Harry Potter and the Cryptocurrency of Stars
kalzumeus.com
kalzumeus.com
That said, I have an vague high level technical understanding of btc, but none of Stellar, and I'm still left not really understanding either what Stellar seeks to achieve, or why patio11 hates btc.
I'm actually inclined to dislike btc, and thus felt that the Defense Against The Dark Arts Professor is not an inapt caricature. But, the TLDR I got was: Stellar is some kind of sweet currency/asset agnostic market exchange.
Also, btc boosters mix their metaphors/have incomplete pictures of the economy, warped by libertarianism.
So far, so good. But Stellar still seems… awfully opaque.
I was not aware that patio11 nor anyone for that matter, have presented any "fundamental flaw" within the "engineering artifact" known as bitcoin. Which apparently, has also been elected to the position of "foundational infrastructure".
Advocation requires an argument, in this case one which I am actually quite interested in reading.
http://www.economist.com/news/finance-and-economics/21599053...
For most of that time, the total quantity of gold and silver in existence remained approximately constant.
I'm still left not really understanding either what Stellar seeks to achieve
If you trust me to speak on behalf of stellar advocates, then my good faith belief is that they'd describe it as something like "We want stellar to be TCP/IP for money." (People who like Bitcoin qua the protocol or blockchain technology rather than qua an asset also sometimes use that metaphor, for what it's worth.) The implication is that "TCP/IP is a fundamentally important technology which allowed other technologies which changed the face of the world" and "money is a crosscutting concern of many extremely important problem domains which you care about."
I'll be looking foward to seeing it Patrick. I've got my own rant about why BitCoin is (mostly) a terrible, terrible idea but haven't committed any of it to written form as yet.
It does solve the Byzantium generals problem rather neatly, which is good. But I doubt that is why it is used. It is used partly because it suddenly became free money for a lucky subset of people who found you could exchange something you got for free for something valuable (drugs sex etc) - and those were at such high rates that the people receiving the bitcoins were also basically being given free money (when one read the official exchange rates)
This managed to fuel an interesting cycle. I would be interested in seeing if bitcoins exchange slips have affected it's purchasing power at exactly the same ratio or if it is being used as a barter not a currency (in these dark corners of the drug dealing world)
I would also suggest that (afaik) real drug dealers who do real big deals work on serious guarantees of trust. Things like knowing the person you are dealing with, and where their children go to school. So things like trustless currencies in these environments are not trustless - quite the opposite.
Your comment about trustlessness also isn't quite correct; Bitcoin is trustless in the sense that it does not require personal trust for its operation (like eg. the USD does).
That's unrelated to whether trust in the other party is a component in a transaction or not - which, realistically, doesn't have anything to do with the currency being used.
I suggest that anything will work as a medium of exchange especially if you have the threat of death to back up your trust needs. All that is needed is the belief on both sides that bitcoin (or a fleet of Porsches) will hold it's value long enough to complete both this transaction and enough similar transactions to expend the bitcoins received.
So bitcoins don't seem special in this regard - they just seem like cash. And that I don't think is a valid proof they can become a real currency as used in the "trust" economy.
I do accept that trusting the other side won't run off with my drugs is different from trusting the Bank of England won't inflate away my value. But the vast majority of transactions in USD don't have that worry on any sensible timescale either. (Not true of say Zimbabwe)
Thank you - and apologies for commenting whilst tired.
Edit: well the parent (toasted) was commenting up thread on drugs, but now that's massively down thread and this making my comments on drugs pretty weird. I see
I hope it won't be a Gish gallop. It indicates that there probably is not one single big case against Bitcoin but many small cases. There is an interesting essay about that here: http://www.gwern.net/Bitcoin%20is%20Worse%20is%20Better
+ I can certainly appreciate the opinion that Bitcoin won't survive in its present form, but I think it's becoming more and more obvious that cryptocurrency in general won't be leaving us any time soon, and I think ignoring Bitcoin's role in that development is extremely foolish.
