Value, Currency and Exchange

[matabele]

An electronic payment routing system (like ripple) need not duplicate
all of the functions of hard currency. Money has several functions:
- a measure of relative value
- a promise or contract of payment (and accounting for this), and
- a mechanism for routing the exchange between parties.

With hard currency these functions were of necessity all rolled into
one instrument e.g. a gold coin. With an electronic banking system
these separate functions need not form part of the same software
application. It is stupid anyway to measure something (value) with a
ruler that constantly changes length (inflation).

Value can be compared using a separate yardstick - a searchable
database of similar trades would do (preferably measured against a
standard universal unit of value). The units used to measure value are
not units of currency at all - more like a ruler with a standard
scale. At present you can look up such values on the internet -
without actually trading.

Likewise suitable currencies can be created by any pair or group of
parties wishing to trade. Existing CC's are examples of these - as is
e-gold.

Ripple would therefore provide only its primary function - determining
a closed path of exchange between the two parties wishing to trade. It
would not need to be currency itself, nor a measure of value. The
exchange values required for routing would be obtained from each user
- each of whom would declare the 'rate' (against the standard unit)
they will accept for the various currencies they hold (these may be
different for different users of the same currency). The result of
routing through a user would effect only the balances of the various
currencies held.

Both the routing and the relative values need not be optimal - only
good. A distributed system rather like torrents should do the trick.
Users can look up a 'good' value for a trade from a distributed
database comprising similar trades made from users running a client at
that time. Likewise a 'good' route for payment would be selected from
those users who have clients running at that time. The same client
could also provide a mechanism for creating the required currencies as
and when required - these need be shared only amongst the parties
wishing to trade in this currency (a loom type mechanism might do here
- but needs to be distributed?).

I believe the ripple concept already includes the idea of multiple
currencies. The arguments for the necessity for central servers appear
to derive mostly from the need to compare value - not from the need to
provide a route (torrents work well with no central server). The
required yardstick of value will derive from a different source - a
distributed database of trades - which could be conveniently provided
by the same client. This should make any use of hard currencies and
the existing banking system redundant - they are used to get
comparative exchange values only (at a huge cost).

The database of values need not comprise part of the system - however,
the one advantage of hard currency is that parties are forced to do
both - make a contract and 'publish' their judgment of value. Once
these functions are separated - there is no need for the parties to
'publish' their valuations and the data will be lost. Putting both
mechanisms in the same software will 'publish' the necessary values
every time a trade is made. It would be possible to have no standard
unit of value - each user declaring only comparative values of the
currencies held - but I think having a universal yardstick is easier
(e.g. the metric system).

Just thought these thoughts may simplify the design of a truly
distributed electronic banking system - and of ripple in particular.
This should comprise a network of P2P clients - like torrent clients -
not a network of servers!

regards William Jackson

[Thomas Hartman]

I think the existing design for ripple is "privacy by default."

Seems your proposal would make data a lot more shareable.

I tend to also want a more open system than is currently in the works,
however it does go against the grain of what ripple currently is.

Thomas.

[Ryan Fugger]

Yes, William, you have summarized the aim of the project well.
There's no need to distinguish between "server" and "peer", since all
servers are peers, and anyone can run their own server if they want.
I tend to think that most regular users don't have the technical
competency to configure and operate a server that stores their
financial data, and so would prefer to be hosted by someone else's
server, but that's just a guess and doesn't limit the system's design
in any way.

Ryan

On Tue, Jun 24, 2008 at 5:21 AM, matabele <matabe...@gmail.com> wrote:
>