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Cryptocurrency company Ripple says SEC lawsuit is imminent (axios.com)
307 points by taytus on Dec 22, 2020 | hide | past | favorite | 177 comments



What I've never understood about XRP and Ripple is that originally XRP was meant to only be used for paying for transactions and the ledger was meant to track IOUs between people denominated in some other "real" currency. They had videos floating around explaining the concept. In fact, they were handing out XRP for free to bootstrap the network of users [0] (that post says 1000 XRP, originally it was 30,000 XRP when the post was first created).

XRPs themselves were basically worthless, but it was required to interact with the ledger (you pay maybe 0.000001 XRP per transaction). The idea was that you pass a small amount on to friends and others interested in using it to create their wallet and start tracking IOUs, and you needed to have at least 20 XRP in your wallet.

Somewhere along the way all hell broke loose, Bitcoin got popular, crypto currencies in general got popular and XRP itself suddenly became worth something, the original concept got lost and everything seemed to go off the rails... That's when I lost interest.

[0] https://bitcointalk.org/index.php?topic=145506.0


No, that was the idea of Ripple, invented by Ryan Fugger long before bitcoin even existed, and requires no new coin or token for its operation. OpenCoin, a company founded by Jed McCaleb, bought the trademarks other IP for Ripple and rebranded their bitcoin competitor altcoin as XRP. They never had any interest in the original concept, and quickly threw it away when it was no longer fashionable.


The original Ripple site was available for a while under https://classic.ripplepay.com/. I just noticed that Ryan is now operating it under the new domain https://rumplepay.com/.


I don’t remember if I had ever talked to Ryan, but I remember talking to people about this in forums and in person at Stanford and Cal in 2007. By 2005, the financial system was showing signs it was headed toward a point of no return because there was no revenue basis to justify the debt leverage, and the only way out was either extreme dollar scarcity, or previously unthinkable monetary base injections. Either way, there was some concern that we’d need a system of barter for those soon to be left behind by the banking system, and some hope that a massively decentralized barter network would be a more just and stable and productive economy regardless. The main theoretical discussion was whether a system could exist without a central currency. Most ripple believers thought that central currency was basically antithetical, although one based on unskilled labor hours might be acceptable as fallback. I believe this transformed into a resurgence of interest in HashCash, which had only been interesting for spam mitigation, but now looked like a possibility on Ripple. There were some weaknesses in the protocol, however, and as soon as the sci.crypt community got pulled into it, they dove into the double-spending problem. The old methods of Chaum’s blinded signatures didn’t work for decentralized exchange because you’d have to trace every coin back to its original minter. So the question was whether to use the network of confirmations to create an acceptable level of trust, or to maintain a central ledger, which looked a lot like a central bank. Satoshi’s concept was to use hashcash to both secure the ledger and issue currency. This was brilliant but antithetical to the no-currency concept, and re-ignited the debate, with Szabo and Dai reviving their own currency ideas and heading toward implementation with Finney. The ripple crowd were mostly interested in new ideas in economics, and as nobody could find a way of securing a decentralized exchange network without a currency, most of the interest faltered. Sure; you could decentralize the currency, but it doesn’t succeed in prioritizing reward to those performing useful work. At some point Mazieres entered with a more rigorous defense of trust generated by the network, but it still relied on a central token of value to process each exchange. Bitcoin emerged from the impending doom of financial collapse as a less hopeful but more realistic option, and interest in cryptocurrency in general fell off dramatically as the Bitcoin network went through its dead period of only one consistent miner, Satoshi himself. Ripple as XRP emerged much later in the post-Doge altcoin boom with huge investments, big claims about XRP in deals to replace Forex, hiring a lot of people, and were the only job option for the people that would be their critics. To the original ripple supporters, XRP looked no different than a central bank with, except that it was even more autocratic, unaccountable, and unequally-distributed. In no way did XRP fix the basic problem of allocating more rewards to useful work.

I could go on... but... just my recollection...


Thanks for that - very interesting. I think it is possible to create a pure credit/IOU monetary system and I’m working on it at the moment. Though reality is that I spend most of the time reading economics journals... The key is to track reputation and enable the minimum necessary amount of transparency. Eg instead of a single currency like BTC or ETH, everyone becomes an issuer and then the problem then becomes how to efficiently make a market in these currencies by swapping IOUs - essentially what banks do today but in a decentralised way. Furthermore, I think it can be done without a blockchain... Simple tech will do. For one who currently works in the blockchain space - I really like the idea of not using blockchain :)

If you are interested, it’s worth reading the articles “what is money” and “the credit theory of money” by Alfred Mitchell-Innes. He maintained that “credit and credit alone is money” and I mostly agree with him. Another good paper to read is “money is memory”. Oh and Knut Wisksell “interest and prices” is also very good. A lot of literature has been written on pure credit economies but it is difficult to find as it wasn’t ever a popular school of thought. I’m hoping for a revival though!


That’s precisely what RipplePay was. This was all sorted out a decade ago. The idea works, and is still relevant today.


I am too thinking about Self-Sovereign banking.


That’s good to hear! How do you envision it working?


> Most ripple believers thought that central currency was basically antithetical, although one based on unskilled labor hours might be acceptable as fallback.

This stuff always sounded like it came from people who've never hired. Unskilled labor is not all equal.

> Satoshi’s concept was to use hashcash to both secure the ledger and issue currency. This was brilliant but antithetical to the no-currency concept, and re-ignited the debate

Satoshi's most important advancement was in making a currency and using it as its own rate-limiter by paying, in it, to publish.

Bitcoin's weakness is that computation isn't priced in BTC, so scripts had to be nerfed. Vitalik applied Satoshi's rate-limiting solution to computation and Ethereum scripts can now be allowed to grow arbitrarily complex.


The unskilled labor concept was not often discussed in forums or in most of my interactions at Stanford, but when I went to Cal, I realized that the labor value theory foundations were a lot more important to the early supporters than I had thought. I learned about the origins of the movement from a UW student visiting Cal. Somebody may have given a talk there and it caught on.