I still don't understand how bitcoin will ever overcome that obstacle for casual transactions (as opposed to ones in which a 30 minute delay isn't a problem)
A valid transaction which is widely seen in the network will be part of the blockchain with a high degree of certainty, even if it is just a few seconds old. That is not perfect, but the risk of accepting unverified transactions with low volume is very low.
It is important to remember that most systems that we use today have serious flaws, including payment systems like credit cards and cash. Bitcoin doesn't have to be perfect in order to succeed.
If someone could come up with a response to that single flaw, I think most of the others (increasing transactions per second, size of the block chain, etc...) can be overcome.
How likely a credit card chargeback?
My understanding is that if you don't wait for multiple confirmations, then it's not particularly challenging to double spend bitcoins. That's why vendors don't accept a transaction as "good" until multiple transactions have occurred.
And waiting for 30 minutes to pay your restaurant bill would kind of suck.
That's incorrect, there is a significant cost associated with executing a double-spend attack. For small transactions, it's uneconomical to mine an alternate chain in order to execute a double-spend attack.
If you trust the miner a little bit, you can assume that a zero-confirmation transaction be part of the common blockchain. Now it's not advisable to do that when selling somebody a Ferrari and letting them drive off, but it's probably less risky than accepting a credit card payment.
Regarding reputation: I don't quite understand the point. You'd just have to sign your tx with a private key that has a corresponding public key with some reputation attached to it. This is pretty independent of bitcoin itself. You could even build a system where you deposit some amount with a third party (or multiple third parties using a MULTISIG tx), which will reimburse the vendor with that amount if a double spend is executed.
But I think your system would work as well - but it then needs more than just a bitcoin transaction from my wallet.
I'm just trying to think of how we can encourage Restaurants and Grocery stores to start accepting BTC, without getting scammed by double-spends.
At Stripe, we've had to integrate with a number of backend financial providers. Stellar is trying to be a single system anyone can plug into that gives you global coverage. There's a lot of power to that, and a successful Stellar would help us focus on the core of our business (making payments seamless) rather than maintaining a bunch of integrations.
I'm happy to answer any questions about what Stellar's doing/how it works: I'm gdb@stripe.com.
Yep, exactly.
And of course bitcoin has some flaws that make it hard to use as a currency in this fashion; as mentioned in the fanfic, it takes a decent amount of time before you can be confident that the transaction has actually gone through. Delays like that are acceptable in some transactions, but not in all.
Furthermore, this use of bitcoin as an exchange of value is also obscured by the fact that people try and use bitcoin as an investment vehicle, try to use the blockchain for other purposes (e.g. as a digital notary), etc.
All these reasons are why I too have been very skeptical of bitcoin. As far as I'm concerned, most of the "value" of bitcoin is driven by people treating it as an investment vehicle, and this leads to a lot of instability in the value. Without a long-term stable value (or predictable trend), it's hard to actually use it as a currency in its own right; anyone not using it as an investment vehicle is encouraged to hold a bitcoin position for as short a time as possible to minimize their risk.
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Stellar is a lot more focused. It's strictly acting as a medium of exchange, and in fact encourages you to not even use STR as a currency but instead to just use currency as a currency. STR will have some intrinsic value, but that value will likely be very stable, based on some particular fiat currency (I'm assuming USD but it doesn't really matter which one). It will largely just be used to facilitate exchanges between other currencies, like USD and EUR. Instead, people will trust various gateways to issue credit in the currency of their choice, and trade that credit.
Not only does this insulate all parties from any market instability (as the value of 1 USD is always 1 USD), but the whole mining infrastructure is also gone, replaced by a consensus algorithm, which means transactions happen nearly instantly. On that note, bitcoin fans probably think dropping mining is a huge mistake, but Stellar transactions are already based on trust (you have to trust the issuer of any credit you're accepting), so extending trust to the network itself seems reasonable; you trust that the stellar service provider (stellard) you're connecting to has chosen a set of other peers that will not collude, which prevents you from being defrauded.
