the government can produce a Ripple TARP (Troubled Asset Relief Program) for when Alice defaults and the whole system falls apart.

Here is a message that pretty much distils my thoughts on how Ripple could work, and how to handle defaults. First step: Define what is meant by "default". This was posted on the rippleusers google group.

http://groups.google.com/group/rippleusers/

I agree with the sentiment expressed by Ryan and others, that no one should be asked to stand up for someone they have not directly granted credit to.

Speaking about how to define"default":

As I understand it, in a system that lives on mutual trust and credit, default is not connected with "paying back" or rather "not paying back" a loan, as it is in the present system.

In a mutual credit system, such as Ripple, default would be defined as a (prolonged or permanent) unwillingness or inability to trade.

Let me develop this further.

We have three main types of interaction in Ripple, that should be well separated from each other.

1) The expression of trust - granting of credit.

People know each other, they interact, more or less intimately, and they have an estimation of and make a decision with regard to how much they would "trust" that person with, in monetary terms. This is expressed as a credit limit that is granted from one person to another. The person granting the credit is "putting their faith into" the other person, and is conscious of the risk of ultimately losing the sum they grant as credit. The sum of mutual trust expressed in Ripple is the liquidity of the system. It is a rather stable entity, because unlike in today's system, we are not talking about a loan we give a person that has to be paid back, but a personal expression of trust in a person, a bet that the person "will make good in life" expressed in a monetary value.

2) The everyday economic activity of buying/selling with the use of Ripple.

People participating in Ripple will be providing goods/services, for which they gain "Ripples" (or whatever measure is called, it might as well be Euro or Dollars, or weights of gold/silver), and they will buy stuff using Ripples to pay for it. This is the normal everyday economic activity, which will really take off when Ripple goes widespread, so much of what a person needs every day can be paid for in Ripples. The economic activity that people have in Ripple is their personal contribution to the system. Some accounts will have lots of movement, some will have comparatively little. But as long as they move the account, staying within their credit limits, their account is considered active.

3) The routing of payments between persons who do not know each other personally.

This aspect of Ripple is an automatism inherent in the Ripple program. The program itself looks for paths a payment can take, between an account making a payment and an account receiving a payment. No intervention of the person through whose account a payment passes is necessary. For accounts in the chain between the paying and the receiving account, the passage of a payment is a zero-sum event. The payment merely passes, decreasing the balance of one directly connected account, and increasing the balance of another directly connected account. In this way, a payment event "ripples" through a chain of trusted connections, but it leaves the total balance of every link in the chain untouched, except for the balance of the initiating
account and that of the receiving account.

I am proposing to define default as a continued or permanent inactivity of a Ripple account.

Discussion: An account could become inactive by departure or death of the account holder. It could also be considered inactive after a prolonged period of no movement (a time period should be defined - perhaps a year?). So default is basically when a person drops out of the system, when he/she can no longer be considered a user.

As long as a person has credit granted to them by another user, and as long as the account moves, be it through the making or the receiving of payments, be it through the routing of payments through their account, that person is a user of Ripple and is part of the system.

This implies a basic principle: Accounts can never go beyond their credit limit.

That basic principle is expressed in all three types of interaction, the granting of credit, the making of trades, and the routing of payments. In the "granting of credit", it means that once credit is granted, it cannot be withdrawn if that withdrawal would mean the account is going over its credit limit. In terms of trade, it means that I cannot make a payment if that payment would put my account outside of the credit limit. And of course in the routing of payments, it means that a payment may not be routed through an account, if the amount to be routed is not present as "free" credit in the account.

Did I capture the essence of Ripple correctly with this?

... and can we agree that default should be defined as inactivity, rather than (as in today's finance system) unwillingness or inability to pay back a "loan"...

Sepp