Smart contracts seemed to me to be another sticking point that nearly killed the whole idea. Most people were looking for a better system of simple exchange, and smart contracts made that difficult. Now transactions became difficult to understand and fraught with error. Running a node meant trusting a fairly large code base you downloaded from an insecure Internet forum, and then let strangers run code on that. Before Script came into it, anybody could look at a shell script implementation and understand what was going on with all trusted components. For a long time it looked like Bitcoin would never release, and vulnerabilities in the early versions made everybody realize that they weren’t trusting a mathematical concept; they were trusting software written by some guy on the internet. Then there was the debate inside the smart contracts community about the halting problem and how it could be used to attack the network. This is probably practically solved with transaction costs alone, but I think it was a practical software engineering compromise do scripting without looping and backward jump instructions because they made the software much more complex and vulnerable to attack. Same with the block size, maybe even block time. This was all an experiment. By the time Vitalik started pushing for improvements, the Satoshi compromises had become canon. I spoke to him and he seemed to be in agreement with upgrading the protocol through miner consensus, but, by that point, an industry of rather unsophisticated mining operations had emerged, and they were not interested in changing anything. Briefly I lived with one of the biggest miners in the world, and he would ask questions and I would explain to him how transactions work etc. So Vitalik gave up on on-chain scripting and proposed an off-chain scripting scripting layer that would use a separate gas currency just for smart contracts with settlement on the Bitcoin blockchain. This was very important to distinguish itself from the rest of the already-defunct altcoins. But practically, I don’t know how it was supposed to happen. We have this now, but it’s been a long road. Is there any reason that Bitcoin doesn’t have Turing completeness, faster blocks, oracles, etc? Not really; but a fork would have been risk without reward, whereas a new token offers the ability to premine and speculate. One of the biggest learnings was how much speculation would dominate over anything non-financial, and how hard it would be to modify the Bitcoin experiment. Still, the use cases for smart contracts are very few, and Turing completeness itself is basically unnecessary. But to more directly address the point, Bitcoin has transaction fees already, and it would be simple to assume that a similar consensus on gas price would emerge and doesn’t need to be part of the protocol. To go further, the gas price itself doesn’t solve the problem of computational complexity because only the miner that wins the block actually gets the reward, while all others downstream are expected to verify it, but they have no incentive to do so, and frankly, today, most don’t. As an example, almost nobody boots up an eth node with verification from origin, and they would be greatly in the minority if they corrected a bug. Eth nodes boot to a trusted state handed to them. Most of the early eth discussions I was involved with implied doing this in snarks or some other provable computation in the initial discussions, but that never made it into eth. So no; that problem was never solved, although we are getting closer.


> One of the biggest learnings was how much speculation would dominate over anything non-financial

Yup. And still does. There was a huge sea change circa 2013(?) when everything became about currency and speculation. Every idea had to pivot to being its own coin, or including some useless utility token (a bit later) because that was 99%+ of the value to investors.

> Is there any reason that Bitcoin doesn’t have Turing completeness, faster blocks, oracles, etc? Not really; but ...

It feels like the first implementation couldn't have gotten it right if it aimed for too much more than Satoshi did. But technically, yes, BTC is a plausible base for this as much as anything else.

> debate inside the smart contracts community about the halting problem and how it could be used to attack the network. This is probably practically solved with transaction costs alone, but I think it was a practical software engineering compromise do scripting without looping and backward jump instructions because they made the software much more complex and vulnerable to attack.

Unbounded loops are an issue, but functional constructs (foreach) have 99% of the power and little of the risk. Ideally we'd have Satoshi take three months now and make v2, which would be BTC in spirit but with the lessons of the last ten years.

> To go further, the gas price itself doesn’t solve the problem of computational complexity because only the miner that wins the block actually gets the reward, while all others downstream are expected to verify it, but they have no incentive to do so, and frankly, today, most don’t.

This seems like where we need a mechanism that allows a script to be audit-executed, and if its outputs don't match expectations a deposit can be claimed by the auditor and the script will be marked as unreliable. If the precondition of the code is that it returns the correct public key, make sure that key works. If it doesn't you can claim the QA/Security prize - which can be set at whatever amount the script author wants depending on their belief in their code.

> Most of the early eth discussions I was involved with implied doing this in snarks or some other provable computation in the initial discussions, but that never made it into eth. So no; that problem was never solved, although we are getting closer.

Is there a specific blocker for this or just that the complexity is 1000x what is currently supported?


At that time the ZeroCoin protocol was known, but an example was only shown for simple transactions, and anything else would have been a lot more complex, and nobody who claimed to understand the snark construction at that level was willing to do it. Gavin was just cranking it out as an op code state machine because he knew he could do that himself. Vitalik would engage with all the big crazy ideas in the room, bringing as much as possible into the idea that was ethereum, and Joe was kind of like the interface between selling the dream and delivery on what they knew they could do. I realized much later that ethereum needed all three personalities in separation to succeed with the crypto community, because they were three different types of promises, not all fully congruent, but the big unifying vision was in the eye of the beholder, a belief that it would all bend eventually toward their personal vision: a utopian egalitarianism for some, and vast plutocratic wealth for others, a gpu mining business for some and environmentally friendly staking for others, etc etc.


Thanks, that recollection is awesome! I'd love to hear the rest!


I remember their original pitch sounding like it made a lot of sense. Fast, cheap, verifiable trading layer for IOUs that can then be settled externally. A lot like how many stock exchanges work. Ended up selling any XRP I had two years ago when things went nuts. Now it looks like people are re-building that whole concept elsewhere and Ripple is becoming irrelevant.


The ripple name was bought to exploit the positive impressions people had of the idea and was slapped onto something entirely different and unrelated.

https://bitcointalk.org/index.php?topic=144471.msg1547843#ms...

Bitcoin's lightning is in many ways the spiritual successor to the original Ripple idea-- a pathfinding network between pairwise relationships, but instead of IOUs, the parties use smart contracts to twiddle funds around in bitcoin payment channels without having to take the updates to the public network.

This fixes the big security weakness of Ripple while preserving the positive scalability properties. Unfortunately it also requires more complexity and limits flexibility somewhat.


I could be wrong, but I always understood the primary purpose of XRP as a mechanism to increase liquidity. Since Ripple is all about cross-border payments, you're potentially dealing with hundreds of currencies. So if you were a bank that needed to do global business, you'd be required to hold a subset of each traded currency in nostro/ vostro accounts. XRP was then meant to be the "standardized" currency that member-banks in the Ripple ecosystem could transaction with.