These changes obviously mean the investment vehicle angle is gone (well, you can invest in STR, but the price is likely to be stable long-term, stellar has inflation too which encourages spending instead of hoarding), as is any of the other messing about with the block chain. All that's left is the currency angle, and Stellar's approach makes a hell of a lot more sense than bitcoin.
It remains to be seen whether Stellar will get the widespread adoption necessary to actually succeed. But I hope it does, because it looks like it might actually work. Perhaps someday banks will start acting as stellar gateways, enabling nearly-instant transfer between any two people with accounts at participating banks. Basically, Stellar seems like it could do what Dwolla has been trying to do, except without even the 25 cent fee.
Bitcoin is a distributed trustless ledger tracking inputs and outputs of transactions. It stores it in a blockchain, and determines transaction values using a script that takes some inputs and produces some outputs.
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As far as I can tell,
Stellar does many things (gateways, trust/debt graph, asset mapping, quality conversion between assets, stellar currency), on top of which people are trying to bootstrap one thing (a big exchange).
Stellar is a centralized trust-based debt graph of arbitrarily-defined assets hopefully backed by trusted gateways. It uses consumer-defined trust and quality (exchange rate) values per asset to other nodes which creates a debit cap for the peer.
The roles between the technology vs ecosystem of Bitcoin vs Stellar are inverted. Clearly Stellar's approach has some benefits (fast transactions, regulation-compatible gateway infrastructure) at some costs (trusted/centralized, bootstrapping risks).
This is about as good of an oversimplification as I can come up with right now.
Stellar, technically, is a bunch of things; gateways, trust graph, etc. But in terms of how people use it, it's a single thing: a mechanism for sending real-world money over the internet. And it is real-world money. It's represented by credit, but most people are already operating on credit; they keep all their money in a bank, and the bank tells them how much credit they have, and when they pay for something the vendor accepts their credit and redeems it from the bank (typically by accepting credit from their own bank, rather than physically receiving paper money).
This does suggest to me, though, that it would have been nice if Stellar had used simple technology (just a distributed ledger, like bitcoin) to bring about the simple use-case (an exchange).
Perhaps that isn't possible, and Stellar truly is the best we could do. But I'm not convinced it is.
This is true of every currency. Do you think all the manufacturers, laborers, parts, raw materials suppliers of that [insert any product here] you just purchased in US dollars is paid for with US dollars?
They do this because the value is stable, so they know that 1 USD today is worth the same amount (or as close as makes no difference) tomorrow, and the day after. They can hold on to the money for as long as they need, until they want to make another transaction with it.
That's radically different from how nearly all businesses treat bitcion. They never hold any BTC balance. They accept BTC as payment, but they immediately convert it into some other currency, and end up never running a BTC balance. This insulates them from the risk of BTC. Also note that their prices are nearly always based on a fiat currency and the BTC they accept is the equivalent of that currency based on the current market rate.
And this is fantastic! It demonstrates clearly that the payment processing aspect alone (without even arguing about the currency aspect) of Bitcoin is a killer application. Being able to receive international payments from any country, in a few minutes, 24/7 (no bank holidays), with extremely low fees, with zero fraud (thanks to transactions being irreversible) beats any current payment processing platform. Quite a few business and financial leaders have noted this. These are also the reasons why Bitcoin is starting to provide great competition to the remittance industry (eg. http://letstalkbitcoin.com/blog/post/in-depth-review-bitpesa)
These are not the same thing at all! Irreversible transactions just means you can't get a refund when you're defrauded. Bitcoin allows recipients to defraud senders at will. I suppose this is popular because the existing system with credit cards defaults to allowing the public to defraud the merchants, but it's not an improvement overall.
1. Fraud come most often from customers (who have nothing to lose), not from merchants (who need to maintain their reputation). As a matter of fact, fraudulent chargebacks cost more than $11 billion a year: http://www.dailyfinance.com/2014/03/20/friendly-fraud-costs-... This is why merchant love Bitcoin's irreversible transactions. This fact alone cuts down most of the fraud that currently occurs with traditional payment systems.
