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Do you accept ripples?

I recently emigrated in UK and faced an unexpected issue with money transfer. I spent my first days in UK literally HOMELESS, waiting for my money to arrive!
Is it any wonder why I can make a return journey between France and England in a single day whereas any money transfer would last at least two days?
This story gave me a lot of time to think about life, death and our monetary system efficiency…

Why do we need money? Is it a government prerogative? Can I make my own money?
What about these ripples?

I- A bit of history…

Money exists since the very first age of human societies, mainly because various goods where difficult to swap. Early money can take surprising forms, such as shells, feather, even salt and barley. And of course later on came gold, silver and various metals.

Although we are quite familiar with our coins and bills, this is a legacy. Obviously making people to trust pieces of paper turns to be difficult.
In the 17th century in the United States, each bank was able to edit its own bills. Soon it turned out that these bills had different values according to the trust into the emitting bank to give the money back. It was so messy that the federal government decided to edit himself the bills. In order to guarantee there values, each bill could be exchanged against gold. See the mention below “will pay to the bearer on demand”. Sounds like casino ūüėČ

One_dollar_1928


#[illustration from wikipedia

The money is necessary and useful. But money adoption is mainly a mater of efficiency and trust.
Nowadays, most currencies are edited by governments, and the question of money neutrality is a long debate against economists. In other terms, does money fluctuation really affect our daily life?

II- Alternate money

Does it make sense to make its own money? Is it legal?

Surprisingly, there is no need to search really far to find such example. A new money has recently been introduced in Bristol city. It is called the Bristol Pound. This new currency aims to encourage local trade. But governments watch out! For any banking activity, you must obtain a licence and provide some guarantee. In case of the Bristol Pound, the bills have the same nominal values than sterling Pounds and for every ¬£Bristol bill emitted, the “Bristol Credit Union” stores the counterpart in sterling.

These kind of alternate currency are spreading over the world and of course on internet. Here comes PayPal. Although it is not technically a bank, nor a currency, PayPal is a top player on internet. In 2012, up to US$145 billion transacted via PayPal. It provides security and reliability over internet and we commonly agree to pay a little fee for this service.

III- The Ripple system

Ripple itself is a protocol for monetary transactions. This is far more than a simple website such as PayPal
As an internet protocol, ripple ensures interoperability between third parties. Among existing internet protocols, HTTP allows you to browse the web whereas SMTP allows you to send emails, no mater who is your provider (hopefully, gmail users can send emails to yahoo users etc)

Ripple offers several advantages:

  • Ripple is open source: the engine is open, free to use and offers full transparency
  • Ripple works as a distributed system, from peer to peer ¬†basis: it can federate actual payments systems
  • Ripple can handle transactions using any currencies in few seconds: very easy, very cheap, very efficient

Ripple-Logo

Ripple is up and running, you can join the ripple community by creating your own wallet in few clicks
Then you need to add your trusted contacts (feel free to add me if you want to send me some money) and buy some ripples

You will soon discover two funny things about ripple
You can only send money to trusted contacts. It means people you know directly or through your contacts’ network
You can get some ripples for free, or add real money to your wallet

IV- Ripple currency

Ripples or XRP is the internal currency in ripple system but it is also a REAL currency. It means it could be exchanged to any other currency. By now US$1 equals 100 XRP
Then, remembering the dollar history, you may ask: How could we trust this XRP currency? Who can create it? What are XRP guarantees on the market?

This ripple system was created with a fixed amount of 100 billion XRP. No extra XRPs will ever be emitted. 80 billion XRPs where given (for free) to a commercial company called Ripple Labs. Ripple Labs intends to distribute freely most of these XRPs to early users.

The Ripple creators are keeping 20 billion XRP in secret hope that there value would grow with the network spread. Crazy fools? Not really…

If we focus on other virtual currencies, one of the most popular on internet is called bitcoin. Unfortunately there is a dark side here because it is often used to purchase illegal things or porn. But bitcoins do have a real value! And it is driving crazy!

bitcoin-vs-dollarGraph from coinbase.com the 21th of November 2013

Sources:

  • http://www.britishmuseum.org/explore/highlights/highlight_objects/aoa/f/feather_money_tevau.aspx
  • https://www.gov.uk/government/policies/creating-stronger-and-safer-banks
  • http://www.bbc.co.uk/news/technology-24986264
  • https://ripple.com/guide/#what-is-ripple
  • http://en.wikipedia.org/wiki/Ripple_(monetary_system)
  • http://en.wikipedia.org/wiki/Currency

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