I want this on record that I cannot understand Ripple. With Ripple, I only generate questions, not answers.
Micon it's nice to see your questions and legitimate complaints expressed in a civil fashion. I totally agree with you that Ripple is hard to understand at first. Perhaps the easiest way to understand Ripple is to recognize the similar ways that you already accept IOUs and currencies. I'll use MtGox as an example:
Imagine you wire some money over to MtGox because you want to buy Bitcoins. A few days after you wire the money, the balance appears in your MtGox account and is visible when you log into their site. Now you look at the order book and decide to place a few orders. Eventually they execute and you are left with both a USD balance and now a BTC balance. Both of these balances are visible on the MtGox website. At this point you decide that you would like to have your dollars and Bitcoins so you go to their Withdrawal page and first ask them to wire you the remaining USD balance to your bank account, and then have them send your Bitcoin balance to your wallet address. An hour or two later the bitcoins appear in your wallet, and hopefully a few days later your bank account shows the dollars.Ripple functions almost identically to this example!
Using Ripple to perform these actions would look like this:
You choose a Ripple gateway that you trust (right now Bitstamp is the largest gateway but that will change as more appear). You open an account at the gateway then you wire some dollars over to the gateway. A few days later the balance appears in your gateway account when you log into their site (bitstamp.net for example). Now you "withdraw" the dollar balance into Ripple. Logging into your Ripple wallet client (http://ripple.com/client
) you will see that you hold a USD balance from your gateway. You look into the BTC/USD order books inside the Ripple client and place a few orders. Shortly after, they execute and you are left with a BTC and USD balance showing. Now you decide that you want to cash out so you "Deposit" the BTC and USD from Ripple back into your gateway account. You log into your gateway account through their website and you can see your BTC and USD balance. You go to the Withdrawal page at the gateway and first ask them to wire you the remaining USD balance, and then have them send your Bitcoin balance to your wallet address. An hour or two later the bitcoins appear in your wallet, and hopefully a few days later your bank account shows the dollars.
What's the difference between this and MtGox? Imagine if you had a $100 balance at MtGox and you could transfer that balance not just to any other MtGox user but to any user in general. That's the power of Ripple! If you are holding IOUs from a gateway, Ripple's decentralized system allows you to send those IOUs to anyone who will accept them in a cryptographically secure manner. You can use those IOUs to trade in the built-in distributed order books to receive BTC IOUs, exchange them for other currencies like Euro IOUs, or anything.
As long as you trust the gateway to redeem those IOUs back into whatever they are supposed to represent (like dollars or Bitcoins), then the balances in the Ripple system are as good as the money they represent.
Can you lose money? Yes. You don't hold actual Bitcoins in your Ripple wallet, you hold a gateway's promise to pay bitcoins later. If the gateway defaults you can lose up to the entire amount of their debt that you hold. This is no different than having a BTC and/or USD balance at MtGox, and they freeze your account or otherwise refuse to redeem your balance.
A lot of bitcoiners might complain that having to trust a gateway is the very problem that Bitcoin is intended to solve, and to a certain extent they are right. However, this overlooks the fact that it is impossible to completely avoid interacting with the fiat money system. Rather than thumbing its nose at the banking system and asking for a fight, Ripple plays nicely with it to the extent that it can. It provides tremendous functionality. You do have to find a reputable gateway for IOUs to have value.
How the pre-mine work? what is an xrp, in reality? who got 50B xrps? so they hold all the Ripple "debt" ?
"XRP" (often confusing called "Ripples") is a crypto-currency that is built into the Ripple system. Like bitcoins there can only ever be 100 billion of them, and they are divisible to many decimal places. Unlike bitcoins, they are not mined. Instead, the "genesis ledger" (this is similar to Bitcoin's genesis block) was created with 100 billion XRPs sitting inside an account whose private key is owned by the founders of the Ripple system.
Ripple uses XRPs to pay for transaction fees. The XRPs used to pay for transactions are destroyed (this might seem counter intuitive but trust me its the right thing to do). XRPs are also held as reserves in your account to allow you to do certain things. For example, in order to even create a Ripple account you need 50 XRPs to sit in there. XRPs used as reserves cannot be sent to any other account, but they can be used for transaction fees. Essentially once the XRPs are used as reserves they are "stuck" or "sequestered", unless the network decides reserve requirements should be lowered because they are too expensive.
OpenCoin states that 20 billion XRP is held by the founders of the software, with the other 80 billion going to OpenCoin. Out of this 80 billion, a full 50 billion will be given away to promote the usage of the system (in other words, to make new account creation essentially free for a time). The remaining 30 billion will be held and sold from time to time by OpenCoin in order to fund its operations. Holding and selling XRP is the only way OpenCoin can make money
Because XRPs are sequestered as reserves, OpenCoin can give away a lot of them without causing the price to drop, since reserves cannot be sent to other people or used to buy IOUs.
so the initial friends of opencoin get most of the initial rights to issue trust (debt) ?
XRPs are different from IOUs. XRPs are not debt. Anyone with a Ripple account can issue IOUs. The trick is getting people to accept your IOUs. Realistically speaking, only IOUs from a gateway will have any significant value or liquidity. Gateways are corporations with legal standing, and should be licensed and fully regulated in their jurisdiction. This is why you can hopefully trust their IOUs. Gateways also need to hold customers' funds on deposit.
It seems Bitstamp and WeExchange were very interested in operating as gateways early on, while other exchanges were not. I see no evidence that OpenCoin is restricting companies who want to get on board. Quite the opposite, it would seem to be in their best interest to have as many gateways as possible. The more gateways, the better, because there are that many more ways to get money into and out of the system. Compare this with Bitcoin, where MtGox is the bottleneck and lifeblood of almost all the Bitcoin businesses. If MtGox was to close down it would disrupt Bitcoin significantly for a while. With Ripple, having many gateways allows many points of entry; Once you have deposited funds in a gateway they can be used anywhere, not just in MtGox' order book.
How do I sell 1 btc for USD? Is this possible with ripple?
Yes it is possible:
1) Open an account at a gateway (Bitstamp.net for example)
2) Deposit your BTC at the gateway
3) Withdraw the BTC as a BTC IOU in Ripple
4) In the Ripple client send a payment to yourself in USD
The client will show you the price, you can accept it or cancel
5) Deposit the USD back into the gateway
6) Withdraw the USD from the gateway to your bank account
It seems way too complex and not needed in any way.
Complex yes. And very much needed!
there is not a second bitcoin IMO...it seems to me that Ripple is trying to be bitcoin
Ripple is definitely not trying to be Bitcoin. Instead, it is trying to take concepts that we are already familiar with like exchanges holding our fiat money and cryptocurrency for us, and make it more explicit and functional using a decentralized cryptographically secure accounting system.