2. In the extreme minority of cases where a merchant is malicious, credit cards are actually terrible. Handing over all your identity details (CC number, expiration date, CVS number, billing address, etc) allows the merchant to steal your identity and make fraudulent charges. Identity theft costs $25 billion a year: http://www.businessinsider.com/bureau-of-justice-statistics-... It is possible but a PITA (and still costly!) to recover from a serious identity theft accident... That's why Bitcoin is an improvement because a transaction authorizes merely a transfer of coins and nothing else, so the malicious merchant cannot cause further damages. On top of that, Bitcoin also allows you to completely get rid of this possibility of even losing coins, via cryptographic escrow systems: two-party trustless escrow (http://blackhalo.info/wp-content/uploads/2014/06/whitepaper_...), or 3-party escrow but where the escrow does not even has access to the funds (https://bitescrow.org/)! All this is completely infeasible with traditional payment systems. Surely, the practicality of such escrow systems will increase overtime. Don't judge Bitcoin based on its current imperfections, but envision what is possible.
That only works if you're talking about a customer buying something from an established merchant. It doesn't help at all if the merchant is unknown (and therefore has no reputation to protect), or is in fact another person and this is a person-to-person transaction.
This problem is why Bitcoin needs escrow services (which most fiat currency transactions don't need), which of course add extra work and fees on top of what should be a straightforward transaction.
> Handing over all your identity details [...] allows the merchant to steal your identity and make fraudulent charges.
Charges that the credit card company pays, not you.
True. However my point stands: Bitcoin reduces fraud overall, because most transactions happen with reputable merchants.
> Charges that the credit card company pays, not you.
That's incorrect. In the end it comes from the customer's pocket. Because credit card companies have to have higher CC processing fees to cover higher fraud levels, which indirectly causes merchants to raise their prices. Sometimes it is not obvious (eg. all prices are 1-2% higher in an industry, eg. supermarkets), but sometimes it is more obvious. There is a perfect example from a few weeks ago demonstrating my point: AirBaltic charges a 5.99 EUR fee when processing a CC payment, but not when processing a Bitcoin payment: http://www.coindesk.com/airbaltic-waives-controversial-bitco...
Only if you already have BTC. And a transaction takes more than a "few minutes" to confirm anyway.
Speaking personally, I did not own any BTC, and I did not have an account with an exchange. If I want to buy a few BTC to use in a transaction with someone else, it takes over a week. A few days to confirm a bank account at an exchange, and then 3-4 more days for the ACH transfer to put funds into the exchange, before I can finally buy the BTC.
This is also far from decentralized. Everyone accepting BTC as a just-in-time proxy for other currency are extremely reliant on the exchange they use to do the immediate conversions (e.g. Coinbase). Since you already need to trust some centralized entity, Stellar ends up being a much better model for this sort of payment, because trust can be distributed better (with BTC, Coinbase goes down and you can't accept BTC until it comes back; with Stellar, you can continue to use the appropriate credits for as long as the issuer is still trusted by people), and because you don't need to do any just-in-time conversions, you can just accept USD credit and hold onto that and exchange it for "real" USD at your leisure.
BTC transfers are fast once you already have coins, and this is a reason why its adoption is increasing. People realize that having BTC on hand is useful, so they start holding it. There is a little friction to start adopting it, but once you use it, you truly appreciate many of its benefits!
It is not true that BTC is far from decentralized. There are more than a hundred exchanges in the world as of today. And more and more exchanges open up, so it becomes more and more decentralized over time! It is also false you need to trust a centralized entity. Switching from Coinbase to BitPay is trivial (Overstock did their integration with Coinbase in about 2 weeks).
10 minutes? More like an hour. 10 minutes will get you one confirmation. But that's rarely good enough. 6 confirmations is usually considered a good threshold to protect against double spending, and that means you're waiting an hour.
