This week we will respond to a comment from one of our readers. This is a continuation of the topic: A call for a new currency. Lee's comment was:
It sounds interesting, but have you ever lent money to a friend?
Trust doesn't work very well as a basis for financial transactions.
These are very good points, and other people may share your concerns about the monetary payment system ripple. Well there are three ways that ripple helps mitigate unpaid debts. The first is that debts with companies should be sound. If a steak house is doing business with this alternate currency then it must honor its debts or the access to this currency will be cut off. It would be easier to not be a part of the system than try to cheat it. Also there would be sore customers if the steak house tried to cheat them, and that's bad for business. It's the same principal that ensures that the steak house will not overcharge your credit card. This ensures that the steak house is honest most of the time.
The second check has to do with person to person accounts. If one of your friends is going to cheat you, the only way they can do this is to stop using the account. As long as your friend keeps receiving payments his credit to you may be used to complete a transaction. This means that if your friend is always in debt to you then you can go in and revoke the credit that you extended to him. Later you may make a payment that will use his credit, and this credit that was owed to you is repaid.
The third reason is very simple. If you are worried about someone paying you back then you don't have to extend them any credit. Being selective will help prevent you from having credit that you can’t use. Someday, I imagine that a credit rating will be incorporated into the program. This could simply be a smite button, when a person has been smitten five times in a year then the account could be flagged, and people would know that the account is in bad standing. People whose account is in bad standing will have difficulty receiving credit, and so people will try not to be smitten.
Lee, thanks again for raising this issue.
Showing posts with label ripple. Show all posts
Showing posts with label ripple. Show all posts
Friday, June 22, 2007
Sunday, June 10, 2007
A call for a new currency
There are many reasons why our current monetary system is less than ideal. Click here for two of those reasons. We'll discuss one reform that is currently being developed.
Well, a little economic history might be in order. Once, the United States dollar used to be redeemable for gold. This made sure that a paper note actually had value. Today all national currencies are fiat currencies. Fiat means force; that is, currency has value because it is declared to have value. In the U.S., businesses are required to accept U.S. Federal Reserve Notes "for all debts public and private."
Another way of using currency is being developed by Ryan Fugger and others. Ryan is writing an open source program, ripple, which can be used to keep track of debts between individuals.
Here's how it works. Say you trust Bob, and you extend some credit to Bob. Bob trusts Julie and he extends credit to her. Ripple would then allow you to make a payment to Julie. A payment to Julie would simply be a debt from you to Bob and from Bob to Julie. Julie then could use this credit to make a payment to anyone in your trust network.
In practice there would be some accounts that would extend credit to many people. Say a coffee shop accepts money and extends credit to you, and this coffee shop would accept this credit for coffee. Then this credit would always have value backed by the drinks in the coffee shop. The coffee shop could then extend credit to a restaurant down the street. Then the credit could be accepted at the restaurant and the coffee shop.
If a monetary shift was made in this direction then some of the unattractive qualities of a fiat currency could be mitigated. Also this would minimize credit card fees that contribute to higher prices for all of us.
Well, a little economic history might be in order. Once, the United States dollar used to be redeemable for gold. This made sure that a paper note actually had value. Today all national currencies are fiat currencies. Fiat means force; that is, currency has value because it is declared to have value. In the U.S., businesses are required to accept U.S. Federal Reserve Notes "for all debts public and private."
Another way of using currency is being developed by Ryan Fugger and others. Ryan is writing an open source program, ripple, which can be used to keep track of debts between individuals.
Here's how it works. Say you trust Bob, and you extend some credit to Bob. Bob trusts Julie and he extends credit to her. Ripple would then allow you to make a payment to Julie. A payment to Julie would simply be a debt from you to Bob and from Bob to Julie. Julie then could use this credit to make a payment to anyone in your trust network.
In practice there would be some accounts that would extend credit to many people. Say a coffee shop accepts money and extends credit to you, and this coffee shop would accept this credit for coffee. Then this credit would always have value backed by the drinks in the coffee shop. The coffee shop could then extend credit to a restaurant down the street. Then the credit could be accepted at the restaurant and the coffee shop.
If a monetary shift was made in this direction then some of the unattractive qualities of a fiat currency could be mitigated. Also this would minimize credit card fees that contribute to higher prices for all of us.
Friday, March 16, 2007
New money? and other issues
Today we discuss actual news, the third paragraph. News that you might not get from the mainstream press.
I think that Ryan Fugger will change the world. You might ask, Who is Ryan Fugger? Well he's a Canadian who has decided to try to put different concepts of money into practice. The result, Ripple monetary payment system. Ripple is a program currently being beta tested, which provides a different payment system. At first the basis of the idea behind the payment sounds a little out there, but after review its surprising properties are discovered. The principal is that payments are processed merely by creating a debt or erasing a debt between trusted parties. To pay a party that you don't trust, ripple must find a chain of trusted relationships and will create/erase a chain of debts. Ryan promotes his payment system as a natural competitor to a bank. Simply put, with ripple, trusted relationships can serve the same purpose as a bank and credit card. Ryan is focused on keeping track of debt in the various national fiat currencies around the world. Another application of ripple is that, once established, it would make micro-payments a piece of cake. Also I, and at least a few others, think that there is the possibility that ripple monetary payment system could completely supplant traditional currency.
And now for the news. Dialstation, a prepaid telephone calling service, has an interest in integrating ripple into its service. The idea is that you could pay for phone service and receive a credit on a ripple server. The customer then could establish credit relationships and use the ripple credit to purchase other goods and services. The phone service could act like a value backer for ripple debts, and it is pondered that this could seed the ripple program. For dialstation users that do not want to be caught up in this new idea, they could not establish any credit relationships and the addition of ripple will have no effect on their account.
