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RippleExplainedGuide
Version1.97

byAndrewWhite
andrew@onemilliongateways.com
twitter@OMGateway

Copyright2014AndrewWhite

HelloandwelcometotheRippleExplainedGuide.Thisbookisonlyfor
educationalpurposes,andisnotintendedtoprovideinvestmentadvice.

Mygoalforthisbookistobelargelynontechnicaland,astheauthor,I
feelacertainresponsibilitytomakesureeveryonewhoreadsthisbook
learnssomethingofvalue.Iapologizeinadvanceifthereisanythingin
thisbookthatistootechnicalortoocomplicated.Ifthereisapassage
inthisguidethatdoesnotseemtomakesenseoristoocomplicatedI
askthatyoudontgiveup,keepreadingandcomebacktoitlater.
Takeyourtimewitheachsectionandsupplementyourlearningwith
Googlesearchestohelpgettheanswersontermsorareasof
interest.ThroughoutthetextIincludelinksforyoutofollowuponfor
furtherresearch.Whenyouaredonelearningalltheinformationbelow
dontbesurprisedifafterreadingthisguideyoubecomethegoto
expertaboutRippleinyoursocialnetwork!

InmyopiniontheRipplepaymentsystemisoneofthemostexciting
technologiestobedevelopedinrecentyears.Forthefirsttime,
paymentscanbesenttoanyoneintheworldinanycurrencywithina
fewseconds.IdescribeRipplelikeemailformoney.Butevenbetter
thanthatisthatactivitiesthatwereoncethesolepurviewofthe
bankingindustry,suchaslendingormakingpayments,havebecome
democratizedintheRipplesystem.Themyriadopportunitiesand
challengesthesenewoptionsbringtothemassesopenawholenew
setofpossibilitiesforthediscerningentrepreneurorinvestorto
consider.Thisebookpresentsabriefoverviewofbusiness
opportunitiesintheRippleecosystemandwhatrolesyoucanplayin
thisexcitingnewareaoffinance.IhavebeeninvolvedwithRipplesince
early2013andIhaveexperiencedallofthedifficultquestionsoftrying
towrapmyheadaroundit.AfterIbegantalkingtopublicaboutitI
Copyright2014AndrewWhite

quicklylearnedthateveryoneasksthesamequestionsandonewayto
satisfythosequestionsistowriteabookaheadoftime.Soonthat
noteIwanttocoverthemajorcomponentsofRippleasitexiststoday
anddivedeeperintoeachtopicbutwithoutgettingintothegritty
details.Sowiththatsaidwithanynewtechnologytherearetradeoffs
betweensophisticationandeaseofuse,newfeaturesand
complications,newcapabilitiesandnewrisks,andRippleisno
different.ThisbookwasstartedinDecember2013inadozenpages.
Overtimeithasexpandedover39pagesandmyintentismakeyou
conversantinthemainareasofRippleandinviteyoutocontinuein
yourownareaofresearch.

Bestwishes,
AndrewWhite

Acknowledgments:Iwouldliketothankthefollowingpeoplewiththeir
helpinthisdocument:FredLaughterforediting,RippleLabsfor
permissiontoreusetheirimages,andtheRipplecommunityformaking
valuablefeedbackandsuggestions.

Copyright2014AndrewWhite

TableofContents
RippleLabs
Wallets
Ripples
Gateways
Consensus
CurrencyIOUs
Traders
MarketMakers
Enterprises
DueDiligenceQuestions
IntheFuture
ImportantRippleInfrastructure
FAQs
Glossary
AbouttheAuthor

WhyDigitalCurrency?
Copyright2014AndrewWhite


BeforewegetintoRippleIdliketoprovidesomebackground
informationaboutwhatcurrencyisandwhatishappeningwith
currenciesingeneral.Irecentlygotbackfromaconferencecalled
Money2020andhadadiscussionwithafriendthatexplainedthe
importanceofdigitalcurrencyintermsofhumanhistoryandIthoughtI
wouldrelatethatstoryhere.

Beforewebeginweshoulddefinewhatacurrencyis,anditisusually
definedtohavethefollowingsixtraits:Durability,portability,divisibility,
uniformity,limitedsupply,andacceptability.Someoneelse(Ihavenot
beenabletofindthenameoftheoriginalauthor)explainedtheseinthe
followingmanner:

Acceptability:Intermsofaformofcurrencybeingacceptedwithin
society,moneymustbeacceptedbyeveryoneintheeconomy.This
acceptanceisforthepurposeoftheexchangeofmoneyforgoodsand
differenttypesofservices.