> People realize that having BTC on hand is useful, so they start holding it.
"People" have been holding it ever since BTC launched, because a lot of people see it as an investment vehicle (albeit a highly volatile one). But BTC is still too volatile for most people to want to hold onto any for any real length of time.
> It is not true that BTC is far from decentralized.
I don't think you understand my argument. I'm not saying that there's a central point of failure that will take down the whole bitcoin network. Heck, that's true of Stellar too, despite the more centralized nature there. What I am saying is that all of the various gateways and exchanges and bitcoin services are still effectively centralized points of failure for the various services they represent. Yes, a company can switch from Coinbase to BitPay, but they won't be able to accept BTC for however long it takes them to move all their services over. Imagine if the company only accepted BTC, that would be a disaster! Similarly, people who use exchanges are taking on the risk of the exchange going under. This is largely due to the fact that people maintain balances with the exchanges, which means the exchange has actually issued them credit, and if the exchange vanishes, the credit is worthless. In that sense it's actually very much like Stellar. In fact, it's nearly exactly like Stellar, because Stellar has both the credit, and has the decentralized trustless currency STR, the big difference is with Stellar people are expected to trade credit, and with BTC, people are expected to redeem their credit with the exchange/gateway in order to trade BTC directly.
Bitcoin does allow you to operate in a completely trustless, decentralized manner where you never leave the network, never deal in any currency except BTC, don't use any online services to manage this stuff (i.e. keep your wallet on your local machine, run the full bitcoin client, etc). But most people don't do that, because it's wildly impractical.
Yes it is. The vast majority of Bitcoin services and users wait for only 1 confirmation. Waiting for 6 confirmations is "excellent" whereas 1 confirmation is "good enough" (when was the last time we saw a Bitcoin double spend attempt? Never!). But arguing whether 1 confirmation is good enough is a moot point. Bitcoin competes with traditional international payment systems where it is common for transfers to post in 1-3 days especially across weekends or bank holidays ("post" has a specific definition, look it up). So even waiting for 6 confirmations makes Bitcoin faster than traditional systems.
On the other point, true, many people rely on 1 exchange, or place their coins in 1 online wallet service, which makes them vulnerable to incidents typically affecting centralized systems. But this is not a problem inherent to Bitcoin. Not at all. This is solved by educating users, by new services (eg. hardware wallets like Trezor), and by "natural selection" (eg. people who lost coins on MtGox tend to learn their lessons, weak exchanges die, secure ones remain in use, merchants can very easily use multiple Bitcoin processors at once, etc).
They do? Before posting that comment I looked up information on transaction confirmations to check that my "1 hour" figure was correct, and the documentation I found stated that the recommendation is still to wait for 6 transactions, and that you may choose to use as little as 1 transaction for low-risk situations where e.g. you're selling cheap easily-replacable items, but that you should use more confirmations for other transactions.
> So even waiting for 6 confirmations makes Bitcoin faster than traditional systems.
But we're not talking about Bitcoin compared to other traditional systems. The context here is in comparison to Stellar, where conformation happens in seconds (worst case would be minutes, if there's network issues).
Let me explain to you why this is okay in practice. A merchant will in general send something to the customer (a seller would ship an item, Coinbase would send an ACH bank transfer, etc). But because sending the service or product to the customer takes time, this gives time to catch double spend attempts. So a merchant considers 1 confirmation as sufficient, and prepares the shipment right away, or initiates the ACH right away. But if in the next hour the 2nd-6th confirmations never come (eg. the 1st confirmation ends up in an orphaned block) then the merchant can cancel the shipment of the item, or cancel the pending ACH.
So if a merchant accepts the (non-negligible) risk of credit cards chargebacks, he will accept the (even smaller) risk of a Bitcoin double spend :)
Regarding bitcoin double-spending, FWIW, a few years ago when MyBitcoin.com shut down, they claimed it was due to a series of double-spend attacks that were successful because they were only using 1 confirmation: https://bitcointalk.org/index.php?topic=34770.0. More recently, GHash.IO successfully executed double-spend attacks against BetCoin Dice, although it looks like they may have been using 0 confirmations?
