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General Discussion / Convince me that bitshares are actual shares in bitshares
« on: September 28, 2015, 05:53:38 pm »
As BTS price began its evil and unholy decent below 1 cent, this question of ' are bitshares functional shares in BTS' caused me some agony. And I am still not sure.
This is what ripple says on XRP, which strikes me as very modest, but perhaps also concerning to anyone that would invest in XRP. Maybe if Bitshares can make (or has) a better argument, it would bring additional confidence to the market?
This is what ripple says on XRP, which strikes me as very modest, but perhaps also concerning to anyone that would invest in XRP. Maybe if Bitshares can make (or has) a better argument, it would bring additional confidence to the market?
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XRP: Math Based Currency
A math-based currency, also referred to as a cryptocurrency, is a digital asset with verifiable mathematical properties, similar to how we can reliably verify gold as a substance made of atoms with 79 protons. Math-based currencies exist as digital assets in their own right and can be transferred directly between users (as fiat cash can be) without relying on a centralized protocol operator. XRP exists as a math-based currency on the Ripple protocol.
The supply of a math-based currency is governed by mathematics. There is no human intervention after the creation & implementation of the protocol rules. This is in contrast to the many “virtual currencies” that can be issued without restriction by companies and people (such as airline miles, reward points, etc.). In this example, XRP cannot be ‘devalued’ by the creation of additional XRP.
Bitcoin was the first example of a math-based currency. Bitcoin exists natively as a digital asset. On the network, it is not a balance that is redeemable at a central point of failure, and does not carry risk from a counterparty as “digital fiat” currencies do (as with an online balance from a bank that is not FDIC insured). You could hand someone a thumb drive with Bitcoin on it, and in doing so, you are transferring the asset itself, like handing over cash, as opposed to transferring an IOU or someone’s promise to pay. It does not require trust in any third party.
XRP exists natively within the Ripple protocol as a counterparty-free currency, as Bitcoin does on the Blockchain. Because XRP is an asset, as opposed to a redeemable balance, it does not require that users trust any specific financial institution to trade or exchange it. All other currencies on Ripple do require some amount of trust, as they each have an issuer, from whom that currency can be redeemed (this includes BTC on the Ripple network).
Users of the Ripple protocol are not required to use XRP as a medium of exchange or as a store of value. The Ripple protocol is currency agnostic. Users can use their preferred currency, whether that’s USD, BTC, XRP, or any other currency. Similarly, users may freely choose to trust any issuers they find reliable; this includes the trust implied by users trading in an issued non-XRP currency.
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XRP for abuse protection:
The primary function of XRP is to protect the Ripple protocol against denial-of-service (DoS) spam attacks. Since the Ripple protocol is based around a shared ledger of accounts, a malicious attacker could create large amounts of “ledger spam” (such as fake accounts) and “transaction spam” (such as fake transactions) in an attempt to overload the protocol. This could cause the size of the ledger to become unmanageable and interfere with the protocol’s ability to quickly settle legitimate transactions.
To protect the protocol from abusive creation of excess ledger entries, each Ripple account is required to have a small reserve of XRP to create ledger entries. This requirement is intended to be a negligible amount for normal users, while preventing a potential attacker from amassing a large number of fraudulent accounts to “spam” the protocol.
As a second line of defense, with each transaction that is processed, 0.00001 XRP is destroyed. This is not a fee that is collected by any one — the XRP is destroyed and ceases to exist. This transaction fee is also designed to be negligible for users. However, when the protocol is under heavy load, such as when it is attacked, this fee rapidly rises.
The goal of this design is to quickly bankrupt attackers and keep the protocol functioning smoothly. Attacking the Ripple protocol can get very expensive very quickly for a malicious user, but for regular users, the cost effectively remains nearly free. In this context, XRP can be thought of as a postage stamp for transactions.
Demand for XRP will naturally result as a byproduct of this design. To access the protocol, users will need some, albeit a tiny amount, of XRP. As the protocol grows, this demand will have to grow with it. However, if the price of XRP were to appreciate significantly to the point where sending transactions becomes a non-negligible cost for normal users, there is a mechanism in place to lower (or raise) transaction fees by a super-majority vote of server operators.
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XRP as Bridge Currency
In traditional financial markets, the role of bridge currency has been played by USD. However, within the Ripple protocol, the following functional reasons for using XRP exist:
XRP has great value as a bridge currency. Because each gateway’s balances trade as distinct assets within Ripple, the number of potential currency pairings can become quite large. Instead of quoting every possible currency/gateway combination, XRP can serve as a useful bridge currency to enable these transfers. This is possible because if every currency is liquid to XRP, then every currency is liquid to every other currency:
XRP has no counterparty risk. It is the only currency native to the Ripple protocol and thus requires no trust relationship with any gateway or third party.
XRP has low friction. It can be sent directly to any account with no transfer fees.
XRP cannot be debased — a finite amount exists. 100 billion XRP was “minted” with the creation of the protocol, and by definition, no more will ever be created.
It is important to note that bridging quotes with XRP is not a requirement; it is just a useful feature. Market makers can directly quote any currency pair, should they choose. There is no requirement that Ripple users hold or exchange XRP, aside from the negligible reserve amount. Ripple is currency agnostic. Merchants do not need to accept XRP to use Ripple. Both buyers and sellers can continue to use their preferred currencies."