Since you as a bank would only need your own fiat currency + XRP, you could materially cut down on additional costs from holding all the other accounts. When it comes time to convert currencies, because Ripple (XRP) transactions settle in seconds, the period you're exposed to market volatility is virtually zero, so you can move in and out of a position in XRP in exchange for whatever other currency you need almost immediately.


I don't see how adding a currency makes this easier. Even if I don't want the currency you have, I want XRP less.


Adding a currency that everyone can agree upon as the "intermediary" prevents you from needing to hold huge sums of random currencies. For example - you're a bank in the UK so your fiat currency is GBP. If you want to manage transactions within just Europe, you would need to have Euros, Croatian Kunas, Danish Krones, Swiss francs, Polish zloty's, Russian rubles, Turkish liras, etc. Therefore you as a bank are subject to the ongoing valuations of these currencies, not to mention you've got hundred of thousands of (insert currency here) tied up in these accounts. As a bank, you have to correct for this inefficiency so you produce conversation rates that are not consumer friendly, but necessary to recoup the money you've lost setting aside all those accounts.

With XRP, you replace all those currencies with some amount of XRP. Because all member-banks use XRP when you need to transaction, say GBP to EUR (simple example), you would take your GBP, convert it to XRP, then use that XRP to buy EUR from another bank, that bank then can hold the XRP or chose to immediately convert it back to EUR through other banks. Like I mentioned previously, that whole transaction takes a few seconds, so you're effectively not subject to market volatility that could impact the transaction itself.


> you would take your GBP, convert it to XRP, then use that XRP to buy EUR from another bank

But I could more easily just use my GBP to directly buy Euros, with one less exchange rate and one less transaction in the process.

> that whole transaction takes a few seconds

For a bank, that's slow. But even if it wasn't, using an intermediate currency simply takes twice as long for each step.


> But I could more easily just use my GBP to directly buy Euros, with one less exchange rate and one less transaction in the process.

In this scenario, the transacting bank would need to have (or want) to have GBP for them to sell Euros. While I agree this is a poor example, think of the more obscure conversions. Swedish kronas to South African rands, etc.

Anyway, I won't pretend XRP is a perfect solution. Just seems to me that it solves the edge cases of liquidity while doing so more cost effectively, which in turn benefits the consumer.


Why wouldn't the bank just use dollars or Euros as the intermediate currency? Have a pile of dollars, a trading pair for everything against the dollar, and you're all set.


Currency roughly speaking doesn't move across borders, correspondent banks in each country have a ledger, you send money by decrementing the ledger on the send side and incrementing it on the receiver side. Someone else does the opposite. The exchange rate is set such that the ledger balance tends around 0.

No new currency needed.


I have no experience here, so I understand this in theory, but in practice, banks would somewhat indefinitely have some digital sum of a range of currencies in which they may not wish to have exposure to. How do you solve for that as a bank?


I suspect they directly trade the major currency pairs, and trade via USD for minor pairs.


I remember thinking it sounded awful. Automated repackaging and reselling of user-valued loans? The original idea was like the subprime mortgage racket, only with less opportunity for the participants to understand the risks.


So what destroyed or displaced the efforts of the original concept - was it the profit incentive associated with Bitcoin's structure, essentially maligning incentives?


Interesting. Do you have any links to some of the new IOU market maker projects? Cheers


Raiden is doing that for the ethereum network, if you count the fact that each node can be a mediator for multi-hop transfers. https://raiden.network


Raiden has fallen short on delivering a workable system and has had funding issues... most people people in the ethereum space are now banking on rollups filling these use cases (a competing approach for low-cost transactions)

Though certainly I'd be pleasantly surprised if Raiden still pulls through on their plans at some point.


Raiden has many issues, but funding is not one of them. Part of the hiring pitch from Brainbot was that the ICO got them funds to finance their operation for a decade at least.

Speaking as someone who worked on Raiden's core team last year and spent a reasonable part of this year working on a project received a grant from the Raiden Trust [0], the last release is workable, but still requires a lot of elbow grease and knowledge of the protocol to get it running. End users will certainly have a better shot when the light client gets parity to the reference implementation and gets a mainnet release.

In any case, I just wanted to point out that Raiden is a project that is related to what OP asked about and that is still alive and kicking.

[0]: https://hub20.io, a self-hosted payment gateway that integrates with Raiden and abstracts all its complexity from the users and node operators to enable fast and near-instant transactions.


So happy to see actual discussion of cryptocurrency concepts and not just visceral hate for all things crypto on hacker news. New line it looks like you guys have really turned a corner I'm proud of you hacker news.


it was doomed from the start, it was never a real crypto currency.


Indeed. I was involved back in 2014 and never understood why people didn't saw ripple as an open source central bank back end infrastructure. Anyone can start a network running rippled (you, me, the central bank), it is simple, ressource efficient, with our own "internal" XRP which are only used as rate limiters for transactions and then interconnect those networks at will. I don't get why there have been so many governments developing they're own infra for making their national currencies as a cryptocurrency, all they need to do is run a parallel ripple network


> What I've never understood about XRP and Ripple is that originally XRP was meant to only be used for paying for transactions and the ledger was meant to track IOUs between people denominated in some other "real" currency. They had videos floating around explaining the concept. In fact, they were handing out XRP for free to bootstrap the network of users [0] (that post says 1000 XRP, originally it was 30,000 XRP when the post was first created).

So the thing is, isn't this kind of system (very similar to a concept I can only remember as Hawala[0]) explicitly illegal?

> Hawala or hewala (Arabic: حِوالة‎ ḥawāla, meaning transfer or sometimes trust), also known as havaleh in Persian,[1] and xawala or xawilaad[2] in Somali, is a popular and informal value transfer system based not on the movement of cash, or on telegraph or computer network wire transfers between banks, but instead on the performance and honour of a huge network of money brokers (known as hawaladars). While hawaladars are spread throughout the world, they are primarily located in the Middle East, North Africa, the Horn of Africa, and the Indian subcontinent, operating outside of, or parallel to, traditional banking, financial channels, and remittance systems. Hawala follows Islamic traditions but its use is not limited to Muslims.[3]

> Some government officials[which?] assert that hawala can be used to facilitate money laundering, avoid taxation, and move wealth anonymously.[citation needed] As a result, it is illegal in some U.S. states, India, Pakistan,[14] and some other countries.[citation needed]

The whole IOU system doesn't need crypto to work -- but you just can't set up the kind of clearing house/federation that you'd need in the US because it's illegal, I thought.