Divisibility:Thisrelatestomoneybeingeasilydividedintosmaller
denominationsfortransactionalpurposes.Peoplewillonlyneedas
muchmoneyasisnecessaryfortheirpurchases,thereforeitis
necessaryformoneytobeeasilybrokendownfordifferenttypesof
transactions.

Durability:Thissimplyreferstothephysicalwearanduseofmoney
overaperiodoftime.Ifsomemoneyiseasilydestroyedordamagedit
islikelythatitisfraudulentandthereforecannotbetrusted.Yet,
Copyright2014AndrewWhite

moneyismadefromapapersource,sosomewearandtearmustbe
expected.

Limitedsupply:Inorderformoneytoretainitsworth,theremustbea
typeoflimitedsupply.Themoremoneythatisincirculationthelessit
isvaluedbytheeconomy.

Portability:Quitesimplyitisnecessaryformoneytobeeasily
transportedsothatpeoplecancarryitaroundwiththemonadaily
basis.Thisalsoallowsfortheeaseoftransactionsothatmoneycan
betransferredfromoneplacetoanother.

Uniformity:Dependingonthedifferenttypesofcurrencythatare
available,moneywithinthatspecificcurrencymustlookthesame.This
alsoallowsformoneytobecountedandmeasuredaccurately.

Analternativewayfordistinguishingthecharacteristicsofmoneyisthat
itiseasilyrecognized.Moneyissubjecttothetypeofcurrencythatis
incirculationwithinaspecificplace,soifitiseasilyrecognizedandit
followstheabovecharacteristics,thenitislikelytobegenuine.

Forthesereasons,thephysicalmetalgoldhasbeenusedascurrency
forthelastfivethousandyears.Thereasonforthisisthatthegold
metalhascharacteristicsthatmakecounterfeitingitimpossible.For
centuriesalchemistsattemptedtheimpossiblebytransformingbaser
metalslikeleadintogoldbutwiththemoremodernscienceof
chemistryitquicklybecameunderstoodthatthiswasimpossible.
Howeverusinggoldasthesolecurrencyisproblematicforeconomic
Copyright2014AndrewWhite

reasons.Firstofallitcanhavesubstantialweight.Itsdifficultor
expensivetosecure.Sendingittosomeoneelseisdifficulttodo
securelyorinatimelymanner.Andtheresimplyisntenoughofitfor
theworldsexpandingpopulationasonlyafiniteamountcaneverbe
minedoutoftheearth.Thusitbecamepopularinrecentcenturiesto
representgoldinpapermoney.Toassurepeopleoftheintrinsicvalue
ofthepaperbills,thefacevalueofthedollarswasbackedbycertain
amountsofgoldorsilverwaspromisedtothenoteholder.Howeveras
mostpeopleknow,thiscreatesanadditionalproblemascounterfeiting
papermoneyiseasy.Famously(orinfamouslyaccordingtosome)in
1972,RichardNixontooktheUnitedStatesoffthegoldstandardand
peggedthevalueoftheUSdollartoanewmeasureofeconomic
fitnesscalledtheGrossNationalProduct(butwewontgetintoallthe
reasonsforthat).WiththeGNPthevalueofthedollarbegantobe
createdindigitalsystems.Inthepresentdaythishasevolvedsomuch
thatsomeeconomistsbelievethatelectronicsystemsmakeup95%or
moreofallmonetarytransactions.Thishasbeengoodforsociety
becauseitmakesthecostofusingmoneylowerforeveryone(and
thatsagoodthing).Creditcardsareoneofthemostfrequentlyused
toolsfordoingthis.Creditcardswereinventedinthetimebeforethe
Internet(WesternUnionstartedacardprogramin1921!).Howeveras
mostpeopleknowtheunderlyingproblemsofearliergenerationsof
currency,fraudulentuseofthetoolisaveryexpensiveproblemthat
theincumbentplayershavenotbeenabletofixandabout1%ofall
creditcardtransactionsarefraudulent.In2009,Bitcoinsrelease
solvedtheissueofhowtomakeadigitalcurrencyandbepractically
impossibletocounterfeit.Bitcoinusessomespecialapplicationsof
mathandcryptographytomakecounterfeitingitnearlyimpossible.This
iswonderfulformerchantssincethehighcostsofhandlingfraudulent
transactionsiseliminated.Understandthatthenearimpossibilityof
Copyright2014AndrewWhite

