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In the Ripple system we have two types of currencies - ripples and all other currencies useful for transacting with people in your web of trust. Ripples are the only currency in the system that can be used for paying transaction fees and transactions between any two users even if they are not connected.

With the discrepancy between the supply of ripples and the size of the fees, spamming the system would be virtually free. This usefulness of ripples is thus moot. Trading between any two peers could be accomplished with Bitcoin, so this use is also limited.

So, with that in mind, what use are ripples really, asides being a way for the developers of the system to monetise?

  • Why do you say that the supply of ripples is so big that the fees can be ignored? – placeybordeaux Feb 13 '13 at 20:54
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    @PeterMichealLacey-Bordeaux With a base transaction fees being 0.00001 XRP (bitcoin.stackexchange.com/a/7575/323) and there being 10^11XRP, we have 10^16 units of transactions available. That would be like like charging a satoshi for a Bitcoin transaction. Also, if a bulk of XRP are to be handed out for free, well, you get the picture... – ThePiachu Feb 13 '13 at 21:12
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    @ThePiachu: The goal is not to make transactions expensive normally. The goal is to have some way to auction off transaction slots if the network is overloaded and to make it impractical for someone to overload the network for long periods of time. The transaction price will increase if the network cannot accommodate the transaction volume. An attacker will have to put more XRP behind every spam transaction than legitimate users are willing to put behind their one legitimate transaction. It's like rationing only when rationing is needed. – David Schwartz May 10 '13 at 8:34
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As explained in this answer fees are not fixed so I don't think that your conclusion about them being useless for spam protection is true.

Other than that I would say that they can be used similar to how Bitcoin is used. They may be a future competitor to Bitcoin even though they are certainly not marketed that way. They are scarce, easy to transfer etc.

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    One possibility is that they may form a useful "bridge currency". If there are, say, 100 currencies in use on the system, there may not be enough liquidity between every random pair of currencies, all 4,950 of them. But there may be lots of liquidity from each 100 currencies to and from XRP (only 200 pairs). This makes it very easy to find a starting path that works and the pathfinding algorithm has an easier time finding a good path if it has a working path to start with. It also may make for a more reliable way to easily estimate exchange rates between arbitrary currency pairs. – David Schwartz Feb 14 '13 at 2:36

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