[0]: https://en.wikipedia.org/wiki/Hawala


Ripple (old-school Ripple, not XRP) doesn't need any clearing house or federation. It's just you, me, and the hops along the way interacting long enough to facilitate the transaction.


My point is that how is that not a hawala system, just facilitated by a distributed ledger instead of phone calls? If it is, why isn't illegal just like those other systems?

The similarity here I thought was the trading of IOUs -- this seems to be very similar to what hawala is/was.


There is no middle man facilitating ripple. (Well, ideally. RipplePay was centralized. But it didn’t need to be.)

Also, hawala is legal in most jurisdictions I believe.


Thanks, I think this might be the big differentiator -- the existence of middlemen is probably the large difference here, but it feels like at some point you're definitely going to need someone to keep track of value across IOUs somehow and at the very least who is trust worthy.


Well to be accurate there are middlemen in most ripple transactions, but not a middleman of the traditional sense. They're not pure facilitators, but rather active participants in the transaction. I'm not a lawyer, but I understand that by some interpretations this makes a difference in the regulation.


Why not use something like Splitwise for tracking IOUs? What use is a blockchain/cryptocurrency for this?


Yup, the original vision of Ripple was payment channels, like what the Lightning Network is trying to be today. Pretty shameful how they abandoned all that to become a shitty version of PayPal.


There are all pyramid schemes. All the alt-coins exist only because BTC got too expensive and they wanted in. A lot of people are going to be left holding the bag.


While I generally agree, there are a few exceptions.

Ethereum exists because Bitcoin isn't capable of running complex scripts.

Monero exists because Bitcoin is too transparent.


And the vast majority of people "investing" in it have no concept of the underlying tech/utility/scalability/whatever, they only care "token go up!" and essentially treat it as a penny stock.

It'll eventually tank, but not until the insane FOMO ends. For example, the completely useless Dogecoin still has a $600M "market cap", and at one point popped over $2B.


Yup, I think the same. I think there’s a lot more “hype runway” left though. It’ll prob hit at least 50k


Absolutely all of them? You may want to look for some subtlety. There are coins with a specific purpose, for example Monero, that have a clear purpose which is separate from Bitcoin.


>All the alt-coins exist only because BTC got too expensive and they wanted in

Ethereum was explicitly created because Bitcoin doesn't support decentralized applications or really anything beyond sending tokens between humans. Vitalik tried to work on the Bitcoin codebase but was shunned and was forced to start a new project.


>There are all pyramid schemes

Do you include ethereum here? if so you are woefully misinformed.


XRP went down, interestingly enough.

I would have hoped for the community to collude and vote/bid its price up to give the SEC a big "ha" and also cover the costs of lawsuits.

After all crypto is one place where markets can be manipulated and the proceeds put to good use.


I'm pretty sure this is precisely what has happened, but I'm not as happy about it.


I don't understand why this hasn't happen sooner as it's been 8 years since their release. Ripple is a centralized, managed network. It's nothing like Bitcoin, Ethereum, or many other decentralized projects. Ripple is not a cryptocurrency.

For years I've told loved ones, friends, and anyone with a passing interest in the nascent space to avoid Ripple like the plague.


It actually was useful for a brief period as a pretty fast and reliable way to process a transaction. There was a time when a good portion of the major cryptocurrencies had transaction confirmation times on the order of minutes and XRP was one of the few reliable and cheap ways to get a fast transaction (seconds) completed.


Of course, because it's a CENTRALIZED service. I can make a centralized transaction settlement service with a completion time in milliseconds. But it will not have the security and freedom of a decentralized service.


The security of having an audit trail with no way of reversing the transaction and the freedom to get ripped off by a shady exchange?


... with the solution being an externalized centralized government with centralized accountability, justice, and enforcement organizations - also left to deal with the bad actors who will freely use the system without the centralized (hopefully in place via democratically elected government with integrity) tools of things like Magnitsky Act to dissuade bad actions of bad actors.


Any system powerful enough to give you everything you want (perfect security) is also powerful enough to take everything away.


If I send you a signed message from a trusted key, your "audit trail" is to save that message. Super simple. And if I have a message ID in each you could even show that there aren't any missed messages, if you wanted.

A blockchain is just an incredibly inefficient way to store those messages, giving them an explicit ordering in case they don't have internal IDs, and to establish ordering between users. All of that can be done with a simple 'index server' that doles out ordered message IDs, without the blocks, the mining, etc.

Banks don't even need the currency. Banks just settle their debts in their local currency and they trust enforcement to the courts and bailiffs. This is what Ripple had right, in the beginning. They only need a messaging layer.


One man's inability to reverse a transaction is another man's security.


The freedom to get ripped off by a shady exchange is the same as the freedom to not have your money stolen by the government. Worth it, in my opinion.


Except you can, through effort and organization (none of this "trustless" mantra non-sense/propaganda), get in place a competent democratically elected government with integrity via accountability and oversight - perhaps even running for elected positions yourself if you're passionate and strong enough.

Or you can ignore the nuances and complexes, say fuck it, and support a system that disables power that good organizations do need to manage bad actors - instead of turning the clock back and making the world a "free for all" - making tools like the Magnisky Act unenforceable, along with other unavoidable pitfalls that pro-Bitcoiners ignore, scoff at without rebuttal, or glance over without serious thought. Regulatory capture is real and it needs to be addressed always - and if you work from founding principles and are honest with yourself you'll come to the conclusion that centralized organizations are a necessity to fighting "evil"/bad behaviour with good, responsible, trustworthy people

The argument then goes into nuance of where the debate continues as to how conservative or liberal you are - how "small" or "big" the government is, e.g. what decision making power or function does or should government have, e.g. Universal Basic Income/UBI - the Freedom Dividend as Andrew Yang calls it - would arguably be more of traditional Conservative/Republican leaning - giving $1,000/month to individuals for THEM TO DECIDE what to do with the money vs. some bureaucratic government agency spending that money themselves making broad-vague decisions, almost always influenced by regulatory capture and industrial complexes manipulating the system via influencing politicians and the population via propaganda of various forms: "tobacco is good for you" - says your doctor, "fat is bad for you" says the sugar and health industry, "MDMA/mushrooms are bad for you" - says big pharma industry who can't patent those medicines, etc.