beingcounterfeitedisthekeyfundamentalreasonforthegrowthof
Bitcoinstylecurrenciesonline.Itisnearlyimpossibletocounterfeitfor
reasonsthatwillbeexplainedlaterbutthemainreasonisduetothe
relianceonaparticularmathfunctionofcryptography,moredetailscan
befoundintheFAQattheendofthisbook.Proponentsofdigital
currenciesthatunderstandthisclaimthatthismakesdigitalcurrencies
abetterstoreofvalueandexchangethangold,whichisanawe
inspiringleapinhumanprogressifthepremiseholdstobetruefora
sufficientlylongperiodoftime.Onlytimewilltelliftheclaimstandsup
toscrutiny.Nowthatweunderstandthebasicreasonstojustifyapeer
topeerdigitalcurrency,soonwewilllearnhowtobuildapeertopeer
exchangeusingRipple.

RippleLabs

Firstletsstartwithadefinitionofterms.Rippleisthenameofanew
paymentstechnology.Rippleisdevelopedbyacompanynamed
RippleLabsInc.inSanFrancisco.Originallythecompanywas
formedasOpencoinIncin2012,andlaterreformedin2013byChris
Larsen,JedMcCaleb,DavidSchwartz,andafewothers.RippleLabs
ownstheintellectualpropertyoftheRippleprotocolandtheRipple
namebutthecodeandprogramsthatmakeupRippleareavailablefor
freeforanyonetodownload,useandmodifyastheyseefit.Ripple
LabssoftwareisextendedbyacommunityofRippleenthusiasts
aroundtheworldwhoarepassionateaboutmakingthetechnology
moreuseful.Thesepeopleprovideessentialfeedbacktoproduct
teamsandengineersleadingtheoverallimplementationofRipples
development.TheknowninvestorsinRippleLabsincludeGoogle
Copyright2014AndrewWhite

Ventures,AndressonandHorowitz,LightspeedVentures,Bryan
Bradford,andothers.AsofOctober2014,RippleLabshasastaffof
60peopleledbyCEOChrisLarsen.Mr.LarsenistheformerCEOof
ELoanandlaterProsper.com,bothofwhichwerepioneering
companiesinpeertopeerlending.
Asanoutsider,IcantsayanythingdefinitiveaboutRippleLabs
specificbusinessstrategies.Buttheiractionsshowthattheyare
committedtoincreasingthevalueoftheRipplenetwork.Theydothis
throughavarietyofstrategiestoshowthepublicthatRippleprovidesa
bettersystemforpaymentsthanthealternatives.Oneofthewaysof
accomplishingthisisbymakingusefulsoftwareandgivingitawayfor
free.ThesourcecodeofthesoftwarefromRippleLabscanberead
andusedbyprogrammersatnocharge,whichisanopeninvitationfor
curiousengineersandprogrammerstomakecontributionstothecode
andexpeditethedevelopmentofthecorefunctionality.Thisalso
providesavaluablesafetymechanism.Sincemoreeyescanlookat
theunderlyingcode,potentialissuescanbeidentifiedandfixedearly,
beforebecomingaseriousissue.RippleLabscangiveawaythe
softwareforfreebecausethecorevaluepropositionofRippleisthat
anopenpaymentnetworkthatanyonecanuseandimproveismore
valuablethanaclosedalternative.Sofartheplanseemstobeworking
wellandRippleisstartingtomakebigwaves.