Now for a twist with commentary. I categorize this idea of ripple as a free thought, a thought that is reasoned out without any constraints that society may provide. Freethoughts lead to other freethoughts, and freethinkers are drawn to other freethinkers. It turns out that there is another freethought embedded in this story. This dialstation is somehow connected to Telekommunisten. Notice the word "kommunisten," Communist in German. So now if you are of a free market persuasion like me this word strikes fear into your heart. This article(german) from Süddeutsche online newspaper refers to this bout of "Venture-Communism" as an application of the "sozialistischen Anarchismus" (socialist anarchist) model. As a proponent of free markets I am sceptical of this venture. At the same time if this actually works, and no force or violence is used to secure this telephone service. I don't see any reason a free market proponent would complain. In fact I would welcome the peaceful competition of different business models, as long as everyone involved agrees to their involvement. Now that I have supported peaceful competition I will discuss some worries that I have.
Socialist anarchist could be another term for a group of people that call themselves libertarian socialists in the United States. There have been a few libertarian socialist uprisings in the United States. You can surely identify a libertarian socialist uprising by the black clothes, and the black (or red) handkerchief that is worn over the face of protesters. These uprisings sometimes involve protesting on the street blocking traffic. I also saw a video that showed vandalism perpetrated by libertarian socialists. I have an interest in these libertarian socialists because they are anarchistic. I certainly do not agree with the tactics of blocking traffic and vandalism. I consider these actions to be against the "non-violence axiom" that is central to free market anarchist thought. I sometimes consider if a libertarian socialist population could peacefully co-exist with a free market anarchist society. I think that they could, and there has been some written about this concept. The divergence between the two ideologies is based on property rights. The co-existence issue revolves around people learning to respect different forms of property rights perhaps even in the same town. I would love to know an actual libertarian socialist's view on the idea of co-existing. Telekommunisten however states that it's goal is to own the world, by that they mean that libertarian socialist own the world. I think that this goal is unobtainable, and misguided, however it should be interesting to see what unfolds.
I think that Ryan Fugger will change the world. You might ask, Who is Ryan Fugger? Well he's a Canadian who has decided to try to put different concepts of money into practice. The result, Ripple monetary payment system. Ripple is a program currently being beta tested, which provides a different payment system. At first the basis of the idea behind the payment sounds a little out there, but after review its surprising properties are discovered. The principal is that payments are processed merely by creating a debt or erasing a debt between trusted parties. To pay a party that you don't trust, ripple must find a chain of trusted relationships and will create/erase a chain of debts. Ryan promotes his payment system as a natural competitor to a bank. Simply put, with ripple, trusted relationships can serve the same purpose as a bank and credit card. Ryan is focused on keeping track of debt in the various national fiat currencies around the world. Another application of ripple is that, once established, it would make micro-payments a piece of cake. Also I, and at least a few others, think that there is the possibility that ripple monetary payment system could completely supplant traditional currency.
And now for the news. Dialstation, a prepaid telephone calling service, has an interest in integrating ripple into its service. The idea is that you could pay for phone service and receive a credit on a ripple server. The customer then could establish credit relationships and use the ripple credit to purchase other goods and services. The phone service could act like a value backer for ripple debts, and it is pondered that this could seed the ripple program. For dialstation users that do not want to be caught up in this new idea, they could not establish any credit relationships and the addition of ripple will have no effect on their account.
Now for a twist with commentary. I categorize this idea of ripple as a free thought, a thought that is reasoned out without any constraints that society may provide. Freethoughts lead to other freethoughts, and freethinkers are drawn to other freethinkers. It turns out that there is another freethought embedded in this story. This dialstation is somehow connected to Telekommunisten. Notice the word "kommunisten," Communist in German. So now if you are of a free market persuasion like me this word strikes fear into your heart. This article(german) from Süddeutsche online newspaper refers to this bout of "Venture-Communism" as an application of the "sozialistischen Anarchismus" (socialist anarchist) model. As a proponent of free markets I am sceptical of this venture. At the same time if this actually works, and no force or violence is used to secure this telephone service. I don't see any reason a free market proponent would complain. In fact I would welcome the peaceful competition of different business models, as long as everyone involved agrees to their involvement. Now that I have supported peaceful competition I will discuss some worries that I have.
Socialist anarchist could be another term for a group of people that call themselves libertarian socialists in the United States. There have been a few libertarian socialist uprisings in the United States. You can surely identify a libertarian socialist uprising by the black clothes, and the black (or red) handkerchief that is worn over the face of protesters. These uprisings sometimes involve protesting on the street blocking traffic. I also saw a video that showed vandalism perpetrated by libertarian socialists. I have an interest in these libertarian socialists because they are anarchistic. I certainly do not agree with the tactics of blocking traffic and vandalism. I consider these actions to be against the "non-violence axiom" that is central to free market anarchist thought. I sometimes consider if a libertarian socialist population could peacefully co-exist with a free market anarchist society. I think that they could, and there has been some written about this concept. The divergence between the two ideologies is based on property rights. The co-existence issue revolves around people learning to respect different forms of property rights perhaps even in the same town. I would love to know an actual libertarian socialist's view on the idea of co-existing. Telekommunisten however states that it's goal is to own the world, by that they mean that libertarian socialist own the world. I think that this goal is unobtainable, and misguided, however it should be interesting to see what unfolds.
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