Ripple - the good, the bad and the ugly

Ripple - the good, the bad and the ugly?

Markus Teufelberger, 2017-01-23

Overview● What is Ripple?● History of Ripple Inc.● Similarities and differences between Ripple (RCL) and Bitcoin● Q & A

What is Ripple?Concept by Ryan Fugger, in 2004

Implemented in a centralized server (https://classic.ripplepay.com/, https://villages.cc/, https://sourceforge.net/projects/ripple/), mainly Friend2Friend

Basic idea: Create decentralized money by tracking trust and debt

If Alice owes Bob 10 USD and Bob owes Claire 10 USD, Alice can pay the 10 USD to Claire instead of Bob.

Bob’s debt “ripples” over to Claire, since he has 10 “IOUs” from Alice and Claire has 10 “IOUs” from Bob.

Alice, Bob and Claire2 main problems remain:

What if Alice owes 10 USD to Bob but Bob owes 5 EUR to Claire?

→ Markets and market makers are needed to cross currency and trust boundaries

What if Alice never really intends to pay back Bob anyways?

→ Choose wisely whose IOUs you’re willing to own by choosing whom you trust for how much

Common usage modes of RippleTraditionally: Friend to friend model (Alice/Bob/Claire scenario)Create network of trust lines between individuals and issue/settle money on the fly

aka. “LETS (Local Exchange Trading System)”, community/mutual credit

Currently: Gateway/deposit based modelDon’t create money when creating debt at consumption time (“I owe you a beer”), create balances at trusted institutions with existing money (“Here is money for my savings account - you now owe me 100 EUR”).

aka. escrow, book money

The history of Ripple Inc.Jed McCaleb, founder of e-Donkey and MtGox thinks mining is wasteful (https://bitcointalk.org/index.php?topic=10193.0, May 2011)

Builds a company (OpenCoin) in 2012 together with Arthur Britto and Chris Larsen to decentralize the idea of Ripple, using his “Consensus” concept to secure it.

Initial commit in 2011, final public genesis block in December 2012 (currently ~27 million blocks/ledgers).

Apparently lots of interest in the concept from industry and community, 2.5M + 3M USD angel and 3.5M USD seed rounds in 2013, hiring several well known Bitcoiners.

https://bitcoinmagazine.com/articles/introducing-ripple-1361931577/

Also in 2013:

Jed McCaleb leaves company (now called “Ripple Labs”)

FinCEN rules on cryptocurrencies

Community backlash begins

2014

Project Codius (smart contracts)

Shift towards supporting institutional use cases (Freeze flag, no-ripple flag)

Freeze: If you issued balances, you can forbid someone to transfer them

No-ripple: If you own IOUs denominated in USD from Alice and Bob, do notmake them implicitly interchangeable

Reason: https://bitcointalk.org/index.php?topic=206948.0

2015FinCen fine (700k USD) and settlement, mostly centered around violating KYC rules

Series A round (32M USD)

Rename from Ripple Labs to Ripple

2016Interledger

Series B round (55M USD)

No rename :-(

CEO changes from Chris Larsen to Brad Garlinghouse

Similarities/differences between Bitcoin and RCLTransaction output based vs. account balance based tracking of units

Transaction tree part of block hash vs. transactions + state trees part of block hash

Proof of Work vs. Consensus

1 native asset (BTC) + scripts vs. 1 native asset (XRP) + IOU markets

Most flexible single currency vs. most flexible marketplace + settlement

Exchanges vs. gateways

Questions?

Contact info:[email protected]