Ripple and inflation

[seafox]

Another rambling bit of thinking from me:

In a scenario where Ripple is used in a community where the national currency experiences high inflation rates:

Would it be possible to use Consumer Price Index figures to 'pin' a currency to a certain point in time? To stop inflation or deflation to favour either the debtor or the creditor.

If your community already uses British pounds for example, GBP, they could agree to denominate their Ripple credit in 'Millenium pounds' from 1999. Let's call it GBP99.

Your Ripple client app on your phone could pull the latest CPI to calculate back and forth between the value of GBP and GBP99 at the tap of a button.

As long as the inflation figures are up to date, when it comes time to settle a Ripple account with someone using cash or bank transfer, it's irrelevant how much time has passed with inflation (or deflation for that matter). If you wanted to settle a Ripple debt of £10.00 GBP99 you would have to pay about £14.6 GBP in cash or bank transfer of today's money.

Would this make Ripple an attractive tool even if there's runaway inflation in a community using a national currency? Or is it not that simple?

-sf

[Melvin Carvalho]

+1

So backing a currency with a basket of goods?

You can do this with a URL that describes the basket. 

How exactly does ripple model currency ... in goodrelations it's modelled as a 3 letter ISO, in webcredits it's a URL, in payswarm it used be EITHER, but payswarm have now switched to URL

The reason is that modelling currency with a URL gives a lot of flexibility and the ability to mint new currencies ...
 

-sf

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[Jorge Timón]

Yes, it's really that simple. Well, you need people to agree in the
definition of the currency.
I've been advocating for this for quite a while. Usually using usd1970
and Terra as examples.
But yours seems basically the same concept.

The most common solution is to use "hours", defined just as "hours of
unskilled labor", but these index definitions would be far more
accurate.

Take into account that you don't need the Bank of England's CPI definition.
You could make your own index, something similar to what shadowstats
does for usd CPI.

Different indexes could compete with each other and eventually a
global standard of value would emerge (used voluntarily, not imposed
by force).
Didn't finished with E.C. Riegel's books, but my intuition is that
this is basically the same concept as his "Valun".

IT is important to note that this valun can only be issued as credit,
not as cash. That is, you cannot hold a GBP99 that's not someone
else's liability.

Medium of exchange and unit of account can be separated too. The old
"definition" (with the 3 supposedly mandatory functions) of money will
fall apart.

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[seafox]

You're probably right that using an hour or another unit has advantages over a nation's fiat currency within Ripple, even if it's pinned to a point in time. I do hope Lietaer's Terra will become a reality. I just imagine that people (within a local community)would feel more comfortable with something like GBP99. If only because it's familiar and if your community is in Britain you'd remember roughly how much a loaf of bread and a pint of milk used to cost in the 'good old days'.

[Melvin Carvalho]

On 4 March 2013 18:29, seafox <osh...@gmail.com> wrote:

You're probably right that using an hour or another unit has advantages over a nation's fiat currency within Ripple, even if it's pinned to a point in time. I do hope Lietaer's Terra will become a reality. I just imagine that people (within a local community)would feel more comfortable with something like GBP99. If only because it's familiar and if your community is in Britain you'd remember roughly how much a loaf of bread and a pint of milk used to cost in the 'good old days'.

currency is the three letter code or currency_id.

https://ripple.com/wiki/RPC_API

I'm unsure what currency_id is.  This looks like the ripple protocol will NOT scale very well to custom currencies (unless URLs can be supported).  So use ripple to trade 3 letter ISO currencies, and perhaps another system to bridge to other types of competing currencies like you suggest.

I could be wrong in that analysis, but that's the impression I seem to have ...
 

[Jorge Timón]

the currency_id is the 3 letter code plus the issuer's address,
because each issuer is really a different currency.
You can define what MelvinUSD or MelvinAAA are denominated in outside
the system though.

The system doesn't really need to know anything about what the amounts
mean. All the 3 letter code does is: if you have trust lines with the
same code from different people you can act as an intermediary and
they will have a 1:1 rate (alterable through fees).

So you can perfectly have GBP99, HRS, 1970USD, Terra, Valun or
whatever you want to use within the system. The definition people will
look at to compare it to other currencies would be outside the system.

There's an planned a design for custom currencies that have special
properties that need to be "enforced" by the system too:
https://ripple.com/wiki/Currency_Format

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[Melvin Carvalho]

On 4 March 2013 22:55, Jorge Timón <jtim...@gmail.com> wrote:

the currency_id is the 3 letter code plus the issuer's address,
because each issuer is really a different currency.
You can define what MelvinUSD or MelvinAAA are denominated in outside
the system though.

The system doesn't really need to know anything about what the amounts
mean. All the 3 letter code does is: if you have trust lines with the
same code from different people you can act as an intermediary and
they will have a 1:1 rate (alterable through fees).

So you can perfectly have GBP99, HRS, 1970USD, Terra, Valun or
whatever you want to use within the system. The definition people will
look at to compare it to other currencies would be outside the system.

There's an planned a design for custom currencies that have special
properties that need to be "enforced" by the system too:
https://ripple.com/wiki/Currency_Format

Thanks for the clarification.  Is there any reason currencies are limited to 160 bits?
 

[Jorge Timón]

No, 160 bits is just a hash.

> Custom currencies will use the 160-bit hash of their currency definition node as their ID. (The details have not been worked out yet.)

A "node" in this context, is a block without a defined format (yet).
Is a node within the state tree of the ledger.

https://ripple.com/wiki/Ledger_Format

Oh, it seems that page has changed since last time...