I demonstrated to you that accepting bitcoins is safer than accepting CCs in most scenarios like (1) when the merchant's half of the transaction is cancellable, or (2) when the merchant waits for enough confirmations. Now in the last scenario (3) where not only the merchant does not wait for confirmations but the transaction is non-cancellable (eg. guy walking away with laptop), nothing inherent to Bitcoin PREVENTS the merchant from taking all the same precautions he takes for credit cards: for example he could check your ID, check your credit score, verify your presence in his own database of high-risk customers, etc. Bottom line is neither in (1), nor in (2), nor in (3) is Bitcoin inferior/riskier than CCs. In fact it is clearly superior to CCs in 2 out of 3 scenarios. There was a great Mashable article recently explaining merchants love Bitcoin precisely for this reason: http://mashable.com/2014/08/06/bitcoin-retailers/
MyBitcoin claim they were using 0 confirmations, not 1. (But many in the community and myself included think their whole story was a lie and that instead MyBitcoin stole the bitcoins, but I digress...) BetCoin also was using 0 confirmations.
Well that, and the fact that it's fraud, which is a crime, and if you get caught then you will get in trouble.
> I demonstrated to you that accepting bitcoins is safer than accepting CCs in most scenarios [...] when the merchant waits for enough confirmations
Even waiting for 1 confirmation can still take 10 minutes, which is a long time to wait for a lot of transactions, especially in-person transactions. That alone makes it extremely difficult to use Bitcoin for "real-world" transactions as opposed to online transactions.
So I will repeat the rebuke I already told you, but I will repeat it only ONCE. After this, if you repeat yourself again, I am done here, since you are wasting our time. You are bringing up scenario (3) and my rebuke was "nothing inherent to Bitcoin PREVENTS the merchant from taking all the same precautions he takes for credit cards: for example he could check your ID (like some supermarkets do in the US), check your credit score, verify your presence in his own database of high-risk customers, etc" Therefore Bitcoin with 0 confirmations is no more risky than credit cards to accept in brick-and-mortar stores where the customer can run away after paying.
In any case, your response is completely wrong. I thought we'd discussed this already. Accepting a bitcoin transaction with 0 confirmations is more risky than a credit card, because you have no recourse if you get scammed. With a credit card, the credit card company accepts the fraud risk, not the individual retailers.
Also, credit score? It sounds like you have no idea what you're talking about. You can't check credit score for individual retailer purchases. That's done when applying for a credit card, not using one. Retailers also don't typically maintain databases of high-risk customers, or really do anything at all on the subject of fraud beyond possibly check ID against credit card (which is actually very rarely done unless the retailer has a reason to be suspicious of the card). The only retailers that would ever need to do anything like that are low-volume high-price retailers that can afford the extra effort spend on every customer.
In the end, when you pay with a credit card, the retailer gets confirmation from the CC company effectively instantly that the payment has gone through. It takes just a couple seconds, and at that point the retailer's job is done, they don't carry any fraud risk. If the guy turns out to have been using a stolen card, it's the CC company that pays. But if you pay with bitcoin, and you don't wait for a confirmation, then by definition you have no confirmation that payment has gone through. If you let the customer walk away, and the payment doesn't end up going through, then the retailer is out 100% of the cost, with no recourse.
So yes, retailers that are willing to accept the entirety of the risk may choose to accept bitcoin with 0 confirmations. But not all retailers will do that, and I warrant a majority of retailers won't want to do that. The two classes of retailers that might are 1) the retailers that don't understand the risk they're accepting by doing this, and 2) the retailers that are in a market where their target customers are more likely than most to care about bitcoin and therefore accepting bitcoin will work as a marketing strategy.
Bottom line: there is, 99% of the time, no recourse for merchants. That's exactly why merchants are so wary of CC fraud! Or else why would they be wary of it if it was all magically covered by the CC company? Food for your thoughts.
