Quote from: OpenCoin on February 28, 2013, 12:55:54 AM

Yes XRP is a currency and can be used as such.

Thank you for a straight answer. Now we can move forward honestly and state with no uncertainty that XRPs are a currency, with the founders acting as the centralized banking authority.

Quote

Yes we will open source the ripple software. We understand that that is essential if the system is ever to gain adoption.

I never doubted this. I do have some doubts about the technical aspects but my assumption is that these will be addressed in reasonable time with mathematical rigor. These issues are minor in comparison to the enormous pre-mine. At current valuation, the XRPs held in reserve by the authors are worth around $60,000,000 (sixty million USD).

Quote

We are going to try to be as fair as possible but after the distribution will it really matter how we did it? A currency's distribution method doesn't really impact its usefulness.

It absolutely does. Just look at every fiat currency. The currency distribution is controlled by the central bank. You're saying that the fiat money reserve system's centralized control doesn't impact it's usefulness? Of course it does. The problem with having one or more individuals with control over such a large fraction of the currency is that they can effectively set a ceiling on the price. It was stated in the wiki that one hundred billion XRP should be enough for "thousands of years" worth of transactions and account reserves.

It has been repeated often that the gateways can set the transaction fees. This is true up to a certain point. At 10 "drops" per transaction, the most they can lower the fees is by 90%. Further reduction in fees would then only be possible with a change in the protocol to add more decimal places to XRP units. If Ripple takes off, those who own the bulk of the XRPs can simply hoard them to drive up the price. This would put pressure on gateways to lower the transaction fees due to artificial scarcity of XRP. But the most they could lower the price is by a factor of 10. Once the controllers of the XRP hoard drive the gateway transaction fee down to 1 drop (the lowest it can be) they now have complete control over the price. Hoard, to make it go up, and sell to make it go down.

There is grave concern about the centralized control over the XRPs. This concern is legitimate.

Quote

We are open to suggestions about how to distribute the coins.

Unfortunately as you have pointed out, this is a difficult problem to solve. I do not believe it can be solved perfectly. Well, there is a dramatic solution:

Biometrics. Each individual is uniquely identified by a biometric marker (DNA or facial recognition?). Individuals would be eligible for a one time 1,000XRP distribution after providing biometrics at a physical redemption location. Their biometric information is hashed and stored in a database to prevent multiple distributions.

There's something else that OpenCoin can do:

Give away the entire undistributed balance of XRPs to one or more separate organizations not associated with the development of the Ripple software. Each organization can come up with its own rules for voting in its board members and distributing the XRPs. Here are some ideas:

- A "commerce board" with 13 council members that distributes a billion XRPs through votes.

- A "citizen board" that distributes a billion XRPs to individuals who display aged Bitcoin balances.

- A "public board" where anyone can join if they provide personal information (to prevent duplicates), and each person can nominate recipients for XRP grants and everyone can vote.

- Commercial entity like MtGox can transparently grant initial blocks of XRP to any of its account holders. Since people opening accounts on MtGox have to provide unique personal information the problem of duplicates and shills is avoided. This can be scaled to any traditional business that complies with AML.

- Commercial entities like MtGox can form an organization where they agree to share a database of hashed personal information on all their customers to reliably identify duplicates, this provides a fair path for giving out XRPs to people who already have opened accounts with companies that comply with "Know Your Customer" laws.

And so on and so forth. Each organization should be as public as possible. The greater the transparency, the more confidence will be inspired.

Taking some of distribution out of the hands of the founders and putting it into the hands of public people who have demonstrated wisdom, fairness, and intelligence would definitely help (although there's no perfect answer). How about Bitcoin foundation distributing some of the XRP? They could certainly keep some in reserve to fund their operations.

Now that we accept that XRPs are a form of currency and that there is a market for it, the most fair way I can think of to distribute them would be to divide the 100 billion hoard into one thousand equal portions, and give them to a thousand independent governing bodies so they can compete with each other, and let the market distribute them. This should keep the price from skyrocketing and also prevent any one person or group from controlling the market.

I think that to fund the development of the software it would be reasonable for the founders to hold some XRP in reserve. Five billion. The rest should be distributed in large blocks to independent third parties as soon as possible.

Politically separating the development of the software from the distribution of the XRPs seems the way to give Ripple the best chance of adoption.