Copyright2014AndrewWhite

IfwelookatthehierarchyoffinancialservicesintheUnitedStates,
RippleisdesignedtoreplacetheAmericanClearinghouse(ACH)
paymentsettlementsystem.ACHwasinventedinpreInterneteraand
isamajordragontheefficiencyofmovingmoney.Anothersystemthat
EuropeanswouldbefamiliariscalledSwift.Swiftisanewerprotocol
forpaymentmessaginganditworksalotbetterthanACHbutthe
problemisthatUSbanksdontuseitdomestically.Swiftisfasterthan
ACH,sameornextdaypaymentsisthenormandothercountrieslike
ChinaandMexicouseasimilarsystem.ButwhereasSwiftis
specificallyapaymentmessagingprotocolandnotapayment
settlementprotocolitstillinvolvesalotmoreworkforfinancial
institutionstolearnwhohaswhat.Rippleoffersasolutionthatoffers
realtime(aboutfivesecond)paymentsettlementandpayment
messaging(thatmightbeastatementthatlookslikeThispaymentis
forBobsnewshoes).SinceRipplecombinesmessagingand
settlementsomesmartpeoplehavebeencallingitSwift2.0but
Copyright2014AndrewWhite

Rippleisreallyalotmorethanthat.Sowiththatinmindletsdiveright
intoexperiencewhatusingusingtheRipplepaymentsystemlooks
like.

Wallets

Touseanonlinepaymentssystem,peoplestartbycreatingadigital
versionofawallet.Awalletconsistsofanameofwhoownsthewallet
andsomesortofsecuritymechanism,likeapassword,tolimitaccess
totheaccount.Itshouldbeimportanttokeepinmindthatnotall
walletsarecreatedequally.Manytraditionalonlinewalletsolutions
allowthemselvestheprivilegetocloseyouraccountforanyreason.
TheirareavarietyreasonsforthisbutaRipplewalletisdifferent,itis
impossibleforanyone,includingthemakersRippleLabs,tostop
someonefromaccessingtheirRipplewallet.Iwillexplainabitmore
abouthowthatworkslaterbutfornowletsmoveontowhatthewallet
lookslike.

Therearetwowaystoidentifywhoownsawallet.Thefirstiscalleda
Ripplenameanditlookslike~SomeRandomWalletName.Anyone
thatknowsthiswalletsnamecansendpaymentstoit.Underthehood
thenameistiedtothepublicnameoftheRippleaddressthatbegins
withthelowercaserandlookslikethis:
r3CxMDQFX1Atq1vQN5sqVsjm3rawGSwd32(note:donationstothe
authorarewelcome!).

Copyright2014AndrewWhite


ThisisanexampleofwhataRIpplelookslikeavailableat
https://www.rippletrade.com

ARippleaddressshouldbethoughtoflikeaphysicaladdresswhere
mail(orpaymentmessages)canbedelivered.Thepasswordshould
bethoughtofasthekeytoopenthedoortothehouse.Inthepriortwo
sentencesIjusttaughtyouthebasicsofpublickeycryptography,feel
freetoGooglethatformoreinformation.

Sothewalletisalwaysavailableonawebpageandhasthefollowing
functionality:wallettransactionhistory,anaddressbook,asectionto
sendandreceivepayments,andasectionofthewalletforyouto
makecurrencytrades.Andthatisaboutit.
ItisimportanttonotethatRipplewalletsarenotinsuredbytheFederal
DepositInsuranceCorporation(FDIC),whichwascreatedbytheU.S.
governmenttoprotectconsumersfrombankfailures.
Formostconsumers,thepowerofRipplepaymentshappenswhen
paymentsaresentacrossthenetworkwithinafewseconds.To
anyoneaccustomedtotheslowandcumbersomeprocessoftraditional
Copyright2014AndrewWhite

paymentnetworks,thisisanincredibleadvanceinpayments
technology.Nolongerdopeopleneedtowaitfordaysforabankwire
transfertobecompleted,orweeksforacreditcardpaymenttobe
processedwithRipple,havingtowaitforpaymentprocessingisa
thingofthepast.Eveninareaswithmodernbankingsystems(like
EuropeandChina)withsamedaybanktransfers,theexistingpayment
systemisstillarelativelyslowandcostlyprocessthatcreatesan
unnecessarydragontheeconomy.Justimaginewhatkindoflowcost
newserviceswillbecomeavailablewithRippletomerchants,
consumers,andinvestorsacrosstheentireglobaleconomy.
Asfarasmostusersareconcerned,theRipplewalletisalsowhere
magichappensinitsroleinredefiningthepaymentexperiencearound
theworld.Tobehonest,inmyopinion,walletsarenotallthat
interestingvisually,orconceptually,norshouldtheybeparticularly
interesting.Theyaredesignedtobeassimpleaspossiblehencethere
isntmuchtoseeordoinaRipplewallet(withtheexceptionof
trading).
Advancedconceptwarning!IliketodescribeRipplewalletsusingthe
followingexamplebutitisnotapreciseanalogy.Ijustmentionedthat
RipplewalletsarenotFDICinsuredbecausetheyarenotissuedbya
U.S.charteredbank.Allowmeartisticlicensewiththefollowing
analogy:aRipplewalletiskindoflikeabankaccountbutyouasthe
walletowner(accountowner)areempoweredtocontrolhowmuch
moneyyoutrusttobeheldbyyourvariousbanklikeentities
(gateways,moreaboutthemlater).
RippleWalletsaregreatbecausewhentheycanstoreormake
paymentsinanycurrency.Theauthorcantthinkofanyotherwallet
evercreatedthatisabletoacceptanycurrencyevercreated,including
governmentissuedcurrenciesandprivatecurrencies!Forthefirsttime
inhistory,digitalwalletuserscanholdanycurrencyeverissued.Thisis
Copyright2014AndrewWhite

