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Imagine if MtGox were a Stellar gateway. I want to pay you $10, but all I have is 100 BTC in MtGox, and you trust neither MtGox nor Bitcoin. Our transaction wil

by natrius 12y ago

Imagine if MtGox were a Stellar gateway. I want to pay you $10, but all I have is 100 BTC in MtGox, and you trust neither MtGox nor Bitcoin. Our transaction will succeed through the Stellar network as long as someone on the network values a 100 BTC MtGox credit as much as $10, modulo any bid/ask spread between those currencies and Stellar's native currency. You trusted no one but your USD bank, which you presumably trust more than cryptocurrency exchanges. 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.

tinco 12y ago
The same thing would still happen though. When it turns out that the MtGox stellar gateway can't actually make good on any of its IOU's, the MtGox!USD and MtGox!BTC will immediately become worthless and any one who hoarded them will feel the pain. 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.
- natrius 12y ago
  I wasn't suggesting that Stellar would've made MtGox unwind any differently. I was pointing out that transmitting money doesn't require you to trust anyone but the place that's storing your money. The $10 still gets sent (with a very low price per MtGox!BTC). This nitpick about trust isn't why you should care about Stellar. Stellar makes your bank deposits transferable around the globe instantly with low fees. It makes your plain old dollars function as cryptocurrency.

by natrius 12y ago

tinco 12y ago

The same thing would still happen though. When it turns out that the MtGox stellar gateway can't actually make good on any of its IOU's, the MtGox!USD and MtGox!BTC will immediately become worthless and any one who hoarded them will feel the pain. 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.

natrius 12y ago
I wasn't suggesting that Stellar would've made MtGox unwind any differently. I was pointing out that transmitting money doesn't require you to trust anyone but the place that's storing your money. The $10 still gets sent (with a very low price per MtGox!BTC). This nitpick about trust isn't why you should care about Stellar. Stellar makes your bank deposits transferable around the globe instantly with low fees. It makes your plain old dollars function as cryptocurrency.