I see no advantage in using Ripple over Mastercoin.
Why would we want to use Ripple when Mastercoin can do the same thing but better?
What are these Ripple gateways? who runs them? Why would we want to trust them? Why choose Ripple? Can we buy Ripples yet?
I am not familiar with Mastercoin so I can't speak as to how it might compare with Ripple or which might be better.
Ripple gateways are similar to currency exchanges; they will accept currencies and IOUs, and exchange them for their own IOUs that they issue (Ripple basically works with XRP, which is its own currency, and with IOUs issued by these various gateways).
For example, SnapSwap.us is a Ripple gateway that accepts USD from US users through ACH and Dwolla and gives you an equal number of "SnapSwap USD" IOUs in their place in your Ripple account. Then you can use these IOUs to make purchases through Ripple as if they were USD itself, as long as the recipient accepts SnapSwap USD IOUs. Or, if the intended recipient doesn't accept SnapSwap USD IOUs, but he does accept BitStamp USD IOUs (for example), and the system finds someone who accepts both versions of the USD IOUs, then the system can still fulfill your transaction by 'rippling through' the other account. The Ripple system also uses XRP (Ripples) as its own internal currency; in case it cannot find a path or bridge between the currency IOUs you have, and the currency IOUs that the person you want to pay accepts, then it can convert from your currency to XRP and then back into the currency that the other person wants you to pay in. All of this is automatic and done behind the scenes.
In terms of trust, users need to trust the gateway issuing the IOU, just like if you buy a security from any issuer now, you basically have to trust that the issuer will follow its contract (we've seen a number of examples on the exchanges, like MOO.COW.MINING, Emma's securities, and TRIPLE-B-MINING on Litecoinglobal, where the issuer has basically blatantly violated its contract and there wasn't anything the exchange could really do about it other than post warnings or delist the security after the damage was already done).
You have to be particularly careful in trusting more than one gateway/IOU issuer for the same currency (like SnapSwap USD and BitStamp USD in the example above). As in the example above, the system assumes that the two IOUs for the same currency from different issuers/gateways are equivalent and may swap one for the other in your account, which might be an issue if the two are not of equal value to you. In some cases, you could end up with getting valuable IOUs switched for worthless ones if you end up trusting an IOU issuer that does not actually intend to back up its IOUs. This was the point TradeFortress made with his 'social experiment' he did a while back when he told people that he would give them free "TradeFortress BTC" IOUs for 1 BTC if they would trust him for 100 BTC in the Ripple system; users who accepted this offer and who also had BTC IOUs issued by another gateway ran the risk of the system automatically replacing up to 100 BTC of their BitStamp or other valuable BTC IOUs with the "TradeFortress BTC" IOUs that TradeFortress issued just to make a point.
Besides SnapSwap.us, BitStamp.net, and DividendRippler that I mentioned in my previous post, some other Ripple gateways I am aware of are WeExchange.co and TheRockTrading. Ripple has also incorporated what they call a 'bitcoin bridge', which means that if you have any currency IOUs in your account (whether BTC IOUs or something else, like SnapSwap USD), you can enter a bitcoin address to send funds to, and the system will ask you which of your source currencies you want to use (if you have sufficient amounts of more than one currency), and the system will automatically convert the correct amount to BTC for you and send it to the bitcoin wallet specified. It's more or less the same thing as if you went to an exchange and exchanged it for BTC yourself, and then sent the BTC to a wallet, but the Ripple system tries to make the currency conversion automatic and behind the scenes so that users can simply use it as a way of sending money in any currency without needing to deal with the details like currency conversion themselves. Ripple takes some getting used to, and some setting up (you have to input the Ripple address of each gateway or issuer that you want to trust, and specify the currency and amount--for example, 'I trust BTC IOUs issued by ripple address RXXXXXXXXXXX for up to 2 BTC', before the system will let you hold their IOUs in your account.) But once it is set up, it seems to be a fairly straightforward way of making payments in a variety of currencies without having to deal with the exchanges yourself. There are also order books you can put bids and asks in in order to do currency trading manually. As I mentioned in my previous post, as far as I know, these 'currencies' in Ripple could actually be anything; if a currency can be created for an IOU for a 'pre-1965 US silver dime', I don't know why IOUs couldn't be created for other assets too.
Ripples (XRP) are available now, and in fact about 200 or so of them are needed in order to fully activate and get started using a Ripple account. There are some giveaways, or you can buy them from exchanges such as TheRockTrading, VirWox, etc.
I don't know enough about Mastercoin (or colored coins) to know if Ripple would be any better than those other two possible solutions. But I do think Ripple would be a possible solution, even if it's possibly not the best one.
