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Will Ripple Eclipse Bitcoin?
First time accepted submitter groggy.android writes This year's biggest news about Bitcoin may well turn out not to be the repeat of its surge in value last year against the dollar and other state currencies but its impending eclipse by another independent but corporate-backed digital currency. Popularly known as Ripple, XRP shot up in value last year along with other cryptocurrencies that took advantage of the hype around Bitcoin. However, among the top cryptocurrencies listed in Coinmarketcap.com, a site that monitors trading across different cryptocurrency exchanges, Ripple is the only one that not only regained its value after the collapse in the price of Bitcoin but has more than doubled from its peak last year. In September it displaced Litecoin to become the second most valuable cryptocurrency. Even more surpising, a Ripple fork, Stellar, is one of the two other cryptocurrencies in the Coinmarketcap top ten that have risen sharply in value during the last few weeks.
What makes Ripple different from Bitcoin? Strictly speaking, Ripple isn't the name of the digital currency but of the decentralized payment network and protocol created and maintained by the eponymous Ripple Labs. Users of the Ripple system are able to transact in both cryptocurrency and regular fiat currency like the dollar without passing through a central exchange. XRP is the name of the native unit of exchange used in the Ripple network to facilitate conversion between different currency types.
What makes Ripple different from Bitcoin? Strictly speaking, Ripple isn't the name of the digital currency but of the decentralized payment network and protocol created and maintained by the eponymous Ripple Labs. Users of the Ripple system are able to transact in both cryptocurrency and regular fiat currency like the dollar without passing through a central exchange. XRP is the name of the native unit of exchange used in the Ripple network to facilitate conversion between different currency types.
Ripple is a debt accounting system.
You can send Dollars or gold over Ripple - you can transfer promissory nodes for those things.
The difference between a promissory note and the value the note represents is something that Ripple should be trying to clarify - instead they seek to obscure it.
Because they try to pretend that promissory notes are equal to underlying assets, they don't include any features that would act like leverage limits. There is no ability to deal with counterparty risk rationally in their system, since trust in a counterpary is binary.
In real world, liabilities of different entities are discounted by a value that reflects their credit risk. Ripple does not permit this operation. You either value liabilities at par or not at all.
As others have mentioned, their consensus system is neither distributed nor trustless. It's a centralized, badly-designed, debt accounting system trying to pretend it's a trustless cryptocurrency.
Sometimes early investors/pioneers make a lot of profit. That's not the same as a pyramid scheme.
Most alternate crypto currencies ARE pyramid schemes.
There's a "pre-mine" amount - the creators, influential people in the scene, pool runners, etc. get a crack at all the early coins and become instant oligarchs within that crypto currency. They then go and shout from the mountaintops how this new crypto currency is going to be the next hot thing so you better get in now!
Then when usage adoption plateaus they dump their millions of coins for fractions of Bitcoin each. A few months later they'll be back with a new crypto currency to do the same old shit.
Its pretty much the same for bitcoin, those that got there first, including the creator had a very easy time mining tons of coins.
In my opinion, they are all scams but some of they are scams that also might work.
It is believed (but not fully proven) that Satoshi destroyed their fat wallet. Regardless, sitting on a mountain of digital gold does not put food in your mouth. You have to trade it. And all transactions are public. The fact that Satoshi is still anonymous is both surprising and evidence that they have not executed a massive payday in their favor.
As for everyone else who got in early, good for them. Bitcoin wasn't a scam coin with a huge premine followed by hype, pump, and dump like nearly all other crypto currencies.