Edit: LUL - imagine a person actually had to put the effort into writing a qualitative response instead of getting a dopamine hit from a single click to ignore/avoid engaging.


> you can, through effort and organization (none of this "trustless" mantra non-sense/propaganda), get in place a competent democratically elected government with integrity via accountability and oversight

No, you can't; that's rather the problem.


You can. It's not a fixed state - where it is or isn't competent. It's complex, dynamic, with many moving parts - and it's evolving. You put a system in place and then you see how bad actors will take advantage of it, then you once you have enough of the population educated, understanding, pissed off - the impetus occurs - they will vote for change that adds policies (or undo bad policy most likely stemming from regulatory capture of industrial complexes) that will correct to prevent or limit potential harmful behaviour that will cascade from bad policy.

In my last comment I highlight the main policies necessary for a big shift to be able to occur:

"Until there's a strong enough impetus and they start to learn the game to understand it: I'd considered Andrew Yang a normal person, who published a book called The War On Normal People before running for President this last election.

More people like him will come to light, especially once policy proposals he's made like Freedom Dividend/UBI, Ranked Choice Voting, Democracy Dollars, Journalism Dollars get implemented to break apart the two-party system." - from https://news.ycombinator.com/item?id=25509841


Normal people don't run for political office. Not from any of my life experience.


Until there's a strong enough impetus and they start to learn the game to understand it: I'd considered Andrew Yang a normal person, who published a book called The War On Normal People before running for President this last election.

More people like him will come to light, especially once policy proposals he's made like Freedom Dividend/UBI, Ranked Choice Voting, Democracy Dollars, Journalism Dollars get implemented to break apart the two-party system.


ALGO/Algorand does that now...at least until ETH2 if the latter hits it's promised transaction rates.


It's a currency based on cryptography, let's not try to exclude projects based on random definitions. You want to be more specific, like, it is not censorship-resistant.


Ok, but the cryptography is pointless if it's a centralized system.


How so?


Because you might as well just use an SQL database


“Proof of authority” chains are a lot more than just a database. There is still a verifiable audit trail etc.


Nothing stops you from having a verifiable audit trail in a SQL database. You could even decentralize the audit trail.

Problem with Ripple is creation of new XRPs, they had full control over that.


How do you decentralize the audit trail? Would need something like ripple


Generate a cumulative checksum of everything that happened yesterday plus the previous day's checksum, and post it in the local paper, on your website, and in all investor documentation.


Eh, last I checked the five primary validator nodes are all run by Ripple.com. Not really "POA" when there's only one authority IMO.


So, a database plus digital signatures.


so a sql database


So files with indexes... so storage devices with a file systems... so... so bits of information...


FWIW, this is how I feel about every crypto-so-called- "currency".


Don't want to get into an argument about crypto currencies, but the value proposition of BTC is different. What is not replaceable by a simple DB is it decentralization and resilience to attack, its resistance to seizure and its incorruptibility in terms of maximum supply (the digital gold / store of value narrative).


It's worth highlighting that there are distributed databases that meet all those criteria except "incorruptibility in terms of maximum supply". You're right to point out that there are a few very specific use cases that a distributed blockchain with multiple independently-owned verification nodes will satisfy and other more performant databases will not. Whether that makes them "valuable" like gold is left as an exercise for the reader.


Distributed is not the same as decentralized.

A decentralized system is a distributed system that still works _when nodes are owned by multiple different (even competing/malicious) parties_.


Exactly. In other words, a "trustless" system.

See the Byzantine Generals Problem[1].

[1] https://en.wikipedia.org/wiki/Byzantine_fault


yes, yes, I said that already: "...multiple independently-owned verification nodes..."


you hold the key to decide what to do with the funds


Which Ripple can invalidate if they control the network, which they do.


If your coin can be sued by the SEC, then it's probably not decentralized.


If it thought there were grounds to do so, the SEC could take on the major BTC exchanges.

Losing a means to convert to/from fiat currencies would drive away the vast majority of BTC traders, and possibly cause something of a bank run upon the announcement of SEC action against them.

I mean, let's be real here, the vast majority of BTC transactions aren't for goods or services.


SEC deals with securities, bitcoin is not a security according to them. Ripple(XRP) is.


Until they are. Mining equipment for BTC is already effectively monopolized by one vendor and they are likely doing significant mining behind the scenes controlling much of the market.


>and they are likely doing significant mining behind the scenes controlling much of the market.

I don't get it, how does "controlling much of mining" allow them to control the market? It does give a bunch of bitcoin to play around with, but it costs money (electricity, manufacturing costs) for them to mine them, so depending on their margins they'll be less impactful than a whale who loaded up on cheap coins a few years ago.


It's a thought exercise, not a serious suggestion that it might occur, hence "if it thought there were grounds to do so." I'm imagining how a Government with sufficient power might go about crippling the value of BTC.


A single government can’t do it, which is why bitcoin still exists.


The US could cripple bitcoins value quite easily by sanctioning exchanges. The main power it would have to enforce those sanctions would be to cut off any institutions that violate them from handling USD. This is how the US manages to do stuff like force French banks to uphold US sanction on Iran.

https://www.wsj.com/articles/bnp-plans-to-slash-dividend-sel...

That wouldn’t eradicate Bitcoin or anything, but it would make it far less useful than it is currently, and have a significant impact on its value. It would also be a pretty bad idea, because the power of US sanctions is largely derived from demand for USD, and political volatility puts downward pressure on that demand, so you generally don’t want to waste it on frivolous sanctions.


A single government can easily block it in country — nobody needs or wants Bitcoin, they want to buy things and that can be attacked by targeting whoever participates in the network. Bitcoin is designed to make this extremely easy since that public ledger means they can go after ever transaction you’ve ever made at any point in the future, not just at the time of transaction. Unless the government is incredibly corrupt and powerless nobody is basing a black market on a system which giftwraps your transaction logs for prosecutors.