aBigIdeathatmaytakeyearstobewidelyunderstood,appreciated,
andacceptedbythemarket.

Ripples
RipplesareaccesstokensusedbytheRippleprotocolandare
referredtoacurrencycodeofXRP(whichislikeUSDorBTC).The
protocolconsistsoftherulesofhowRippleworksandtheserulesare
translatedbyprofessionalprogrammersintosoftwaretoperformall
thefunctionsthatRippledelivers.Moregenerally,peoplemake
protocolstosolveaprobleminaconsistentandentirelyreliable
manner.Welldesignedprotocolsshareanumberoftraits.For
example,thinkoftheprotocolofshakinghandswhengreeting
someone.Thisprotocolhasbecomeinstantlyrecognizableworldwide.
Itsnotabletraitsarethatitissimple,easilyreproducible,and
cooperativeinnature.Thebestcomputerprotocolsandmonetary
systemsaimforsimilarresults.
Tobeconsistentwithinternationalnamingconventions,Ripplesare
knownbyathreeletteracronym,comparabletohowUSdollarsare
representedasUSD.ThethreelettercodeisXRP.TheRippleconcept
hasbeenaroundpriortoRippleLabs.Itwasfirstworkedonin2004
andlateronin2011thecoreteamaroundRippleLabswasformed
whothenreleasedittothepublicinthebeginningof2013.Everytime
youuseRipple,areallytinyamountisdeletedtomakesurethe
networkdoesnotgetoverloadedbypaymentmessages.Thelogicis
thataverageconsumersmightonlyneedtousearelativelyfewRipples
acrosstheirentirelifetime.Ripplewasreleasedwithahardlimitof100
billionunitsofXRPtoeverexist.The100billionnumberwasjudgedto
belargeenoughtobeusefulfortheRipplenetworkforhundredsof
years,andquantifiableenoughtoprovideabusinessmodelforRipple
Labs.
Copyright2014AndrewWhite

OnceRippleswerecreatedthenextstepwastofigureoutthebest
wayonhowtodistributetheminthemosteffectivemanner.Itiscritical
totheRippleLabsbusinessstrategythatXRPbedistributedtoawide
numberofmarketparticipantswhointendtouseRippleasasystem
forpayments,currencytrading,orassetissuance.Acoolfeatureof
XRPisthatasthenativecurrency(Ilikethetermmetacurrencybutit
isnotascompletelyobviousastowhatthatmeans),XRPcanbe
spenttosend(orreceive)anyothercurrencyofferedforsaleinside
theRipplenetwork.RippleLabsalsosellsbulkquantitiesforlarge
ordersandgivesawaysmalleramountsforfree.Inlargeparttheir
targetmarketarebankstouseXRPtomakeinterbankpaymentsand
facilitateinternationaltrade.

SonowthatwehavecoveredabitofhowmuchXRPthereis,whatit
isusedfor,andRippleLabsroleinthedistributionofXRP,letsmove
ontoinvestmentopportunitiesinthespace.

TherearedifferentinvestmentstrategiesinvolvingRipplesandalarge
numberofpeopletradethemagainstothercurrenciesforspeculation.
Beforegettingintothevariouschoicesavailable,Iwouldsuggestwould
beinvestorsaskthemselvesafewquestionssuchas:

AmItechnicallyproficientenoughtohandledigitalcurrenciesonmy
own?
DoIalwaysfollowbestpracticesforcomputersecurity?
ShouldIrelyonareputableconsultant,broker,orhedgefundto
managemyinvestment?

