Clogging the Ripple network
Corey
This is because if someone hits a credit limit, that closes that particular route completely, perhaps forever (think about supply chains--one person always sells, the other always buys). So isn't the chance of a Ripple network getting "clogged" (having a lot of routes closed due to maxing out credit limits) very likely, especially for smaller networks?
// Corey
Ryan Fugger
your selling. No one "always sells", and no one "always buys". The
main issue is that Ripple might not be pervasive enough to be used for
all your activities. For example, you might buy a lot on Ripple, and
sell a lot in regular currency. The solution is to find a way to
convert between Ripple and regular currency. The way Ripple works
isn't fundamentally different from regular money, except that it
automatically finds multi-hop paths, where the banking system still
can't accomplish this in general.
Ryan
Corey
But with regard to buying and selling, you're limited by how much you trust people and, eventually, how much everyone in the network trusts each other. Let's assume no one in the network grants more than $2000 to any given connection. In this case I can't just buy a $3000 ATV from a friend because no one even has a limit that high. Is this correct?
// Corey
abb
debts. Would you dump your friend for a $100k? What about $500k?
Many would. If Ripple were pervasive, it would create a society of BS
artists who are great at persuading new "friends" to lend them money.
Are you a persuasive person? If not, you're locked out of the
monetary system because noone will lend you any money.
Am I the only one that sees this fatal flaw? It leverages the social
relationship to create a monetary system. It's a clever idea, but it
would destroy society. Haven't you ever heard, "never do business
with friends"? Would you feel comfortable asking your buddies to lend
you $40k for a new car? What if the relationship sours? You get the
car, and your old buddies get stuck with the bill. It's insane. I
realize you can create collective entities to hide this effect, but
the fatal flaw remains. The pressure Ripple places on social
relationships is incredible.
Responsibility and accountability MUST go directly to the person
making the promise. If you promise to deliver value, you must be held
responsible for breaking that promise. Not your friend. I've posted
that solution earlier... noone seems to get it.
Ryan Fugger
are responsible for delivering the value of a payment. Ripple is no
different. If you don't want to trust your friends to do this, trust
someone or something else that better suits you. There's no way
around it other than barter.
Ryan
Thomas Hartman
One solution would be, don't do high-value ripple through friends, do
ripple through people that do ripple as a business. Could be banks,
but could also be other types of "entities" -- hawala dealers, western
union's ripple window, who knows.
More thoughts. I for one would not sell out my friend for $40,000. But
presumably if I had a ripple deal going on for such a high amount of
money there would be a written contract and if I defaulted my friend
(well, ex-friend) could go after me via lawsuits and collection
agencies. This would be exactly the same as defaulting on a $40,000
bank check.
Written contracts with default clauses are outside the scope of
ripple, the same way they are outside the mechanics of routing value
within the existing banking system.
thomas.
Ryan Fugger
> I was thinking of just two people--one always buys from the other since, for
> example, they're a provider of a material the first person always needs.
> This could be a common situation for small communities where common supplies
> are transferred between members (fuels, food, etc).
Yes. Unless Ripple encompasses the whole supply chain there will need
to be conversions to external monetary systems. If supplies are
brought in to the community using regular money, then regular money
must also be brought into the community by someone working outside.
Ripple would regulate the flow of regular money through the community.
If the only things Ripple buys are externally-produced items, and all
Ripple transactions are just proxies for cash, then it is probably not
very useful. The goal is to support more value production within the
community (however you define it).
>
> But with regard to buying and selling, you're limited by how much you trust
> people and, eventually, how much everyone in the network trusts each other.
> Let's assume no one in the network grants more than $2000 to any given
> connection. In this case I can't just buy a $3000 ATV from a friend because
> no one even has a limit that high. Is this correct?
No, that's not right. Once you max out your direct credit ($2000), the
system will find other paths to the seller through common friends --
if you are both connected to Alice, then there's another path of
$2000. And then there are paths with 2, 3, 4, 5, etc. intermediaries.
Of course, you are ultimately limited by how many connections you
each have.
A common objection has been that it would be difficult to get enough
credit to pay for a house. I'll admit for most people that will
probably take a greater pool of credit than their immediate relations.
But there's nothing stopping regular bank-type credit aggregators
from operating in the Ripple framework...
Ryan
Corey
If Ripple were pervasive, it would create a society of BS
artists who are great at persuading new "friends" to lend them money.
Are you a persuasive person? If not, you're locked out of the
monetary system because noone will lend you any money.
Sadly, I think that would be hilarious. If people could be so easily persuaded, they deserve what they get.
Our society has grown rather weak in that regard--our bubble of luxurious comfort has conditioned us to trust more than is reasonable; to get caught up in the moment too easily; and not adapt quickly enough to new situations. This needs to change if we are to survive the long haul, and a new economic paradigm like Ripple is a good starting point. Climate change too, while harsh, is a good slap in the face that's completely deserved.