A government which participates in international banking coalitions or treaty groups can use those relationships to go after transactions internationally, too. Think about how drug cartels have secret bank accounts frozen, and then about how Bitcoin is designed to make that easier by giving the authorities a full list of your activities which is trivially extended to every partner. Once you’re on that list, everyone you know will be getting pressure to turn on you.

Now think about a major government: they can not only use normal law enforcement but also control the exchanges themselves with things like anti-money laundering laws. Someone might choose to blow off demands from a small country or a pariah state like Iran but if the US or EU decided to act everyone involved is now facing things like not being able to fly internationally or do business with most major companies. Since they have no upside to resisting and it’s trivial to block Bitcoin transactions, anyone in those jurisdictions is unlikely to risk that protecting a stranger in a different country.


the SEC shutting down centralized exchanges would be a short term shock to the value of BTC but long-term would be a disaster for regulators.

Decentralized P2P exchanges exist(bisq/hodlhodl), and shutting down centralized exchanges would force people to use those as the on/off ramps.

The best way for regulators to fight bitcoin imo is to slowly assimilate it into the legacy finance infrastructure to the point that it becomes similar to gold reserves, something only central banks and large institutions hold, while the public might only hold IOUs. Similar to what paypal is already doing.


I still maintain that if the government truly wanted to regulate cryptocurrency they would go after average citizens and add onerous reporting requirements. Even with decentralized exchanges, the government can still find a way to clamp down on citizens using cryptocurrency. Sure, it would be impossible to prevent someone from using a decentralized exchange, but would you personally risk being prosecuted for doing so?


You can walk into any major bank in the US with tens of thousands in USD cash, deposit it via deposit ticket with no ID, and have anonymous bitcoin/ether/monero in your account within minutes.


Is this actually true? I find it very hard to believe you can do anything at a bank with tens of thousands of dollars in cash without presenting ID.


The scenario isn't a problem I've ever had, but it doesn't make any sense. Unless you say, I want to deposit this money into account 12345.


They are blatantly claiming centralization is a feature in their defense.

https://twitter.com/VitalikButerin/status/134121951954555699...

You can't have it both ways. If you're centralized, you must be regulated as such.


They aren't suing XRP


Ripple is the central operator of XRP.

They absolutely are suing XRP.


It's hard to agree or disagree as decentralization doesn't have a clear definition. It is decentralized, but not to the point of making it censorship-resistant.


Make no mistake. They're going to make an example of Ripple. This is going to be horrible for them and a warning to anyone trying to run a similar Ponzi scheme. You can't centralise, hype and then cash out on vaporware without there being consequences. XRP held zero value at the time the founder cashed out and they've been trying to make their consulting business work ever since. Dare I say XRP goes to zero. Watch this space.


Actually Ripple is not Vaporware. I work for an MTO and we use ripple XCurrent product. XRP enables MTOs to send / receive without having to use USD as an intermediary currency. This reduces costs on money transfer and also enables money transfer even when US banks are on holiday. So I can say there is real value in the network Ripple is building and also XRP itself being used as the tool for cross border remittance.

As far as I can see they're delivering on their promises.


Why not use ether/smart contracts? Seems way better than ripple for this use case.


Because who do you contact for support when something goes wrong?

The problem cryptocurrency industry doesn't understand is when you work in finance you are heavily regulated. You cannot just work with "decentralized" systems and call it a day. Every action you do is answerable, everything is questioned and scrutinized.

Having someone like Ripple and XCurrent as an intermediate as a regulated company helps solve a lot of problems. Since Ripple itself is regulated it's easy to justify to regulators. Ripple is also answerable when transactions delay happens.

For Etherereum / Smartcontracts who do you contact for support when transactions SLAs aren't being met?


Bitcoin core's lightning should be the next on the chopping block of SEC.


The lightning network is a decentralized protocol for transferring BTC, it's not even remotely comparable.


You forgot the /s


Why? People pay tax on every sale in the US, lightning or not.


The nodes violate money transmittal laws


What is the core argument for this position?


If I were to guess: The SEC considers Bitcoin to be a currency. Intermediaries handling currency transactions are subject to "Know Your Customer" laws, and need to get various identifying information from the parties whose currency they're transmitting. Lightning network nodes don't collect such information. Therefore, the Lightning network node operators are in violation of US law.

I'm no expert though, there may be other SEC rules that are more relevant.


Oh wow, I think you're right.


Lets not forget a few years ago when Ripple was running around trying to pay companies millions of dollars to list XRP. Ripple has always operated under a thin veneer of legitimacy, but it's basically to cover up the massive exit scam that effectively happened.


There is immense value in disrupting and supplanting the global monetary hegemony. Credit card Payment processing amounts to a 3% tax on a majority of transactions. These companies also are increasingly imposing moral judgements on who should be allowed to transact. With little recourse available to the affected. (The blacklisting of Patreon alternative New project 2, and pornhub) are examples of this. Liberating payments online to the same level we have with exchanging cash is definitely desirable.

In general, crypto technology is valuable for it's ability to replace capricious monopolies with distributed implementations built on federated protocols run like a constitutional democracy.

We can of course expect established monopolies and governments to retaliate in every way possible in an attempt to maintain power.


> Credit card Payment processing amounts to a 3% tax on a majority of transactions

Only in America. Most other countries have this under control.

> In general, crypto technology is valuable for it's ability to replace capricious monopolies with distributed implementations built on federated protocols run like a constitutional democracy.

No, in general crypto technology is valuable because it can avoid laws created by constitutional democracies. Its a back door for money launderers and illegal payments.

> We can of course expect established monopolies and governments to retaliate in every way possible in an attempt to maintain power.

Exactly we voted for this government to enforce some rules, if cryptos are a way to avoid the rules, it will be made illegal.


Most other countries? Where do you get that information from?

Also maybe it’ll be made illegal in some countries, but if others work as fertile grounds for crypto, they will leak into all others eventually. Specially if their advantages are too good to pass.


Europe has cap of 0.3%, Australia is 0.5% https://en.wikipedia.org/wiki/Interchange_fee#European_Union


I would hardly call Europe and Australia most other countries.


>No, in general crypto technology is valuable because it can avoid laws created by constitutional democracies. Its a back door for money launderers and illegal payments.

