Ok so here XRP is a currency. I see 100 billion to start.
-that's the highest number of units for any currency (at start) in history correct?
-divisible by many decimals, would then be the most inflatable in history too, correct?
The number of units doesn't really matter, as long as there are enough of them. I think they choose 100 billion because it fits into a 64-bit integer (100,000,000,000,000,000 including the fractional part)
-I require this currency - to spend currency - and once used it's sequestered. Isn't there an unnecessary extra step in here?
Not really Right now it takes 50 xrp to fund an account. One Ripple is made up of 1,000,000 "drops". A transaction costs 10 drops to send. The 50 xrp that funds your account is sequestered. You can only use it to pay for transaction costs. If you had more than 50 xrp you could send the remainder elsewhere. For example if you had 70 xrp you could send 20 of it to a friend.
- Why would you call it a "trick" to get someone to accept this IOU?
Its not a trick in the "trick or treat" sense. What I mean, is that it is not a simple task. Getting other people to trust you requires effort. You need to show them that you can be trusted, and that there is a legal recourse if you don't honor your agreements. That's why anonymous gateways should be avoided at all costs.
- Gateways are corporations (e.g. banks and too big to fails); EG same as the current monetary system, check.
It sounds like you're saying that all corporations are bad. That's certainly not the case. MtGox is a corporation, are they bad?
- Gateways hold my funds, right, same as banks currently.......but why do I get an IOU instead of money like I can do now with current banking system?
The "IOU" is a cryptographic token that can be passed around the Ripple network. In the current banking system there is no convenient way to transfer a balance out of your bank account to someone else. These are your choices:
1) Write them a check (physical, takes a few days, can't be automated)
2) Wire the money (takes a few days, expensive, can't be automated)
3) Withdraw cash and hand them the money (requires face to face, can't be automated)
4) ACH Transfer (one end has to be a business, costs a lot of money for regulatory compliance)
Unlike your bank balance, a Ripple balance can be sent through the decentralized peer to peer Ripple network in flexible ways. Ripple transactions take 2 to 20 seconds to "confirm." They are incredibly fast compared to bank methods. And they can be automated.
- This sounds remarkably similar to the sales pitch used with derivatives that caused the housing market collapse, correct? (e.g a high value gateway (like AAA bank) could take on junk IOUS (like junk house mortgage)
No. There are different kinds of "debt." When you deposit money at MtGox they "owe" you dollars, or bitcoins if you buy from their exchange. This is not a derivative - its a different form of IOU. Is a MtGox balance the same as a mortgage or collateralized debt obligation? I hope you don't think so!
- Why would I use a Gateway and Ripple middle man, making 2 more steps in this process?
Imagine if you could deposit your money at MtGox, but then send some of your USD balance to a friend. They could take that USD balance and buy Litecoins from BTC-e. Then they take those Litecoins and use them to pay a guy in China, who receives it as CNY (Yuan, China's native currency). This is what is possible with Ripple.
Here's another scenario: you open a Ripple-enabled checking account. Using your bank's online banking web page, you withdraw the dollars into the Ripple network and use it to purchase bitcoins at multiple gateways for the lowest price. Then you redeem the bitcoins into your bitcoin wallet. Or, you keep your bitcoins as a balance in your checking account and when you use your debit card, it sells just enough at market rates to pay for the charge.
Doesn't this remove the "highly touted" No-Middle-Man concept of BTC?
Sort of. MtGox could be considered a middle man. Any time you want to sell your coins you need to trust someone, unless its a face to face exchange (and even then you have to make sure that they don't rob you).
- This removes any "hightly touted" anonymity belong to BTC as well, correct?
Like bitcoin, anonymity is not the default but it can be achieved to varying degrees of success with work.
Finally then, since all currencies are held by these gateways; no individual actually owns anything correct? EG at 100% market integration - 100% of the global value would be in the legal possession of these "corporation gateways", correct?
That's right. In theory, you could lose some or all of the entire amount that you are trusting to the gateway.
This is why Ripple will not replace Bitcoin! When you need to reduce your counterparty risk to zero, you will use bitcoins. When you need to pay a bill in fiat, you can use Ripple to pay for it with your bitcoins. Ripple complements Bitcoin.
Until most people can live their lives paying all bills and receiving all income with Bitcoin exclusively, it will be necessary to interface with the traditional financial system. MtGox must interact with the fiat world, and most people need to interact with MtGox. Even Bit-Pay depends on MtGox, as well as most other Bitcoin payment processors. If you only buy things using Bitcoins, you are indirectly dependent on MtGox if your payment processor requires access to their liquidity.
For as long as Bitcoin exchanges are needed, Ripple will be a superior solution. If we can get rid of all the Bitcoin exchanges and still have a well functioning economy, then it might be possible to live completely without the need for trust. I don't see this happening in the forseeable future though.
I may be off base with some of these questions; but these are what comes to my mind from reading your description.
Yep, I understand where you are coming from. Given the current global economic situation, it is totally legitimate to be concerned when hearing the words "trust", "debt", "IOUs", and "licensed, regulated gateways" in Ripple's description. Ripple doesn't prevent the problem of government seizing funds at a gateway. But it is an improvement over the current banking system. And it enhances the value of Bitcoin.
