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When will the creators of Ripple explain why they've premined all the Ripples and kept most of them for themselves?

thisiswrong 13y ago
I have been following the progression of Ripple for some time. But I also get the feeling that Ripple is a huge pyramid scheme. To quote the 2 main criticisms from Wikipedia: 1. Ripple Labs will hold half of all the XRP in existence, in the hope that they will gain value 2. Ripple Labs have repeatedly made claims that they would give away 50 billion Ripples (XRP), but have not done so. So rather than reward early adopters of the currently (with future deflation), like Bitcoin did, Ripple Labs will hold onto 80 billion XRP in hope that its value will increase. Source: http://en.wikipedia.org/wiki/Ripple_monetary_system http://en.wikipedia.org/wiki/Ripple_monetary_system
- SJoelKatz 13y ago
  Either the value of the currency will increase or it won't. If it won't increase, then Ripple Labs will have no reward. If it will increase, then early adopters who buy and hold XRP will be rewarded. Say Ripple Labs currently holds a chunk of XRP worth $X. Say by January, it goes up to $Y. Then Ripple Labs will turn $X into $Y between now and January. Except an early adopter who bought $X worth of XRP today would also turn $5X into $Y over that same time frame. The cost to buy Bitcoins is usually pretty close to the cost to mine them, so Bitcoin early adopters didn't get their Bitcoins for free either. Using mining to reward early adopters has proven to be economically infeasible. The cost and reward of mining will adjust, as mining becomes profitable or unprofitable, such that mining will not generally be more rewarding than anything else people might do. Bitcoin took a lot of criticism for rewarding early adopters. So this is really a "damned if you do, damned if you don't" kind of thing.
SJoelKatz 13y ago
The concept of "premined" doesn't really apply to a scheme that has no mining. For currencies that use proof of work to solve the double spend problem, mining is a good way to reward miners for providing the useful service of ensuring sufficient proof of work to secure the currency and make it useful before it's possible to do so with transaction fees. Because Ripple has no need for mining, implementing mining to distribute the currency would basically just be paying people to waste electricity. It would make no sense, and an actual valuable asset (electricity) would be destroyed in the process. Bitcoin has demonstrated that mining at a significant profit quickly becomes impossible. So long as mining is particularly profitable, more people will do it. More and more resources compete for ever smaller shares of the pie. Where it secures the currency and the transactions, as it does in Bitcoin, it's an essential service that is worth paying for. Where it is not needed for that purpose, it's a colossal waste of a significant fraction of the value that Bitcoin creates.

I have been following the progression of Ripple for some time. But I also get the feeling that Ripple is a huge pyramid scheme. To quote the 2 main criticisms from Wikipedia: 1. Ripple Labs will hold half of all the XRP in existence, in the hope that they will gain value 2. Ripple Labs have repeatedly made claims that they would give away 50 billion Ripples (XRP), but have not done so. So rather than reward early adopters of the currently (with future deflation), like Bitcoin did, Ripple Labs will hold onto 80 billion XRP in hope that its value will increase. Source: http://en.wikipedia.org/wiki/Ripple_monetary_system http://en.wikipedia.org/wiki/Ripple_monetary_system

SJoelKatz 13y ago
Either the value of the currency will increase or it won't. If it won't increase, then Ripple Labs will have no reward. If it will increase, then early adopters who buy and hold XRP will be rewarded. Say Ripple Labs currently holds a chunk of XRP worth $X. Say by January, it goes up to $Y. Then Ripple Labs will turn $X into $Y between now and January. Except an early adopter who bought $X worth of XRP today would also turn $5X into $Y over that same time frame. The cost to buy Bitcoins is usually pretty close to the cost to mine them, so Bitcoin early adopters didn't get their Bitcoins for free either. Using mining to reward early adopters has proven to be economically infeasible. The cost and reward of mining will adjust, as mining becomes profitable or unprofitable, such that mining will not generally be more rewarding than anything else people might do. Bitcoin took a lot of criticism for rewarding early adopters. So this is really a "damned if you do, damned if you don't" kind of thing.

SJoelKatz 13y ago

The concept of "premined" doesn't really apply to a scheme that has no mining. For currencies that use proof of work to solve the double spend problem, mining is a good way to reward miners for providing the useful service of ensuring sufficient proof of work to secure the currency and make it useful before it's possible to do so with transaction fees. Because Ripple has no need for mining, implementing mining to distribute the currency would basically just be paying people to waste electricity. It would make no sense, and an actual valuable asset (electricity) would be destroyed in the process. Bitcoin has demonstrated that mining at a significant profit quickly becomes impossible. So long as mining is particularly profitable, more people will do it. More and more resources compete for ever smaller shares of the pie. Where it secures the currency and the transactions, as it does in Bitcoin, it's an essential service that is worth paying for. Where it is not needed for that purpose, it's a colossal waste of a significant fraction of the value that Bitcoin creates.