It's also valuable for that, but I argue it has greater value in legal transactions that currently must operate through said gatekeepers who impose extralegal restrictions.


https://kin.org/ got sued by the SEC for the same reason. They 'got away' with a 5m fine but were not branded a security (does that automatically declare them a currency?). They're now free to carry on development with the SEC behind them. The difference is they just moved to Solana as a token, so they're decentralized, whereas what I take from XRP is that it's not. I don't fancy XRPs chances seeing what the Kin boys and girls went through, but if they 'win', whatever that may look like, they'll be up and away.


> does that automatically declare them a currency?

If they were branded as a security that would not automatically declare them to be a currency. It would put them in the category of equity securities (with the owners having rights accordingly as equity owners). USD holders are not regarded as having an equity ownership stake in the currency for example.


I saw some articles where they suggested this announcement is strange

It is not strange, the SEC sends what are called Wells Notices to companies and reporting companies often announce the receipt of them

Ripple is not a reporting company and doesnt have an asset to report on, and coming to an agreement with the SEC on staying that way has hit an impasse, for them to announce this


I did notice Vitalik Buterin's tweet about some "strangeness":

> Looks like the Ripple/XRP team is sinking to new levels of strangeness. They're claiming that their shitcoin should not be called a security for public policy reasons, namely because Bitcoin and Ethereum are "Chinese-controlled". [Two relevant screenshots of the document enclosed in tweet]

https://twitter.com/VitalikButerin/status/134121951954555699...


Thanks for sharing, not sure why you're getting downvoted as Vitalik always have good insights


It's not weird for securities law, but Wells Notices are kinda weird in the broader context of the US legal system. The DOJ doesn't let you know they've convened a grand jury.


I kind of thought the SEC had given Ripple a pass since they waited so long, but it's a pretty clear cut case if you ask me. I don't expect the SEC to lose this one. I'm not sure what the consequences will be.


Maybe they were saving a "slam dunk" for a politically-opportune moment.


What makes now a politically opportune moment?


Uh, the new Treasury rules applying the Bank Secrecy Act to cryptocurrency transfers to self-hosted wallets?

Announced three days ago. Public comment period ends right after New Year's.


'Now' being 'the moment you can easily win'?


That depends on who you think is pulling the strings behind the scenes.

The bankers are loaded with Bitcoin now (with Bitcoin having gone fully mainstream on Wall Street), so maybe it's time to eliminate/weaken some of the perceived competition.

Or, because Bitcoin is at $22,500 and they'd like to tarnish the crypto market a bit if they can, cast it as a shady place, drive down institutional interest via scandal and government prosecution. It's a plausible serious competitor to fiat currencies in the coming decades. The ideal scenario for the major central banks - they who rule fiat - is that Bitcoin goes to zero.

The clowns that run this world frequently view gold as a problem, a threat, and they work hard to suppress its value. They also occasionally get caught doing so. If they can figure out a good way to do it, they may assault the value of Bitcoin, directly or indirectly, given the chance.

Who has a vested interest in not seeing fiat currencies weaken as the central financial instrument of every major economy? Pretty much everyone that controls everything today, the entrenched.

And one other very plausible reason: this is being fired off just before an administration switch-over, because the people that have pushed for it may think it'll get lost in the shuffle, as the new administration will have its own priorities it will want pursued (such that this could get pushed down the list or neglected). It often happens in government right before admin switch-over, it's why all the anti-trust cases were rushed and fired off right before the presidency changes hands.


>The clowns that run this world frequently view gold as a problem, a threat, and they work hard to suppress its value. They also occasionally get caught doing so. If they can figure out a good way to do it, they may assault the value of Bitcoin, directly or indirectly, given the chance.

How do you feel about the theory of BTC acting as a controlled opposition to gold?

I find it interesting that the same CNBC commentators who slam gold promote BTC as "digital gold". If gold is so useless in their eyes, why is intangible "digital gold" being pushed? Despite the anti-establishment veneer of BTC, it is accepted and promoted by the MSM. Gold is still derided.

There's a parallel with the captured, walled-garden Internet. BTC's lack of usability, Mnuchin's words on self-hosted wallets all point to this so called disruptive technology being captured. Similarly, platforms like PayPal taking an interest in BTC point in the same direction.

Looks more and more like a steppingstone, positioning of goal posts towards CBDC.


What are the implications here for the Stellar project and Stellar Lumens? They seem like an awfully similar use case.


From what I remember Stellar started as a fork of XRP by Jed McCaleb, who also created XRP. As I understand it, technically it has evolved a lot since then, so I don't know how much of the concept is still shared with Ripple.

As for what this SEC lawsuit would mean to them, your guess is as good as mine. The price of XLM has dropped a little [0] and actually tracks XRP reasonably closely [1].

[0] https://www.cryptocompare.com/coins/xlm/overview/BTC [1] https://www.cryptocompare.com/coins/xrp/overview/BTC


I think they are on a better position since they are a non-profit and they don't have token sales afaik. But I can't really tell since I'm not familiar with american laws.


You are correct.


2021, the year when shitcoins, scamcoins and ponzicoins have their comeuppance.


The Ripple people made centralization and regulation out to be a positive thing - and now they get exactly what they deserve.


Ripple Wells Submission Summary has been posted:

https://ripple.com/wp-content/uploads/2020/12/Ripple-Wells-S...

Primary risk seems to be de-listing from 200+ crypto exchanges


We may see a pull back in a few crypto currencies soon.

ETHE the grayscale Ethereum trust has skyrocketed lately and has about 285 Million shares outstanding.

On January4th an additional 1.05 Billion shares come free trading as their 6 month lockup expires.

Oh and its currently trading at a 200+% to its net asset value.

Its conceivable Ethereum itself could double and ETHE could still drop 50%.

Fun times!!


Your first sentence claims that there's going to be "a pull back in a few crypto currencies", but then the rest of your comment seems to be talking about ETHE, which looks like some sort of ETF for holding ethereum?


Well I was assuming that Ripple would fall on the news that the SEC is suing the company who runs it.

That makes two which is, checks definition in dictionary, a few:)

I'm not exactly sure what you want me to respond to:)


But in the case of ETHE, it's the ETF dropping, not the cryptocurrency (ETH) itself. The same logic would apply to the reverse situation. If tether (USD stablecoin) crashes, you wouldn't say the USD was crashing.


ETHE is backed by ETH. If ETHE gets sold, ETH gets sold - ~0.01 ETH per ETHE.


