Tag: news

What is Payment Protocol “Ripple” and How Does it Allow for Physically Backed Digital Gold Currency Exchange

I’ve known about Ripple for close to a year now. I’ve been meaning to write a post on it for several months, but since doing so is such a difficult effort I kept putting it off. The most accurate expression I’ve seen to-date describing the daunting task of explaining Ripple to someone who has never heard of it is the following line published in a recent Bitcoin Magazine article:

If you’re ever explaining Bitcoin to someone and they’re getting it, start talking about Ripple, just to confuse them again.

That was precisely how I felt when a friend of mine first introduced me to Ripple. I had only recently really gotten behind Bitcoin, and now I had to try to understand something else? Even worse, something that seemed far more complicated. While I was interested in the idea right off the bat because I have a huge degree of trust in this person’s opinion on technology, it seemed overwhelming so I put the entire thing to the side.

My perspective changed later in the year when another friend of mine asked me if I knew about Ripple. It turns out he is friends with the head of Markets and Trading at Ripple Labs, Phil Rapoport. Since Phil is based in NYC, and I was headed there, I decided to set up a meeting and develop a more informed opinion on the subject.

By the time I met with Phil, I had put a lot more thought into Ripple in order to ask good questions by the time he showed up. I was highly skeptical for many reasons.

Ripple is not particularly embraced within many areas of the Bitcoin community, and I can understand why. Going in, I had many doubts. It is first and foremost a payment protocol, and secondly a “math based currency.” Since I couldn’t grasp the payment aspect until my meeting with Phil, I had spent all of my time thinking about the currency aspect of it, and that part was not appealing to me when compared to Bitcoin.

First off, the currency is pre-mined. This means that all the units are already in existence from day one and controlled by the creators, as opposed to Bitcoin, where the currency is mined over time by computers confirming transactions and ensuring the system runs smoothly. The distinction is important since the distribution process for Ripple is entirely opaque, while the distribution process for Bitcoin is far more transparent. While you do not know who exactly receives the bitcoins as each block is created, you do know how many are being distributed and at what pace until that moment in 2140 when the very last BTC is mined. With Ripple (the native currency of the protocol is known as XRP), the only thing we know is that there are 100 billion in existence (the most there will ever be) and that the founders kept 20 billion for themselves. The remaining 80 billion have been allocated to a company called Ripple Labs, which is in charge of distributing the remaining XRP as they deem appropriate. To-date, about 9.5% of the 80 billion have been distributed and you can track the progress here.

From a business standpoint, I can understand why this would be the case. They can sell some of it into the market to pay day-to-day expenses (Ripple already has a total valuation of about $1.4 billion), they can allocate it to employees as compensation, they can give it away via charity such as their partnership with the World Community Grid, and most importantly they can gift them to strategic ”Gateways” (more on those later) in order to grow the payment system into what it needs to become in order to succeed.

One of the things that I and many others in the Bitcoin community have loved about Bitcoin is the fact that some poor computer nerd could have started mining bitcoins from his home computer several years back and now be a millionaire. It is very grassroots in that way. The people who saw its potential early on had the ability to participate in what was kind of like a decentralized IPO. All you needed was a little vision and some computer chops. There is something brilliant and beautiful in that distribution process. While mining is now a very expensive affair and out of the reach of the average person, this wasn’t the case in the beginning when there was far more risk involved in the entire experiment.

With Ripple, a somewhat equitable early distribution process was never on the table. The founders have/are allocating the currency in a highly centralized and opaque manner. There’s something about this that rubs many in the crypto-currency community the wrong way. Moreover, because Bitcoin is such a grass roots creation, it is simply much more political than Ripple is or ever will be. Buying Bitcoin and supporting it is for many of us an expression of disgust with the Federal Reserve in particular, and the legacy banking system in general. While many supporters of Ripple will most definitely harbor similar sentiments, buying XRP isn’t really a statement, while buying and spending BTC very much still is.

So those are some of the “negative” aspects of Ripple. I think they represent much of the skepticism in the Bitcoin community. They certainly reflect many of my own sentiments before I learned more about the tremendous potential of the payment system.

I will now explain how I overcame my initial skepticism on Ripple and saw the enormous power and benefit of the payment protocol itself. Earlier, I described some of the main differences between Ripple and Bitcoin. I called your attention to many of the aspect of Ripple that folks within the Bitcoin community tend to dislike. I think it is also important to understand some similarities they share.

