Author Topic: Does Ripple still Promote Peer to Peer Lines of Credit?  (Read 3140 times)

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Offline topcandle

Very experiential and untested.  This would be a huge gamble with little reward if done early in bitshares life
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Offline merivercap

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I suspect that everyone on the bitshares network knows everyone else via 6 degrees of separation.   

If you want a real "credit rating" and a true "web of trust" that is actually meaningful then put money on the line.

I agree.  Having a web of trust system would be great. 
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Offline monsterer

I also take issue with the implication that "the real world" (by which I assume you mean the mainstream) is the most effective way to do anything at all.

I wasn't implying that, but merely that the existing methods of dealing with this problem rely on there being no anonymity, which is of course contrary to the design ethic of most cryptos.

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Darknet markets, where anonymity is very important, seem to be doing fine with reputation based systems and appropriate technology.

Scams are absolutely rife in dark markets, so I'm not sure you could call that situation 'fine'.

My point is, there is a lot of benefit in going trustless... I'm at a loss to understand why the same system used in the MPA markets to margin call cannot be applied to collateralised peer to peer lending, since that's basically what a short was already doing for a long.
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Offline Permie

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It's a fundamentally broken concept. Any time you combine anonymity and trust the result is a sea of scams. That's why the real world has businesses and regulation.
"Regulation", by which I mean market-participants coming to a consensus on what should or should not be allowed, can come in other forms than governments de-anonymizing everyone with force and threats.

Darknet markets, where anonymity is very important, seem to be doing fine with reputation based systems and appropriate technology. They are growing.
They've managed this with just bitcoin and basic user-review features. BitShares' extra capabilities of reputation-UIAs, prediction markets, complex multisig and voting functionality can only make things easier.

I also take issue with the implication that "the real world" (by which I assume you mean the mainstream) is the most effective way to do anything at all.
For BitShares to further the cause of freedom and root-out inefficiencies it shouldn't be shackled to the current way of doing things.
Some methods might not work, but bts can adapt.

I suspect that everyone on the bitshares network knows everyone else via 6 degrees of separation. 

Like the six degrees of kevin bacon?

...I guess that's fine for now, when nearly everybody knows each other and bitshares community is like a small hamlet, but when it becomes a city, how will that work then?
6 degrees of separation (a theory) connects everyone and everything in the entire world. Not just the hamlet of bts.

https://en.wikipedia.org/wiki/Six_degrees_of_separation
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In 2001, Duncan Watts, a professor at Columbia University, attempted to recreate Milgram's experiment on the Internet, using an e-mail message as the "package" that needed to be delivered, with 48,000 senders and 19 targets (in 157 countries). Watts found that the average (though not maximum) number of intermediaries was around six.[16] A 2007 study by Jure Leskovec and Eric Horvitz examined a data set of instant messages composed of 30 billion conversations among 240 million people. They found the average path length among Microsoft Messenger users to be 6.[17]
Even if it's actually 7 or 8, the point is the same. If you can't access the internet, you can't use bts anyway.
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Offline monsterer

I suspect that everyone on the bitshares network knows everyone else via 6 degrees of separation. 

Like the six degrees of kevin bacon?

...I guess that's fine for now, when nearly everybody knows each other and bitshares community is like a small hamlet, but when it becomes a city, how will that work then?
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Offline bytemaster

I suspect that everyone on the bitshares network knows everyone else via 6 degrees of separation.   

If you want a real "credit rating" and a true "web of trust" that is actually meaningful then put money on the line.   
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Offline monsterer

It didn't work, so they reduced the scope of the problem by making trust lines apply to gateways only, which are already trusted business entities.

What didn't work about it?

It's a fundamentally broken concept. Any time you combine anonymity and trust the result is a sea of scams. That's why the real world has businesses and regulation.

The one which was the catalyst for ripple was the TradeFortress scam... being a bitcointalk member, you must recall it?

https://bitcointalk.org/index.php?topic=207718.0
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Offline ag

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theoretically nothing is stopping gateways from issuing IOU's that are not backed. but this action would be very objectionable!

