Explaining Ripple to potential users

[Sepp]

Hi,

I'm new to this group, but not really new to the Ripple idea. I've
been mulling this for some time, and have an article on my blog that
plugs Ripple

http://blog.hasslberger.com/2006/03/ripple_pay_open_source_cashles.html

More recently, I've participated in the open money discussions in a
ning group created for the purpose of preparing for a meeting of LETS
and open money aficionados in Mexico. I wasn't at the meeting, but
there are interesting discussions about money on the ning group:

http://openmoney.ning.com/

As I got into reading posts and discussions on this list, I was
stimulated to write up my own introductory explanation to Ripple. Here
it is. Any comments and ideas to provide answers to the open questions
would be very welcome.

Sepp


The Ripple Project

Developing an open decentralized payment network

Ripple is an account like your bank account or your pay pal account.

The Ripple account is useful because

- it leverages personal trust from friends and family to create
credit

- it provides a simple method of payment between Ripple users

Although credit from your friends lets you jump-start the Ripple
account by allowing you to go into negative balance, like any other
account eventually your Ripple account needs to be balanced, which
means you need to put money in to be able to take money out.

To put money in, you either have to get paid through Ripple for
something you sold or some service you provided, or you have to
convert some of your cash or bank money into Ripple money.

For making payments, Ripple will only be as useful if it has wide
acceptability.

There are four distinct layers to the Ripple system.

1) The system layer, which is the Ripple program that keeps track of
account identities, credits and transactions between accounts and the
user interface that allows us to become part of the community and to
use Ripple for making and receiving payments.

2) The interpersonal layer, which is an extensive network of friends
who grant each other credit as expressed in Ripple currency. Trust
between people is converted into liquidity that can be sent here and
there to keep track of economic interactions. The network of trust is
what provides the route that payments can travel on.

3) The business layer, which connects the Ripple system and our
network of friends to the real world, to useful physical products.
Businesses that accept payment in Ripple currency are part of that
layer.

4) The banking interface, which provides for exchange with the current
monetary system. The interface is established by entities like banks
or credit unions opening a Ripple account, perhaps as an additional
service to their customers.

Each one of the three layers has its own problems that need to be
solved. Each one needs to be built up to full functionality if Ripple
is to be a successful payment system.

The Ripple program

Layer 1 exists and there is a workable implementation of the program
running at

http://www.ripplepay.com

Ripple software is open source. The current user interface is browser
based and records are kept on the server. Other implementations are
possible, such as a network of servers that link between each other to
route payments. There could also be a peer-to-peer implementation in
the future, which does away with the need for a centralized server,
storing records and transactions transparently and redundantly on the
users' own computers.

The interface that allows us to make payments could be brought to
mobile phones and similar devices.

The transfer method is simple - as simple as ordering a payment from
your bank account or through paypal. The mechanism behind the payments
is not something the person who uses Ripple needs to know in detail.
The Ripple program will look for payment paths and do its job in an
unobtrusive way. What's of more immediate concern is how to enter in
the Ripple community and to link up with others who are already in it.

The network of friends

It is possible to start forming that network of friends by going to
www.ripplepay.com, registering as a user and offering credit to some
of your friends. It would be normal for those friends to offer you
credit in turn. By doing that, both of you immediately have the
possibility of using Ripple to settle accounts with each other's
friends, but of course the real useful part only comes when businesses
join up and you can buy useful things with Ripple instead of spending
cash or bank money.

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 business layer

To be widely acceptable, Ripple needs to attract businesses of all
kinds to accept its currency as payment. In turn, those businesses
have to have some way of spending the accumulated Ripple currency,
either with other businesses or by paying their workers and perhaps
the owners.

For a business, a Ripple account is like any bank account. Payments
can be received into it, payments can be made from it, and there will
be a credit lines in and a credit lines out that further characterize
the account and link it into the system. For accounting purposes, all
that is of interest is the correct registration of transactions and
the balance of payments, either positive or negative.

In a time of first implementation, businesses could opt to accept
Ripple currency for a certain percentage of any sale, demanding cash
or bank money for the rest. As Ripple takes hold, some businesses may
move to accepting Ripple currency for the full amount of any payment
due.

To attract businesses into the Ripple community, there has to be some
advantage, something that makes it worthwhile to use this particular
system of payment. It should be more profitable to accept Ripple
currency than to only accept money. (open question: what would be a
good "hook" for recruiting businesses to accept Ripple payments?

The banking interface

Banks and credit unions could be persuaded to join the Ripple
community to offer an additional service to their clients. Banks could
also provide smart cards that allow transfer of ripple currency. (open
question: how to exactly does a Ripple currency account link to a bank
money account or to cash?)