One major similarity is that they both represent new payment systems that at their core allow for transfers of value from one person to another across the world at essentially zero cost. Both run on open source code and empower merchants and economic growth generally by eliminating the middlemen currently taking anywhere from 2%-3% for merely processing payments. The tens of billions of dollars spent on such fees can be repositioned as fuel for the global economy and put to more productive uses.

They were both released to the world for free. This represents a huge revolution not just in payments, but in potentially how some startups might choose to fund themselves in the future. Within Bitcoin, the unit of exchange, BTC, is needed in order to participate in the payment protocol. In that way, bitcoins, can be seen as the equity of the network. Early adopters bought or mined bitcoin, and as they increased tremendously in value, many of them have used their wealth and knowledge to greatly advance the protocol to where it is today.

Ripple also has a currency, called XRP, which can also be seen as the “equity” of the payment system. Here is where we start to see a major difference between the two systems. Within the Bitcoin network, you will use BTC, whereas the Ripple network is currency agnostic for the most part. The system does not discriminate between one currency or the other. Using Ripple, you can send payment to someone quickly and at essentially no cost whether it is USD, gold, XRP, or bitcoins.

That said, the currency XRP does play two major roles in the system.

1) Since it is the native currency on the protocol, it is the only currency traded or exchanged on the system that does not have any counter-party risk. Anyone with a Ripple wallet can send anyone else XRP at any time with no exceptions, sort of like Bitcoin. By contrast, in order to receive any other currency or asset of value on the system you must trust certain “Gateways.”

2) There is also a certain amount of XRP that is destroyed with every transaction on the system. The amount is a negligible .00001 XRP (a extraordinarily tiny fraction of a penny), and is used to prevent spam transactions from clogging the protocol. As such, each wallet on Ripple needs to have a minuscule XRP reserve balance of 20, which is at total of $0.28 at current prices.

In a nutshell: XRP has value as the reserve currency of the payment system. It is the grease in the wheels of the whole thing.

Ok, so I probably lost a lot of you above with the whole “Gateway” and “trust” concept. Let me explain.

First of all, no other currencies or items of value are actually held within the Ripple payment system. Gold traded on Ripple will be held in a vault somewhere, and U.S. dollars (USD) traded will be held in some sort of external financial institution, a bank, credit union or whatever. This is where “Gateways” come into play. “Gateways” are essentially companies that serve as the custodians for non-XRP assets that trade on Ripple.

To make this easy to understand, I will use the USD example. If you are a U.S. citizen and want to hold USD in your Ripple wallet the best “Gateway” to use at the moment is SnapSwap. SnapSwap has a bank account at Bank of America and you “fund” your Ripple wallet with USD by sending the currency to SnapSwap’s bank account. At that point your USD enters the Ripple network and you can purchase XRP and send it to anyone, or you can send your USD to anyone on the Ripple network who also “trusts” SnapSwap. As I mentioned earlier, you don’t need “trust” to send or receive XRP, you only need “trust” to send other items of value that have counter-party risk. Since there is obviously counter-party risk associated with your USD (risk resides at both SnapSwap and Bank of America) a Ripple user must conduct due diligence to determine whether or not they “trust” SnapSwap in order to receive USD via Ripple. The choice is yours.

For more information on how SnapSwap funding works, I suggest reading this explanation.

This brings me to what I think is one of the most exciting parts of Ripple, the ability to trade physically backed, deliverable precious metals. All you need is a “Gateway” with a vault (or access to one) that is willing to allow the metals to trade instantaneously and in fractional amounts on the payment system. While my mind was already excited about this potential after I met Phil in NYC, one of the things holding me back from writing this article was the lack of a solid option for doing so. Well that option arrived in January with the launch of Ripple Singapore as a “Gateway” in late January.

In the press release describing the service they explained:

continue reading

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Tonight on The Independents: “Environmentally Challenged,” Starring Bill Nye the Science Guy, Ron Bailey, Bjorn Lomborg, John Tierney, and More!

Friday night editions of The
Independents (9 p.m. ET, 6 p.m. PT, with repeats three
hours later, on Fox Business Network) are organized around a single
theme, and tonight’s is about what happens when you attempt to
apply cost-benefit analysis and the scientific method to
environmental problems such as (but not limited to) the warming of
the planet. Before we get to any of that, watch our interview from
earlier this week with Wyoming welder Andy Johnson, who is getting
threatened by the Environmental Protection Agency with fines of up
to
$75,000 per day for the sin of building a fully permitted duck
pond on his property:

Chilling stuff. Anyway, “Environmentally Challenged” starts off
with a contentious interview about global warming impacts and
policies with serial debater Bill
Nye the Science Guy. Next comes a discussion about the science
of the stuff with Climate Depot
skeptic Marc Morano (once tabbed by Media Matters as the “Climate
Change Misinformer of the Year“) and Center for American
Progress Director of Climate Strategy Daniel J. Weiss, who refused to
debate directly with Moreno, and chided us for airing his
views.