Ryan wrote:
A common objection has been that it would be difficult to get enough
credit to pay for a house. I'll admit for most people that will
probably take a greater pool of credit than their immediate relations.
But there's nothing stopping regular bank-type credit aggregators
from operating in the Ripple framework...
Currently we're running on the assumption of endless resources and riches so we're consuming a lot and producing little. Ripple will likely change this, so to compensate, people will likely become producers themselves--it would be easy to start up a business with Ripple and earn new connections that way.
I have a strange question though. Instead of people, won't it be possible to create bank 'bots'? In other words, turn a computer into something like an automated bank that grants high limits to its connections?
// Corey
Ryan Mulligan
abb wrote:If Ripple were pervasive, it would create a society of BS
artists who are great at persuading new "friends" to lend them money.
Are you a persuasive person? If not, you're locked out of the
monetary system because noone will lend you any money.
Sadly, I think that would be hilarious. If people could be so easily persuaded, they deserve what they get.
Our society has grown rather weak in that regard--our bubble of luxurious comfort has conditioned us to trust more than is reasonable; to get caught up in the moment too easily; and not adapt quickly enough to new situations. This needs to change if we are to survive the long haul, and a new economic paradigm like Ripple is a good starting point. Climate change too, while harsh, is a good slap in the face that's completely deserved.Thanks for clarifying Ryan, that's good news. What I was hesitant to say was that Ripple isn't simply decentralizing money--it's going to force people to change their spending habits (unless, of course, banks get in on it). We'll no longer be able to draw up massive amounts of debt because there will unlikely be anyone who is willing to support that kind of behavior.
Ryan wrote:A common objection has been that it would be difficult to get enough
credit to pay for a house. I'll admit for most people that will
probably take a greater pool of credit than their immediate relations.
But there's nothing stopping regular bank-type credit aggregators
from operating in the Ripple framework...
Currently we're running on the assumption of endless resources and riches so we're consuming a lot and producing little. Ripple will likely change this, so to compensate, people will likely become producers themselves--it would be easy to start up a business with Ripple and earn new connections that way.
I have a strange question though. Instead of people, won't it be possible to create bank 'bots'? In other words, turn a computer into something like an automated bank that grants high limits to its connections?
Bank bots already exist. People build programs that predict how they should invest in the stock market and then the follow the directions of it. It would seem to me that banks do a similar thing with loans already, just probably more conservatively than a quantitative options trader.
Thomas Hartman
earned trust somehow.
no one would extend credit to a bot directly.
Corey
Obviously we already have market prediction programs, but they're not bots--they don't automatically respond to events, they're just models of an existing system. Banks do not have "bots" that grant loans. Those are applications that the user trudges through to get accepted and allowed a predefined amount. People just need to meet certain criteria which is easy to ascertain (as all the spam in your physical mailbox can tell you).
No, the bots I'm referring to are of the likes of those seen in chat programs. The kind that analyze the input, process the information, and spit out an intelligent response that fits into the present context. Someone could write a program that calls methods from the Ripple server (the bot could sit on the server itself) based on input from other users. If the bot gets an invite, it could accept and default to any predefined limits. It could automatically adjust it's limits between users and administer payments at random.
That wouldn't undermine the system, but it would cause some trouble that would need to be addressed as quickly as possible. Hopefully people would simply close their connection with the bot after news of its odd behavior spread and maybe even catch the hint and blacklist that server. The malicious coders would adapt and try again, and it would go on...
While there are ways around it, but unlike present economic systems, there will be "banks" that cause a lot of trouble. It's just a new ecosystem to learn I guess. Whatever. New age, new troubles. Someone tell me I'm missing something.
// Corey
Chris Wagner
> Thanks for clarifying Ryan, that's good news. What I was hesitant to
> say was that Ripple isn't simply decentralizing money--it's going to
> force people to change their spending habits (unless, of course, banks
> get in on it). We'll no longer be able to draw up massive amounts of
> debt because there will unlikely be anyone who is willing to support
> that kind of behavior.
Keep in mind, banks create most of the money that's in
"circulation" (generally, as bits on a computer); and money that doesn't
come from them usually comes from a "central bank" or government. All
of this centralization creates great inequalities. When new money is
created it eventually waters down the value of everyone else's money,
which is likely why, in today's world, it's so unrealistic for friends
to loan each other money to buy houses.
If an honest money system like Ripple became *the* money system of the
world, then all of the trust that banks receive today would simply be
distributed. In theory, the "money" (i.e., trust) should still be
available, but the mechanism for pooling it together, for making a
purchase, will be done in another fashion.
It will obviously take a long time for the trends of the current banking
system to die out and stop causing unfair wealth redistribution, being
replaced by Ripple and other honest monetary systems. I believe it will
have to be a long, evolutionary process; we may have to begin by using
Ripple for small and petty transactions, moving up to more "risky"
transactions over time. I think it (Ripple and other honest money) will
change the world, though.