Offline bytemaster

It didn't work, so they reduced the scope of the problem by making trust lines apply to gateways only, which are already trusted business entities.

What didn't work about it?
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Offline Permie

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Depending on the type and degree of interaction a user has with a gateway, the gateway may have anti-money laundering (AML) or know your customer (KYC) policies requiring verification of identification, address, nationality, etc. to prevent criminal activity.
Perhaps others may disagree, but on a freedom-centric platform like BitShares it think it's important that the same old statist lies and falsehoods aren't perpetuated further.
They want to track your money, not protect you from scary-crims. (Criminals)

 +5% for the informative post
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Offline speedy

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So Im guessing you are designing the bond market to allow posting more flexible types of collateral? I.e. not just posting a fixed amount of BTS etc but maybe credit that lenders can trust to various degrees? (Havent fleshed that idea out Im just imagining what could happen).

Offline monsterer

It didn't work, so they reduced the scope of the problem by making trust lines apply to gateways only, which are already trusted business entities.
« Last Edit: July 04, 2015, 10:56:37 am by monsterer »
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Offline merivercap

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I don't think the Ripple guys promote these features as much between individual users because Ripple is focused on financial institutions, but the underlying mechanics with trustlines are the same for users, gateways & market maker institutions.  Ripple's pathfinding algorithm seems very useful.

Gateways
A gateway is any person or organization that enables users to put money into and take money out of Ripple's liquidity pool. A gateway accepts currency deposits from users and issues balances into Ripple's distributed ledger. Furthermore, gateways redeem ledger balances against the deposits they hold when currency is withdrawn. In practice, gateways are similar to banks, yet they share one global ledger known as the Ripple protocol. Depending on the type and degree of interaction a user has with a gateway, the gateway may have anti-money laundering (AML) or know your customer (KYC) policies requiring verification of identification, address, nationality, etc. to prevent criminal activity. Popular gateways as of 2015 included Coinex, Ripple Fox, Panama Bitcoins, Payroutes, Ripple Union, Gold Bullion International, Bluzelle, Bitstamp, SnapSwap, and btc2ripple.

Trustlines and rippling
Pictured is the 2014 Ripple user interface that allows for advanced users to add trustlines and "rippling."
Users must ‘extend trust’ to the Ripple gateway that holds their deposit. This manual creation of a trustline indicates to the Ripple network that the user is comfortable with the gateway’s counterparty risk. Furthermore, the user must put a quantitative limit on this trust and create a similar limit for each currency on deposit at that gateway. For example, if a user deposits US$50 and BTC2.00 at The Rock Trading, the user will have to grant trust of at least that much in both currencies to the gateway for the monies to be available in the Ripple network. When a user has allowed multiple gateways in the same currency, there is an advanced option to allow "rippling," which subjects the user’s balance of that currency to switch (or ripple) between gateways. Though their total balance doesn't alter, users earn a small transit fee for providing inter-gateway liquidity.
https://en.wikipedia.org/wiki/Ripple_(payment_protocol)

Understanding Trust Lines
https://ripple.com/knowledge_center/understanding-connecting-to-a-gateway-trust-lines-2/

Using Ripple for Cross-Currency Payments (mentions path finding)
https://ripple.com/knowledge_center/using-ripple-for-cross-currency-payments/

Here is David Schwartz's explanation of the pathfinding algorithm:
https://forum.ripple.com/viewtopic.php?f=2&t=6094#p43645

"This process includes looking at which order books, accounts, and ripple lines exist and are authorized to carry the payment. This finds a set of candidate paths that are then filtered."...

Hope this helps...

BTW Being able to use P2P credit trustlines & Local Exchange Trading System(LETs) in a web of trust was the main reason I followed Ripple for a long time.
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Offline bytemaster

With all of our focus on gateways, how is the P2P routing of payments through ripple handled?
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