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Eugine_Nier comments on Less Wrong used to like Bitcoin before it was cool. Time for a revisit? - Less Wrong
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On a related note, has anyone else in the Less Wrong community looked into RipplePay? It's a system that, instead of being based on a finite currency, is based on distributed transferable IOUs.
Paper fiat money can be interpreted as an IOU from the government, transferable, and valid for use on your taxes. Ripple payments are private IOUs, valid for canceling debts with the issuer. To make a ripple payment to someone who trusts you, you simply issue them an IOU (assuming you haven't maxed out your credit with them...). To make a ripple payment to someone who doesn't trust you, the system finds a route along which IOUs can be exchanged (eg Alice gives one of her IOUs to Bob, who gives one of his to Carol, and then Carol gives whatever it was that Alice bought to Alice).
My biggest critique is that there isn't a distributed protocol, and the only implementation currently relies on a single central server. That, combined with the bootstrap problem, makes it unusable in practice. (BitCoin has a similar bootstrap problem, but less of a critical mass problem, since you don't have to find a route among people who both trust each other and use BitCoin.)
Comments or critiques, on either the theory or practicality?
Well, for start the single centralized server is a huge liability, previous digital currency schemes have collapsed when the government sued/arrested/raided the central server for enabling money laundering.
Also, unlike bitcoins, IOUs aren't fungible; thus, there is a need to haggle over each transaction.
The IOUs are transferable, if not entirely fungible. The idea is that the per-transaction haggling is handled by the server (automated route-finding), some fungibility is achieved automatically (circular debts are canceled automatically), and people will act to balance income vs expense by settling large outstanding debts for cash (incentice provided by credit limits).
The single server problem is a huge liability, but distributed route finding and cryptographic chains to provide distributed record keeping seem to me a remarkably easy problem.
I don't know much about RipplePay, are the IOUs denominated in some standard unit?
In the current implementation, they can be denominated in any of several typical currencies. I've never played with the exchange rate side of things, so I don't know off hand how that works in practice. (I've only used ripplepay a tiny bit in total, for tracking a couple small debts between friends.)