New York Times science writer and friend o’
Reason John Tierney is next with an update on his classic and
controversial 1996 piece, “Recycling
is garbage.” Followed by “skeptical
environmentalist” and cost/benefit addict
Bjorn Lomborg, who talks about comparatively inexpensive
solutions to pressing environmental problems, and vice-versa.
Energy economist Jerry Taylor of the
Cato Institute discusses fracking and future energy sources, and
beloved Reason Science Correspondent Ronald Bailey
talks on one of his
favorite themes: how things are actually getting better all the
time.

IMPORTANT NOTES: This show will re-air not just at midnight ET
tonight, but also at 7 pm Sunday. On 7 pm Saturday you can watch a
repeat of Wednesday’s fab
libertarian red meat episode featuring Greg Gutfeld, Belle
Knox, Julie Borowski, Greg Lukianoff, and more. Finally, I’ll be
bumping this post in the 8 o’clock hour for ease of discovery by
our time-sensitive commentariat. 

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Stocks Slump As Bullard Doubles Down On Yellen’s “Six Month” Fedian Slip

While mainstream media was awash with status quo huggers proclaiming Yellen’s “6-month is a considerable period” comment as a slip – and assuming several Fed heads would come to the rescue to focus investors on lower-for-longer – it appears they are wrong:

  • *BULLARD SAYS YELLEN’S ‘6-MONTHS’ COMMENT IN LINE WITH SURVEYS
  • *BULLARD SAYS FED WATCHFUL FOR ‘ANY KIND OF REPLAY’ OF BUBBLES

This came on the heels on Fed Fisher’s comments on the end of efficacy of Fed QE and that asset-buying would end in October and short-dated bonds and stocks are fading (as JPY crosses are tumbling).

 

Stocks and short-end bonds double-whammied…

  • *FISHER SAYS FED HAS EXHAUSTED EFFICACY OF U.S. QE POLICY
  • *FISHER SAYS ASSET-BUYING TO END BY OCTOBER AT CURRENT PACE
  • *FISHER SAYS SOME MORE VOLATILITY IN MARKET WOULD BE HEALTHY

 

and then Bullard:

  • *BULLARD SAYS YELLEN’S ‘6-MONTHS’ COMMENT IN LINE WITH SURVEYS
  • *BULLARD SAYS FED WATCHFUL FOR `ANY KIND OF REPLAY’ OF BUBBLES
  • *BULLARD: AFTER CRISIS, ‘ONCE BITTEN TWICE SHY’ A NATURAL VIEW

 

Not what the doves or stock/bond bulls wanted to hear…

 

And the short-end is not happy (as stocks drop to lows of the day)

 

JPY carry unwind en masse…

 

And the Nasdaq now at post-FOMC lows…


    



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The Turkish People React To The Twitter Block…

In the hopes of maintainijng his status quo amidst a plethora of corruption probes and allegations, Turkey’s Erdogan has blocked Twitter after pledging to “destroy” the social media platform after troubling leaks occurred appearing to confirm his corruption. As one can imagine, the Turkish people (among others) are not happy…

 

Some have offered solutions and workarounds…

And Twitter itself helped…


    



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Nancy Pelosi Still Thinks Obamacare is a Winner for Democrats

Democratic Minority Leader Nancy Pelosi
says she believes Obamacare is a winner for her party. Asked about
how the law’s ongoing low approval numbers would affect Democrats’
chances in tight races this November, she said, “You’ll have to ask
to ask the member, but I believe it’s a winner.”

The polls say otherwise. Indeed, they’ve said otherwise since
before the law was passed. On average, polls currently show that
about 53.7 percent of the public disapproves of the law, while just
38.5 percent approves,
according to RealClearPolitics (RCP).

There have been minor shifts in approval and disapproval since
the law passed, but overall those numbers have consistently shown
disapproval since the law passed. The law passed in March 2010, but
according to the RCP poll average, at no point since that year has
public approval ever topped disapproval.

But Pelosi still claims to think it’s a winner. If that sounds
familiar, it’s probably because that’s the same argument the
Democratic establishment pushed back in 2010 to help nudge anxious
Democrats to vote for the law. As Politico
noted at the time, numerous top Democrats and party
strategists, including Bill Clinton and Obama administration
pollsters, publicly predicted that the law would become popular
after passage, and that party legislators would be able to run on
its successes.

