Stellar & Ripple: Pretender to Bitcoin throne?

You might know that I am a board member and co-chairperson of CRYPSA, the Cryptocurrency Standards Association. (I write this Blog under a pen name). The organization is brand neutral. That is, we don’t endorse or favor one particular coin over another. Think of CRYPSA standards as the security paper onto which money is printed. The paper can be used for Dollars, Yen and Zlotties. If it prevents counterfeiting then any currency can benefit. Like security paper, the standards we create and the safe practices we promote apply equally to all cryptocurrencies.

But, as with any user network, recognition, adoption and gravitas count! It’s no secret that Bitcoin is the elephant in the room. It is by far the biggest, baddest and most reported new age coin by any yardstick.

ripple_by_Mo

Dollars & cents? Ripple Labs unit = XRP

But Bitcoin has a problem—at least that’s what fifty start up companies want us to believe. The code that validates transactions (also used to mine coins) is transaction bound and hampered by original design. Moreover, alt coin entrepreneurs make a persuasive case for new features that more fully exploit the block chain potential.

Wild Ducks may know of Litecoin, Feathercoin, Dogecoin and Mastercoin, but there are even newer coins attracting the eyes of the crypto and investment community. If you have your ear to the ground, the smart money seems to be betting on digital currency coined by Stellar and by Ripple Labs. The rival companies share an eclectic and storied founder and they are both headquartered in San Francisco.

The New York Observer offers an illustrated history and analysis of the two pretenders in the novel-like style of Wired Magazine. They call it The Race to Replace Bitcoin.

Wow! In my humble opinion, this is a great article! I will assume that you have perused it. Very little recap here—just a Wild Duck commentary and analysis…

Ripple-1Ripple and Stellar co-founder Jed McCaleb has a history. He founded eDonkey, a Napster-like service of the early p2p era and Mt. Gox, the big Bitcoin exchange that collapsed in a spectacular and still-mysterious failure. Another co-founder, Sam Yagan also survived eDonkey and OK Cupid. He is now CEO of dating behemoth, Match.com.

Stelar-1aI know some of the other players, but hadn’t realized that Ripple Labs was making waves (pun intended). McCaleb’s newer venture, Stellar, claims to represent more than just a coin. It is a monetary ecosystem that inter-operates across currencies and boundaries. (Isn’t that what Bitcoin does? It seems that I have a lot to learn)…

I have less programming expertise than these geniuses, and possible less cryptography expertise. But I can outdistance their collective chops on macro economics.

Wild Duck Analysis

It is exceedingly unlikely that any venture will create the next cryptocurrency by design, unless the new coin is directly tied to and sanctioned by a believable and uncontested legacy of Bitcoin prime. In effect, a new coin must be a fork of the original code or at least a proper heir with blood lines and public trust.

Ripple Labs and Stellar have a very bright team. I don’t doubt the need to improve on the Bitcoin protocol, perhaps even with a wholly new technical approach. But the string of failures in McCaleb’s background, the mystery surrounding the first 1.5 billion STRs, and the daffy distribution scheme with Facebook are almost deal killers. This needn’t be an epitaph. There is a path to righteousness…

Cryptocurrency is already hard for the public to understand and harder to accept. For this reason, an heir to Bitcoin needs five things to succeed:

  1. Direct ties to the ownership of all original BTC
  2. Sanctioned by top Bitcoin developers AND blessed by Satoshi in a signed email
  3. The coin must be ZERO growth. It must never fall prey to inflationary economics. It accommodates a growing base and users and transactions by slicing the pie thinner (or ‘mining’ from a capped pool)—never by creating coins out of thin air.
  4. Source code that is transparent, open and without proprietary interests.
  5. A unshakeable commitment to continued decentralization and p2p operation with no mandatory reporting of anything (identities, or anything about transaction beyond date, pseudo-anonymous wallet ID and amount). In short, there must be no authority and no requisite bookkeeping beyond the open and distributed block chain.

There you have it: Our unofficial CRYPSA manifesto of what it takes to dethrone Bitcoin. In short, a successful replacement must be no less than Bitcoin 2. It elevates Bitcoin to the status of emeritus, because it respects the equity of early adopters (and without watering down with ‘newly created shares’)—and it must provably disavow any potential for inflation or manipulation.

Ellery Davies is a founder and board member of CRYPSA. He is also chief editor at AWildDuck.com.

Related: Could Bitcoin be Dethroned by an Altcoin