Any way to know what the cost basis per share was for those initial investors? I assume we'll see more price drop, unless their basis is higher than the current price (doubtful).


Reddit bag holders are dumping their XRP into BTC/ETH/Tether atm. Interesting to see what the #3 in market cap bleeding into #1 and #2 do.


This was 100% spot on, btw.


I guess the real question is: what will actually happen if the SEC wins this case (which we should assume they will). Ripple is vast and presumably has the resources to deal with any judgement against them. The ruling would have to make the administrative burden of managing global XRP holdings unviable in order to really change the overall equation here. Is Ripple just getting slapped with a small fine in the realm of possibility?


Maybe they force them to shut it down for good?


Chris Larsen is certainly spending like this won't make a dent.

https://www.townofross.org/sites/default/files/fileattachmen...


Besides looking like a James Bond villain villa, how do you know this is him?


Abject failure to optimize his PDF files.

20 meg PDF = guilty as charged.


It's a 289 page scanned document, it's OK for it to be a few times larger than a React Hello World.


This is a shame, Ripple was one of the few currencies with actual adoption, and actually usable for everyday transactions.


The real issue here is the fundraising - and in Ripple's case, the ability to sell XRPs as needed - which seems to be a fair question from the SEC given the very big amounts involved?


It's happening; theres like 4 posts about it on the front page of HN


One more proof that Ripple, being centralized, was bound to fail from day one and never was a match for Bitcoin (and all its more or less retarded cousins).


I still remember I'd bought this coin when it was worth $3 in 2018. Sadly, it's under a dollar today.


Feeling glad I consolidated my alt index portfolio to Ethereum two days ago.

XRP is currently down 9.55% for the day and will surely tank further.


A crypto thread on Hacker News without mentionning Monero is a sad thread.


No, it's a thread that's staying on topic.


What I don't understand is why the SEC doesn't investigate the federal reserve bank? I don't see any difference between Ripple and US dollars. The SEC can only win this case if the judge is corrupt because logic is not on their side.


Won’t have an impact on the broader crypto market, but it will signal that the US is diehard anti-crypto. So many companies have already moved offshore, anyone trying to play in the US should get out ASAP. Who is the SEC protecting? Anyone who has bought XRP doesn’t give a shit.


Ripple isn't really a crytocurrency, it's certainly not a decentralized cryptocurrency.

I don't think this is likely to send a signal that the US is "anti-crypto", though I'll have to see the litigation to know for sure.

When ripple was created many people in the cryptocurrency space had or were considering doing something similar and many reached the conclusion that what ripple went on to do would be unambiguously unlawful.

More enforcement can actually send a very positive signal: Lack of enforcement goes on to create a lemon market where bad conduct flourishes. It's extremely difficult to be in business against someone that can bring in billions in funding with almost no real obligations by deceiving unsophisticated members of the public. The lack of enforcement also sends an ambiguous signal that maybe more legitimate efforts will be prosecuted but just haven't yet because they haven't gotten around to it as evidenced by the lack of prosecution of many of the more obviously sketchy efforts.


>by deceiving unsophisticated members of the public

I don't think they've deceived anyone. It takes <2 minutes of research to figure out that it's a network of financial institutions approved by Ripple controlling their network, as well as their supply schedule details/distribution. Anyone who buys XRP should be expected to figure this out for themselves. The government shouldn't waste tax dollars and resources babying irresponsible people who don't take the time to figure it out before buying.

I can't believe I'm defending Ripple. I think anyone who buys XRP is making a very unwise decision, precisely because the government does ridiculous things like this all the time.

I wish the government wouldn't do things like this and Bitcoin had no use case. But alas, governments will continue to suck.


> It takes <2 minutes of research

That may be true today-- years into it, due to a lot of people exposing themselves to enormous amounts of harassment just to get the message out.

It certainly hasn't always been the case.


You actually think someone who bought XRP at any point in the past unaware of this did reasonable diligence?


Yes. I've received numerous emails thanking me for my public criticism and saying directly that they didn't. It's extremely easy for people to fall down the rabit hole of only reading content authored by people pumping it.


This sounds like bs to me. I've been in the space for years too, I've encountered many pro-XRP folk. Every single one either didn't know anything about it and bought because they wanted to get rich quick, or was aware the network is controlled by a consortium of banks.

Could you share the text of an email someone sent you that shows what they weren't aware of?

Edit:

>It's extremely easy for people to fall down the rabit hole of only reading content authored by people pumping it.

I also don't even deny this. But it doesn't excuse the irresponsible decision to buy something without understanding the most critical aspects of what it is and how it works. We should expect people to be responsible when investing, and to be able to do proper research for themselves, and to let them lose their money when they fail to do so. We don't need to waste tax dollars babying and protecting irresponsible investors.


> but it will signal that the US is diehard anti-crypto.

From the article: SEC officials have declared Bitcoin and Ether to be currencies, as they are decentralized in their management, but have left the door open for others to qualify as securities, especially at the time of their issuance.

So not really. The US needs to evolve to the new world.


Do you have an authoritative source for BTC and ETH being considered currencies? I think the article has it wrong. IRS treats all cryptocurrencies as property. SEC has only said they are not securities. That does not imply they are currencies.


The SEC (an extension of the Federal Reserve) can turn around and declare whatever is useful at any point, as has been observed. There's nothing special or protected about the traded Cryptos, despite the speculation.

If a currency crisis arises and the market is frozen, cryptos will not be on the first lien right to trade for Fed assets (whatever that currency might end up to be) or even continue trading, depending on the decisions of the Fed. Hell, I don't expect the issued currency (cash - which the long tail of people are still using) will have that right...since the Fed board members aren't going to be running around with palettes of cash when buying goods either.


> Won’t have an impact on the broader crypto market,

BTC has been struggling to push higher for a few days with bearish moves. I'm still a long term bull but I just pulled 100k out, should get a nice discount as it breaks down toward 20k. (I'll average in at anything below 21.)

> Who is the SEC protecting?

JP Morgan and the US e-Dollar.


> US e-Dollar.

Or FedCoin as George Hotz called it recently in a Lex Friendman podcast [0].

P.S.: I thought this was an entertaining podcast, George is a funny guy.

---

[0]: https://www.youtube.com/watch?v=_L3gNaAVjQ4




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