Redemption questions

Redemption questions

Postby Mattt » Sat Dec 22, 2012 10:28 pm

I see it's mentioned that certain promises will be worth more than others. I'm wondering how this might work at scale and if there is a certain metric/algorithm that will be associated with each of the promises (ie how does one keep track of this)?

Also, what is the method for redemption of promises? Is this handled within or outside the system?
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Re: Redemption questions

Postby jed » Sun Dec 23, 2012 3:01 am

You can assign each trust line a quality. Right now this isn't supported in the client. But the idea is you can rate which of the IOU's you prefer to hold.

> Also, what is the method for redemption of promises? Is this handled within or outside the system?
This is handled outside of the system.
In the typical case you will just trust a nexus and only accept/redeem that nexuses IOUs
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Re: Redemption questions

Postby JoelKatz » Sun Dec 23, 2012 4:07 pm

Personally, I think eventually community credit will be Ripple's killer app. But for the risk averse, you definitely only want to extend credit to a Nexus where you have a "withdraw on demand" agreement.

If you're a little more adventurous, you can extend credit to other nexuses because you know others have withdraw on demand agreements with them and the risk is therefore very low. Arguably, the risk is lower if you diversify.

Ultimately, if people use the system sanely, I don't think redemption will be a big deal in the sense of one party having to chase another party to get them to redeem. If I extend $50 in credit to you and you use it up, you now have no access to my credit network. And I now have full access to yours as I hold $50 in your IOUs. Assuming you're reasonably well-connected, I can unload those IOUs in my natural course of making payments. Assuming I'm reasonably well-connected, you'll want to get that credit back by repaying me. And, of course, you can always settle in the system by pushing any IOU I accept to me, so you don't need to bother me to exchange cash in person.

Essentially, extend credit to entities whose IOUs you *want* to hold or to people you want to help out by allowing them to owe you money. I think some social adjustments will be needed for this to work, which is one of the reasons I say it will be big "eventually".

For now, we'll probably be telling people to only extend credit to their nexus.
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