Indeed, even months after the law passed, that was the line that
Pelosi and her staff were feeding reporters. She and her leadership
team were “doubling down on healthcare reform,” the Hill reported
in July 2010, “betting that it will do Democrats more good than
harm in November’s elections.” Once the public were more exposed to
the law and its benefits, the argument went, they would warm up to
it. 

Obviously, they didn’t. In fact, there’s some pretty solid
political science research suggesting that
Democrats lost the House in 2010 because of
Obamacare. 

Four years later, the public has had plenty of exposure to the
law and its effects—and if anything, it’s less popular now than it
was when it passed. That doesn’t sound much like a winner to
me.

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The Russia “Sanction Spiral” Elegantly Spirals Out of Control

Wolf Richter   http://ift.tt/NCxwUy   http://ift.tt/Wz5XCn

Attorneys with the SEC’s Investment Management Division are exhorting managers of registered investment funds, such as your mutual fund, to disclose their holdings in Russia and warn of the risks associated with them, now that the Crimean debacle has turned into a magnificent sanction spiral. “Several people familiar with the matter” had been talking to Reuters. The SEC is apparently fretting that the funds aren’t truthful with investors and aren’t even thinking about how to respond to the possible outcomes of the crisis.

Investment Management Division Director Norm Champ, when contacted by Reuters, didn’t even deny it. “We want to be proactive,” he said.

The Division contacted asset managers on other occasions when civil unrest erupted or when things threatened to blow up; it wanted to make sure managers weren’t omitting or misrepresenting material information – for example, during the uprising in Egypt in 2011, when the Cairo stock market simply shut down. But this time it’s different: the lawyers at the Investment Management Division were joined by another group of SEC lawyers who focus on risk examinations.

Would the White House be trying behind the scenes to give investors second thoughts about plowing money into Russia? Would it be trying to demolish Russian stocks, bonds, and the ruble? Naw.

The efforts by the SEC, which started “over a week ago,” were accompanied by a White House announcement that 5 million barrels would be released from the Strategic Petroleum Reserve. WTI tanked. Russia, a huge energy exporter, depends on its oil and gas revenues, and knocking down the price of oil could wreak havoc on the Russian economy. It was a declaration that commodities would be used as a weapon against the Putin Regime. 

Then on Tuesday, White House spokesman Jay Carney launched another attack on the Russian markets at a press briefing. In light of the sanctions the US and the EU were slapping on Russia, its economy would pay the price, he said. “I wouldn’t, if I were you, invest in Russian equities right now, unless you’re going short.”

Shaken to its roots by these threats, Russia annexed the Crimea and picked a new target: Estonia. A Russian diplomat told the UN Human Rights Council in Geneva on Wednesday that Russia was “concerned” by the treatment of the ethnic Russian minority “in Estonia as well as in Ukraine” … even while Vice President Joe Biden was in Lithuania to calm tattered nerves in the Baltics and the EU.

On Thursday, German Chancellor Merkel announced in Parliament, shortly before the EU summit in Brussels, that the EU would come up with new sanctions, such as expanding the list of Russians subject to travel limitations and freezing assets. And if the situation escalates, there would be “without doubt” economic sanctions, she said. Russia was “largely isolated in all international organizations.” And the G-8, which includes Russia, and whose upcoming shindig has already been cancelled, “no longer exists.”

She was immediately attacked by the parliamentary leader of the opposition Left Party, Gregor Gysi, who accused the government of double standards; the separation of Kosovo from Serbia had been a breach of international law too, he said, but it had been supported by the German government at the time. The transitional Ukrainian government wasn’t legitimate, he said. “Fascists are part of this government, and we want to give them money?!” Under pressure from the US, Merkel was imposing sanctions on Russia to the detriment of Europe, he said. That’s “moral cowardice.”

The “Putin Doctrine” was what SPD parliamentary leader Thomas Oppermann, who is part of Germany’s governing Grand Coalition, was fretting about. Under that doctrine, Russia could intervene if ethnic Russians were perceived to be in danger outside Russia. It would give Russia an automatic right to intervene anywhere, he said. “Such a right does not exist, and such a right cannot exist.”

