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Author Topic: Ripple - Cashing in at Gateway  (Read 1284 times)
bitaccumulation
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April 09, 2013, 06:29:30 PM
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I haven't cashed out any Bitstamp USD or BTC yet (back to my Bitstamp account), but I assume you just send the amount you want to withdraw from the Ripple system back to an address Bitstamp provides.  Is that correct?

Now this brings up some questions, but I'll start with this scenario...

If I send an IOU back to the originator of that IOU, how does the Ripple system know the obligation is fulfilled?

For example, let's say I create an IOU called USD-BT.  Someone comes into my store with cash, I issue that amount of USD-BT to them to their Ripple account.   They can come to me whenever they would like to redeem for cash again.   Now let's say they come in and want that cash today, they walk in and send me the IOUs back to my address, but I don't give them the cash.   How does that information get relayed through the system so that people would realize that these IOU's are now worthless (at least in that case)?

Am I missing something.  Or is an intermediate solution necessary (like the funds just showing on the Bitstamp website but not being in my hands)?

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dchapes
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April 09, 2013, 07:35:34 PM
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I haven't cashed out any Bitstamp USD or BTC yet (back to my Bitstamp account), but I assume you just send the amount you want to withdraw from the Ripple system back to an address Bitstamp provides.  Is that correct?
You follow the instructions on the Bitstamp deposit->ripple page. If you don't care about the details that is all you need to do/know. The rest is implementation details just because you asked, again I stress that users don't need to know the details.

The address they give will include a destination tag like so: ?dt=12345. This is what lets Bitstamp know what gateway account the payment is for. You either use the provided button that links to the Ripple client, copy+paste the address as is, or adjust your Bitstamp contact to include the destination tag (to make it easier for yourself in the future). If a user screws up and tries to send a payment without a destination tag, Ripple will refuse it (the Bitstamp account has set a special flag to always require destination tags). If a user screws up and uses a tag that matches someone else's account then they're screwed (same as if you used the wrong destination bank account on a wire transfer).

If I send an IOU back to the originator of that IOU, how does the Ripple system know the obligation is fulfilled?
You just make a payment to the Bitstamp address (with the correct destination tag for your Bitstamp account) and it all works. If you have Bitstamp IOUs they will (usually) be used. But *any* path will work as with any other payment/send in Ripple.

For example, if you ask to send a very small amount of BTC to Bitstamp you'll notice you're given the option to use XRP (assuming you have some extra). That option is added using the current best BTC/XRP trade offers. Similarly if you had no Bitstamp-BTC IOUs but instead had dchapes-BTC IOUs from me you could still "cash-out" at Bitstamp by making a payment and Ripple would do the payment through me. That's because I'm holding Bitstamp-BTC that you can access via my IOUs (or a line of credit). Your balance (of my IOUs) goes down; my balance stays the same (I have fewer outstanding IOUs to you and fewer IOUs from Bitstamp); and Bitstamp's balance goes up (and they record it as a deposit to your account due to the destination tag).

As a detail, I said "(usually)" above. If someone entered a trade offer accepting 0.97*X of your USD IOUs for X of Bitstamp-USD IOUs then Ripple would notice that's better for you and automatically use it. You'd see a suprising option on the "send" page saying to pay Bitstamp 10 USD you can send just 9.70 USD! Your balance goes done by $9.70; the other generous person has their balance go down by $0.30 as they swap IOUs; and Bitstamp's balance goes up by $10 USD. Why would anyone make such an offer? Perhaps they're your next door neighbour and they know you'll redeem their USD IOU at face value for no fee (e.g. they Ripple you 20 USD and you hand them a twenty dollar bill) where-as to bank wire transfer the funds to themselves through Bitstamp costs bank fees and is prohibitively expensive for small amounts. E.g. they're paying you ~3% instead of whatever Bitstamp+banks charge.

For example, let's say I create an IOU called USD-BT.  Someone comes into my store with cash, I issue that amount of USD-BT to them to their Ripple account.
Normally that's the kind of thing a gateway does but if you wanted it to act like a gift certificate that's exactly what you could do.

They can come to me whenever they would like to redeem for cash again.
That effectively makes you a gateway. If you just wanted to use it like a gift certificate you'd only redeem it for merchandise and not for cash. (Although perhaps you'd give them cash change for a purchase; some retailers may also do this for small amounts instead of leaving pennies on a gift card).

Now let's say they come in and want that cash today, they walk in and send me the IOUs back to my address, but I don't give them the cash.   How does that information get relayed through the system so that people would realize that these IOU's are now worthless (at least in that case)?
They IOUs are not worthless. Once the payment occurs in Ripple, everyone's balances are updated. Either IOUs get destroyed (like when you pay Bitstamp to redeem them) or they get transferred around or even created.

As for you not honouring your part of the transaction, that operates just like any real life transaction. With a cash for product transaction if they hand you $20 or let you charge their debt/credit card and you then refuse to let them take the product out of your store they'll get upset. Similarly if they hold up the $20 and you bag the product and hand it to them and they then run out of your store still holding on to their $20 you'd be upset.

IMO, Ripple questions are best asked (and answered) on the Ripple forum and/or StackExchange
dchapes
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April 09, 2013, 07:46:31 PM
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On re-reading your question and my answer I think calling things "IOUs" may be confusing in this case. All Ripple does is track balances just like your bank accounts. The whole second part of your question is probably best understood just by thinking of account balances as with any other accounts you may be more familiar with (bank balances, credit card balances, gift card balances, etc).

A positive balance means someone owes you something (with a bank account it's the bank; with Ripple it's a friend or a gateway). A negative balance means you owe someone something (with your bank it'd be a mortgage or bank loan; in Ripple it'd be a friend, Bitstamp and WeExchange don't extend credit so you can never have a negate balance with them).

The total balance shown in Ripple is just the sum of all the amounts on each trust line (per currency). You can see them individually on the "Advanced->Trust" page.

IMO, Ripple questions are best asked (and answered) on the Ripple forum and/or StackExchange
bitaccumulation
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April 09, 2013, 07:55:42 PM
 #4

I guess the issue I'm trying to address is that once the IOU (the note) is transferred back to the originator - the transaction history is done in Ripple.  Yes?

So when I get USD-BT and I'm the issuer, I now owe that person x amount of USD (real cash).  However, once the USD-BT is sent back to my address Ripple as a ledger is done (there is no way to confirm that the actual cash was paid).  

Is this correct?


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