[Sepp Hasslberger]

I think you have some good points, Robin, and I will have to take some time now to see who else responds and then flesh out the description a bit better, including the answer to your important questions of 

What's the pain being cured?

What are we really after?

I'll see what else comes in (Michel Bouwens also sent it to some of his people interested in money matters) and then get to work. 

Sepp

On 06/apr/08, at 16:50, Robin Good wrote:

HI Sepp,
thanks for sharing all these goodies. I think you are definitely making some progress on this front.

I also like your introduction which I find very informative and rather easy to read. In fact I would love to have your permission to republish it as soon as you give me an OK on Master New Media, as I see interesting and valuable ties with social media, social networking, reputation systems, trust, and more.

As you are also well aware, the only things it lacks, outside of the part you are yet to write at the end, is a clearer explanation of the WHY and of the specific benefits of going into this new fascinating direction.

What's the pain being cured? What are we really after?
Why are YOU so desireful to see it adopt it?
Can you unroll the whole vision? :-)

Re your specific questions I will attempt to answer the first one:

To attract businesses into the Ripple community, there has to be some
advantage, something that makes it worthwhile to use this particular
system of payment. It should be more profitable to accept Ripple
currency than to only accept money. (open question: what would be a
good "hook" for recruiting businesses to accept Ripple payments?

Some ideas:

The hook for the businesses may be the opportunity to tie a closer relationship with their customer communities.

Kids may be a huge platform from where to introduce Ripples. Kids have trust but no money. Introducing ripples in marketplaces where kids are the main consumer category may help business get a lot of new customers while enticing kids to create small personal economies of know-how or service-exchange to build up their ripple accounts. This is so good marketing-wise that any brand name with a vision would be stupid NOT to jump on this opportunity and run with it. Kids are also great marketers, evangelists and have no ties or sold assets into the existing payment system: what better crusaders to introduce OVER TIME such a new alternative payment option?

The benefits of using ripples may be specific to the community in which they are used. Great reasons for using Ripples may be found by searching for existing communities of interest that circle around non-monetary exchanges. For example: it would seem to be a natural to see Ripples adopted by the majority of online communities that deal with spirituality, health, ecology and other fundamental issues of the planet in alternative ways. Those looking for change basically. So these are not few either.

The business hook is the opportunity for these companies to get closer to their customers, by supporting and accepting forms of payment that encourage exchange, investment and that are possibly not handicaped by existing banks-financial-taxation systems. As an individual who wants to use Ripples because by using them I can fuel and realize things I couldn't do otherwise (this part we are yet to develop in this document) I will support and spend more happily my preferred currency where there is a company/vendor/supplier that supports it. Just like I do now for PayPal. I now choose Paypal over other payments methods for immediacy. But given the same level of immediacy my next choice would probably be on affinity with the company on some other level. And Ripples may appear to be able to potentially provide that extra level of company-customer affinity.

What do you think?






Robin

--
Robin Good
Chief Editor

Master New Media
Independent Publishing and New Media
www.masternewmedia.org

Follow me and my scoops on:
www.twitter.com/RobinGood

[Ryan Fugger]

Hi Sepp. Your breakdown of Ripple into four layers seems very astute to me.

On 4/6/08, Sepp Hasslberger <se...@lastrega.com> wrote:
> What's the pain being cured?

Monetary signals have a very strong influence on our economic lives.
Ripple attempts to bring monetary values more in line with human and
community values, rather than corporate and institutional values.
Read more at http://ripplepay.com/essay/.

> What are we really after?

Michael Linton's original vision for LETS was a that if money is
essentially a scorekeeping system, then no one ought to have a
monopoly on points. Ripple's specific take on that is that any two
people should be able to keep score in a way that is meaningful to
them, and be able to translate that into the economy at large in a
useful and accountable way.

Ryan

[Joshua Zeidner]

On Tue, Apr 8, 2008 at 9:35 AM, Ryan Fugger <rfu...@gmail.com> wrote:

Hi Sepp.  Your breakdown of Ripple into four layers seems very astute to me.

  Ryan,

    So is this breakdown into four layers an observance of Sepp's or is it a explicit architectural feature?

   -jmz

--

- http://www.joshuazeidner.com/

[Sepp]

On Apr 8, 6:44 pm, "Joshua Zeidner" <jjzeid...@gmail.com> wrote:

So is this breakdown into four layers an observance of Sepp's or is it
a explicit architectural feature?

-jmz

I think we can safely assume that the four layers are my observation,
something to try and more easily visualize the concept in the mind of
someone who's never heard of alternative currencies.

I actually had three levels at first, with businesses and banks in one
"real world" level that connects the ripple system and trust network
to the real world of everyday economic interchange. Then I decided to
separate businesses and banks into their own levels each.

It's really just a tool for conceptualizing the system.

Cheers - Sepp