Hours later, President Obama announced he’d slapped new sanctions on a “number” of oligarchs, additional Russian government officials, and a bank that provides services to them. The White House was working “closely” with the EU “to develop more severe actions that could be taken if Russia continues to escalate the situation.” Then he urged US Lawmakers to approve the aid package for Ukraine and urged the IMF to put its aid package together pronto. Alas, read…. Aid for the Ukraine “Will Be Stolen” – Former Ukrainian Minister of Economy

As Obama’s words were still echoing around the world, the Russian Foreign Ministry shot back: nine US officials, including Speaker of the House John Boehner and Senate Majority Leader Harry Reid, would be barred from entering Russia. And it published the list on its website.

Delicious irony: that boring list with nine names on it, issued by a Russian ministry whose website rarely gets shared in the social media, lit up a mini-firestorm on VK.com, the second largest social network in Europe after Facebook, and one of the most popular sites in Russia. The list got, as I’m writing this, 538 VK “likes.” Not sure if Obama’s list got any Facebook likes.

Not to be left out, Standard & Poor’s slammed Russia by lowering its outlook to Negative from Stable. “In our view, heightened geopolitical risk and the prospect of US and EU economic sanctions following Russia’s incorporation of Crimea could reduce the flow of potential investment, trigger rising capital outflows, and further weaken Russia’s already deteriorating economic performance.”

The Sanction Spiral works in a myriad ways and performs, as we can see every day, outright miracles. It spirals elegantly higher and higher and takes on grotesque forms. And by the looks of it, no one at the top has a clue how to back out of it. Yet stock and bond markets in the US and Europe, stuffed to the gills with central-bank liquidity and intoxicated by free money, the only thing that really matters anymore these crazy days of ours, are blissfully ignoring the entire drama, and what may eventually come of it.

The first official warning shot was fired. Not by a Putin advisor that can be brushed off, but by Alexey Ulyukaev, Russia’s Minister of Economy and former Deputy Chairman of the Central Bank. A major escalation. Read…. Kremlin: If The US Tries To Hurt Russia’s Economy, Russia Will Target The Dollar System


    



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S&P Tumbles, Gives Up All Post-Yellen Gains

Once European markets closed, US equity markets gave up any correlation with JPY crosses and began to fade. After bouncing off early Nasdaq-Biotech-driven lows, a ramp of AUDJPY saved the European close but that was it. There does not appear to be any news catalyst to drive this dump as Quad-witching pumps are unwound. The S&P 500 and Russell 2000 jooin the Trannies and Nasdaq in the red from the FOMC statement.

 

Stocks now red post -FOMC…

 

 

As The European close appears to have been the tipping point…

 

VIX is rolling back higher (inverted below) and catching up with stocks drop…

 

As the yield curve continues to collapse…


    



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Will the Feds Crack Down on Medical Marijuana in Washington?

My
latest Forbes column considers whether the failure of
medical marijuana legislation in Washington is apt to trigger a
federal crackdown. Here is how it starts:

Last week Washington‘s
legislature ended its
2014 session without approving new restrictions on medical
marijuana, a step that supporters portrayed as necessary to prevent
federal interference as the state begins allowing the sale of
cannabis for recreational use. After all, the Justice Department
indicated in an August
29 memothat it would allow legalization to proceed in
Washington and Colorado only if both states created “strong and
effective regulatory and enforcement systems.” Washington’s medical
marijuana dispensaries, which are not licensed or regulated by the
state, seem inconsistent with that expectation.

Jenny Durkan, the U.S. attorney for the Western District of
Washington, said as much the very day the DOJ memo was released.
“The Department guidance is premised on the expectation that the
state will implement strong and effective regulatory and
enforcement systems,” she warned.
“The continued operation and proliferation of unregulated,
for-profit entities outside of the state’s regulatory and licensing
scheme is not tenable and violates both state and federal law.”

Now that it looks like these unregulated entities will continue
selling marijuana for another year or so at least, competing with
the state-licensed stores that are supposed to start opening this
summer, will Durkan feel compelled to crack down? Probably not,
judging from her past behavior and a close examination of her
public statements. Patience certainly seems like a more appropriate
response, especially since Durkan is largely responsible for
creating the situation that she now views as “not tenable.”


Read the whole thing.

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Damon Root on Obamacare, Corporations, and Contraceptives

Do for-profit corporations get to enjoy the free
exercise of religion? That question lies at the heart of next
Tuesday’s Supreme Court battle over the so-called “contraceptive
mandate,” the provision of the Patient Protection and Affordable
Care Act requiring most employers to cover birth control in their
health care plans. Senior Editor Damon Root explains what’s at
stake in the March 25 oral argument in Sebelius v. Hobby Lobby
Stores Inc.

View this article.

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