Comments on: The Ripple mutual credit and payment system: Will It Work?

By: Tom Salfield

Tom Salfield — Sat, 11 Jun 2011 14:39:10 +0000

Hi Michel,

This is a great article, particularly in its explanation of mutual credit systems. Its full of fascinating insights and I’ve been a fan of Ryan’s (ripple) work since 2004 when he wrote http://ripple-project.org/decentralizedcurrency.pdf.

I see the potential of ripple as a transaction network, and a credit system whereby I can give you credit based on something I hold, or don’t even hold. However, intuitively and logically I fail to see how it could be used to create a currency or something like a currency. The problem is that the nature of currency is that we have to have a shared “unit of value”, and as far as I can see this can only be done where there is some kind of community (or central authority) controlling the issuance of new units. In other words a currency needs to have broad acceptability and a shared understanding of it as a unit of value.

Whether ultimately we need a shared unit of value (currency) is questionable. However without a massive increase in our ability to manage the informational problem of measuring heterogeneous value creation, I feel we do.

I know my explanation isn’t as clear as it could be and I accept the possibility I am wrong…but do you see where I’m coming from?

Tom

By: Tom Crowl

Tom Crowl — Sat, 11 Jun 2011 12:05:08 +0000

Ripple seems like a GREAT idea! And really gets to the idea of a truly distributed method of credit creation… (and its in this broader network that the true source of ‘value’ exists anyway… rather than the decisions of a small group of central bankers with their own interests which may not always be shared by all!)

But what will happen (as has happened before)… is that the minute it actually attains any significant usage it will be relentlessly attacked by very powerful interests…

(e.g. What happens when businesses try to do transactions between themselves and the government says “WHOA dudes… you’re trying to avoid taxes?” And banks start screaming to the population about how its going to ‘destroy the value of their retirements’ and support drug-running, terrorism or whatever other boogeyman they can come up with. You gotta know that’s gonna happen!)

UNLESS it can grow in a way that can counter that opposition. I believe that a broadly based, user-owned and controlled neutral network handling traditional currencies for at least certain kinds of transactions has the potential to become… for lack of a better phrase… “the elephant in the room”.

And if such a network wants Ripple… it can have it. And no existing institutional force would be capable of stopping it.