Bottom line: you're blindly trusting the word of the operator of a sketchy online retailer and claiming that what he says applies to brick-and-mortar stores when it doesn't.
The value of 1 USD is always the value people are willing to trade for 1 USD at a given moment, being just a worthless piece of paper otherwise, though because of trust in the US government, the system mostly works. However, there's a reason for why countries prefer gold reserves over fiat reserves, as gold can't be printed. Gold is an example of a real-world offline distributed currency that has been in circulation since the dawn of men. It doesn't have much value either, other than being shiny and a good semiconductor, yet it's still relevant because it's not a currency that a central banking system, like the Fed, can control.
I don't know much about BTC or Stellar or how they work, but it has been my hope that we'll suffer some enlightenment in this century and stop dynamiting and poisoning mountains in the search of gold and thus destroying real value in the process. And I've been hoping that BTC is it. So if Stellar is not an alternative currency, it's not really interesting.
If you are _not_ familiar with Ripple, you should learn about it before you get on board with Stellar. (Stellar is a clone of Ripple, so familiarize yourself with the controversy about Ripple in order to learn what the controversy about Stellar is going to be in short order.)
I am a fan of both the Bitcoin and Stellar concepts; I hold a bunch of Bitcoins as well as some Stellars. I used to hold some Ripples; I may yet buy some more.
Stellar, on the other hand, is only holding 5% of STR in reserve, which is used to fund the nonprofit, and already sold off 2% of that to Stripe (who in turn is going to be auctioning off 50% of that). Ripple's approach looked like a pre-mined altcoin thing, but Stellar has a significantly smaller reserve that's very publicly being used to fund the operations of a nonprofit, rather than being used to enrich 3 individuals.
Basically the only odd thing here is that using STR as a source of funding means that they care about the market value of STR, whereas most uses of Stellar don't care at all about the market value of STR but only use it as a medium of exchange. That said, all the Stellar Foundation really wants is for STR to remain relatively stable (which it should), whereas with Ripple's approach there's a genuine conflict of interest as the founders would get personally rich if they could boost the value of XRP (conflict of interest because it's in the network's best interest for XRP to remain stable, just as STR is expected to remain largely stable).
Ripple started out with really nice-sounding politics, but because the tech is centralized, all the nice promises were promptly violated. There is no reason the same won't happen here.
I am honestly interested in this. I have trouble finding any reliable information about the viability of the Ripple consensus mechanism.
Another was that the open source software was not delivered on time and did not live up to expectations, especially not given the above. If Ripple the company went under, so did the network, and that is not really acceptable for a trustless distributed global currency.
Has Stellar addressed any of this or are we just supposed to trust them?
Both are well worth the read.
(If you like either, good for you! It's a polarizing piece of fiction.)
I only vaguely understand stellar (and ripple), but one thing i do know is that for all the hype over the last few years noone ever used ripple for anything other than speculation. Stellar is also shaping up in a similar way.
Hermione: Magic.
Effectively, Stellar is federated among entities that (indirectly) trust each other, but does not work between entities who establish no trust relationships other than direct ones with currency exchanges.
This isn't quite accurate: a lot of Stellar's mechanisms are set up to allow transactions to flow despite the lack of a trust path. For example, this is the main function of the stellar currency. As well, the distributed exchange doesn't require trust between the parties — just a mutual desire for the exchange to occur.
I'm not talking just about the currency exchange process itself; I'm also talking about the "ledger" mechanism and maintenance of it. Stellar seems much more reliant on trusted third parties.
This story gave a lot of detail about trusting specific third-parties, but treated Stellar as a magic inherently trusted mechanism for IOU exchange above reproach. Thus, it gives me no confidence or inclination to trust Stellar itself.
Given the requirement for trust already built in to Stellar, the consensus protocol seems like a natural extension of that. Just as you need to trust the issuer of credit, you also need to trust your stellar provider to have chosen peers that will not collude.
