Quote from: Red on May 09, 2013, 09:33:35 PM

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Why do you seem to believe that increasing the supply of a currency leads to it being "stable"?

Price is a measure of instantaneous supply vs instantaneous demand. Demand for a currency will always grow over time. There will be more people creating new types of valuable goods and services in the future. products and people that don't even exist today.

More available goods/services chasing the same amount of available coins means currency prices will change (not be stable). To preserve stable prices the amount of currency available to be traded must scale with the amount of goods/services seeking to be traded.

Occasionally then amount of goods and services available for trade will fall compared with the amount of currency available for trade. That will need to be compensated for as well.

Increasing supply beyond a marginal baseline rate distorts the market and creates a destructive feedback loop that will harshly return the market to its equilibrium. In other words, you are creating a bubble that will eventually burst creating negative consequences for everyone. The two books that I have listed in my quote in my previous post describe this very well.

Bitcoin's current volatility is because people do not trust the safety of Bitcoin. However, the trend is for the cryptocurrencies' usage to increase exponentially over the next 10 years, as more and more people realize their inherent advantage and put a greater amount of assets that they control either directly or indirectly into them. This is further abetted by the catastrophic state of the world economy, where the probability of its implosion and of the magnitude of the implosion are getting greater and greater. Whether this usage will relate to Bitcoin or to an alternative that will pop up that significantly improves upon Bitcoin's security, performance, and usability, remains to be seen.

As people's understanding in the safety of the best cryptocurrencies improves, their volatility decreases. Once the most ideal cryptocurrency becomes the dominating world currency, volatility will be a thing of the past, as people's trust in its safety will be complete and there will be no real possibility of its supply increasing beyond a marginal baseline rate therefore causing bubbles (called malinvestments).

Most of the currency will be stored in full reserve banking for safety (the company storing the currency guarantees that it will not lend it out), while a much smaller portion will be invested in fractional reserve banking (the much smaller portion of the currency is invested in another company that lends your investment without guaranteeing any reserve, just like how it is done with Ripple, where the amount a company is trusted is based on its lending performance). This means that the risk of bubbles, or that is of malinvestments, originating because of fractional reserve banking is minimized.

Quote from: Red on May 09, 2013, 09:41:49 PM

@several,

Anyone fixated on who owns how many XRP doesn't understand the Ripple System. Inside Ripple XRP isn't intended to be used as money. That is purely a projection of BitCoiners onto Ripple. It also has absolutely nothing to do with the [StableCoin] concept. Even when implemented inside the Ripple System a [StableCoin]'s value will have no dependency on XRP at all.

The founders, employees, and investors of OpenCoin have bet everything on XRP appreciating exponentially, and this is precisely because XRP has a relatively fixed supply and exponentially increasing demand.

Its weakness is its centralization, that can be offset from a competitor arising with an algorithmic distribution method.