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xourexe

A question about ILP/RCL

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I was wondering if ILP could complement RCL in a way that I hadn't thought before. The question is: would it be possible to make deposits in escrow directly on the ILP-enabled blockchains/ledgers thus obviating the current gateways' role? That is, the IOUs issued on RCL would be guaranteed by the ILP protocol, through a cryptographic signature, ensuring integrity and non-repudiation. Thus, when making a transaction/exchange on RCL, the funds in escrow would be settled automatically on the native ledger, without counterparty (gateways) risk. if this is possible, then I'm starting to see clearly how ILP and RCL are part of something much bigger.
 
Any ILP expert who wants to comment on this?

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You don't necessarily need ILP for this because you're just duplicating transactions.

What should happen when transaction on RCL succeeds, but transaction on other ledger fails? I think you need escrow on RCL.

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If I'm understanding your question right, this is actually one of the problems that we were trying to solve when we thought of ILP in the first place.

If implemented properly by the gateway, ILP provides better, but not foolproof, security for payments into RCL ("deposits") and payments from RCL out to other systems ("withdrawals"). With ILP, a deposit into RCL could look like this:

1. Request a payment into RCL and define a crypto-condition that will prove you've received your issuances in RCL.
2. You put your non-RCL funds into escrow, such that they'll be paid to the gateway when your crypto-condition is met*.
3. The gateway sends you the money in RCL, fulfilling your crypto-condition. That releases the funds in escrow so the gateway gets your money.

*One problem here is that traditional digital payments allow chargebacks or cancellation of the payment later, even after the irrevocable RCL payment has occurred. Whatever system you use to handle the escrow has to be pretty trustworthy.

The withdrawal from RCL looks like this:

1. Request a payment out of RCL. The gateway defines a crypto-condition that will prove you've gotten your money outside of RCL.
2. You put a Ripple payment in escrow, such that the funds will be released when the crypto-condition is met**.
3. The gateway transfers the money to you outside of RCL, fulfilling the crypto-condition. That releases the escrowed Ripple payment, so the gateway gets their money.

** T8493 is spot-on in one regard, though, which is that you need escrow on RCL for this to work. That's why we're working on Suspended Payments for RCL. You can try out SusPays for XRP in the Test Net already; SusPays for issuances are not a solved problem yet, so stay tuned for more info there.

One of the limitations here is that you still have to trust the gateway -- if the gateway shuts down and stops honoring its RCL issuances, the people holding those issuances are out of luck. Even though you get to keep your in-RCL balance unless the gateway pays you outside RCL, that's little comfort if the in-RCL balance is worthless. The good news is this still improvement over the current system: if the gateway is still honoring some issuances, but fails to pay you outside RCL, you can trade away the issuances in the ledger instead of having them just disappear. It also means that it'll be more obvious when a gateway decides to cut and run, because suddenly RCL will have a big percentage of SusPays that expire instead of having their condition met.

Honestly, though, the system works better for XRP than for issued currencies.

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Thank you for your responses.

Well, forget about traditional digital payments for now. This would apply only to trustworthy and irrevocable systems like blockchains, so I'm assuming a transfer should not fail once the funds have been deposited in escrow. Or am I being too optimistic yet¿?¿?

The idea is that RCL would do the same function as today, as a public, decentralized order book where many tokens/cryptocurrencies are exchanged, but eliminating the counterparty risk of gateways totally. Thus it would be possible to make buying/selling operations and payments with a total guarantee of withdrawal of the funds in the native blockchain. IOUs on RCL would be something more than IOUs because you would have the same level of security as if you were transacting directly with the real asset.

For example, I could deposit bitcoins into a Bitcoin escrow address on a ILP-enabled Bitcoin blockchain, and automatically the correspondent IOUs to that deposit would be issued on RCL, with the whole Bitcoin blockchain acting as the gateway. Then I could place a sell order on RCL with those IOUs and, if somebody buys it, they would automatically have access to withdraw the funds in escrow on the bitcoin blockchain, with no other intermediary gateway.

I know this probably goes beyond the purpose of ILP and is more like a smart contract behavior... Anyway, do you think this scenario will be possible at some point, with or without ILP? Maybe with gateways fully operated by smart contracts?

Edited by xourexe

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If we're talking only about gateways between blockchains, things get a lot easier. I think the answer to your question is, "yes, it's possible" with or without ILP. The advantage of ILP is that it is (or aims to be) a standard way of doing this across all ledgers, so you don't have to reimplement the smart contracts different for every possible combination of ledgers.

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I understand things are not so easy when dealing with non-irrevocable systems but it would be great if RCL could act as a global exchange for all kind of cryptos, with no counterparty risk.

1 hour ago, mDuo13 said:

Honestly, though, the system works better for XRP than for issued currencies.

I think this is not the first time that I read from you guys that RCL and ILP will do better for XRP than for issued currencies, but one thing I don't understand is where are the buy/sell orders placed, because there must be an order book where the prices are determined, right?

Edited by xourexe

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i think pricing is preprocessed  in some other way with HTTPS before ILP's processes start.  ILP is not for trading desk but payment according to the whitepaper.

 

 

 

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On 3/23/2016 at 4:16 PM, xourexe said:

I think this is not the first time that I read from you guys that RCL and ILP will do better for XRP than for issued currencies, but one thing I don't understand is where are the buy/sell orders placed, because there must be an order book where the prices are determined, right?

You are exactly right, and that is one of the most interesting outstanding questions regarding the implementation of ILP as an ecosystem, in my opinion.

Edited by mDuo13
typo: "implication" was suppposed to be "implication"

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