In a sense, this is actually kind of like Tor. When you establish a circuit through the Tor network, you're trusting that all the relays on the circuit are not colluding together. If they are colluding then you've lost all your privacy.
Ultimately, if Stellar takes off, I think it makes sense for real-world institutions like banks to start running stellard. If I hold an account at a bank, I'll use their stellard, and exchange credit issued by them. I've already trusted the bank to hold all my money, so I'm not really taking on any new risk by also trusting them to run stellard.
That's my primary concern. Given the choice between trusting a particular issuer or just trusting that some entity exists who will exchange a currency I hold, I'd much rather do the latter.
It's a lot easier if you really do trust the issuer, because then you don't have to worry about finding someone else who does who will exchange Foo!USD for another currency.
Also, it's worth pointing out that even with Bitcoin you end up having to trust specific entities to be good actors. Notably, any time you use an exchange you have to actually trust the exchange to give you the value you paid for. For example, if I use Coinbase to exchange BTC and USD, Coinbase ends up holding a balance on my behalf. I have to trust that if I request to withdraw my balance from Coinbase, that they'll actually deposit the USD in my bank account, and will actually send the BTC to another wallet of my choosing.
In fact, the whole MtGox debacle is a great example of how this completely and utterly failed. Didn't a lot of people lose a lot of money, in the balances that MtGox held for them? People trusted MtGox and their trust was violated.
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Basically, the need to trust individual entities is not new with Stellar. Bitcoin has the exact same issue. Stellar has the benefit of being more likely to be adopted by existing centralized financial institutions, which are far less likely to abscond with your money, than the various gateways/exchanges that deal in Bitcoin.
I'd trust USTreasury!USD over WellsFargo!USD any day. Since the US government is the actual issuer of the currency in the first place, and the institution which guarantees it as legal tender for all debts.
If you're exchanging your own funds between currencies, you need to trust two entities: a USD gateway and a BTC gateway. These gateways can be the same entity; Bitstamp, for instance, is a Ripple gateway for several currencies. There isn't any extra trust involved in Ripple/Stellar unless you want it.
The biggest problem with MtGox was that an untrustworthy entity was trusted with too many (much?) assets. We had a hunch about the amount of assets, but no one an exact amount, that's the first thing Stellar would solve, if I understand correctly Stellar would reveal MtGox's total outstanding assets. A bank would always have a large outstanding total though, it's their main value.
Perhaps Stellar would make visualising and understanding debt of banks easier so it would also be easier for authorities to check on them. Who knows, perhaps there's banks today with much less credit than they debit. With all the digital transactions going on, we're trusting banks with way too much.
Stellar makes your bank deposits transferable around the globe instantly with low fees. It makes your plain old dollars function as cryptocurrency.
> Have I mentioned that I don’t like Bitcoin? I don’t like Bitcoin.
Lo and behold, we have reached the base case, sir: it's `bitcoin'.
One thing I don't understand is why do the rich people have more say than someone with less Stellars?
It's a long time, but I won't mind waiting for it.
For that matter, why would any business necessarily refuse to accept it?
That said - if Bitcoin or something like it makes it less expensive for me to take on international clients then i'm all for it. But nobody's going to just ignore fiat like it isn't there.
(btw: More logical than changing the tender of dollars to bitcoin would be to tie the value of the dollar to a fixed amount of bitcoin. Which would be the same thing but without losing the word 'dollar'.)
patio11 if you are reading I mostly linked to the above to get your take on the idea that we can get even more subjective than transitive exchange rate finding. Maybe the Wired article is shorter: http://www.wired.com/2014/07/document-coin/
The short term goal is just to get people to think more broadly about what cryptocurrency can mean. Your essay does that brilliantly, thanks!
i admit it's nice from an engineering standpoint and maybe if this imaginary liberal (does that word even mean anything concrete anymore?) utopia some people seem to be living in was true, it would actually be useful to people who don't want to wait 45 minutes at the supermarket checkout for their crypto-monopoly-money transaction to confirm.