Copyright2014AndrewWhite

AmIwellversedinthenatureofonlinescams,walletsecurityissues,
andlegalissuesbeforebuying?
ShouldIuseXRPasahedgeagainstmyotherinvestments?
Youranswerstothesebasicquestionsshouldhelppointyouinthe
directionthatsrightforyou.Itdoesnthelptobelessthanentirely
honestwithyourself,sobecandidandassessyourstrengthsand
weaknessesbeforemakinganyinvestment.
Investorsmustbeawarethatthereareinherentrisksassociatedwith
digitalassets.Theftsandscamsareanunfortunatebutinevitable
aspectofonlineofferingsandtheinvestormustalwaysperformdue
diligencebeforetrustingotherswiththeirmoney.Evenifaninvestment
isnotfraudulent,thereisnoguaranteethatthevalueoftheinvestment
willyieldprofits.Youarecompletelyonyourownonthisone.Ripple
LabscannotandwillnotcommentontheinvestmentfitnessofRipple,
XRP,orthevalueandsafetyofclaimsmadebynonRippleLabsstaff.
Duediligenceistheprocessofinvestigatingaproposedinvestment,
andtheresponsibilityforduediligenceisentirelyuptoyou.Be
appropriatelyskepticalandcautiousinallyourdealings.
Atfirsttheywereworthnothingatmarketrates,butXRPhassteadily
increasedinvaluethroughasteadilyincreasingnumberofservicesbuilt
forit.AlthoughthepriceofXRPhasbeenrelativelystable,itisnot
immunefromdrasticpriceswingssimilartoapennystock.Although
currentlyvaluedforlessthanapenny,Ripplesarereallyonlyusefulfor
makingtransactionsontheripplenetworkbutspeculatorsonthe
Ripplenetworkliketotradeitagainstotherassets.Becautious
howeverasonrareoccasionsthevaluehaschangedhundredsor
thousandsofpercentaday.

Copyright2014AndrewWhite

Gateways
GatewaysareserviceprovidersthatletRippleusersdeposit,transfer,
andwithdrawmoneybymeansoftheirgatewayaccounts,including
transfersbetweenaconsumerswalletandtheconsumersgateway
account.Toattractandretainusersoftheirservice,gatewayswill
innovateandofferbeneficialservicestotheircustomers.

Asgatewayscompeteformarketshare,Ifullyexpectthatmore
gatewayswillbelaunchedthattheywillincreasinglyofferinnovative
rewardsprogramslikeairlinemiles,coupons,andpremiumservice
discounts.

Thereareanumberofservicesavailabletopeoplewhowanttocreate
andoperateagateway.Iftheyhaveastrongtechnicalbackground,
theycanusuallysetoneupthemselves.Iftheydonthavethetechnical
skills,theycanuseahostedwallet(moreonthatinamoment)oruse
consultants.Iftheyareseriousaboutgettingintothegateway
business.Inthefuture,cloudbasedoptionswillbeavailablesuchas
OMGsOneMillionGatewayshostedservice.

Copyright2014AndrewWhite

BecauseofRipplesdesign,anyonewithaRipplewalletcantechnically
becomeagateway.

However,thatisneitherlikelyornecessaryinalmostallconsumeror
investorcases.Whenpeopletalkaboutgatewaystheyareusually
referringtoabusinesssetuptooperateassuch.ARippleWalletcan
becomeagatewaywhenpeopleaddtrusttoawalletyoucontrol.
TrustinthecontextofRipplemeanshowmuchofmymoneydoI
trustthisgatewaytohold?Gatewayswithanestablishedhistorywith
agoodreputationforcustomerservicetendtobemoretrustedby
usersthannewgatewaysthatarelessknownandhavealimited
historyofoperation.

ThisisanexampleofagatewayserviceloginpageusingSnapSwapInc.asanexample.

Copyright2014AndrewWhite


Hereiswhatabasicgatewayaccountexperiencelookslike.

Gatewaysasabusinesshaveafewdifferentbusinessmodels
availabletoguidethem.Oneexampleisagatewayprimarilyusedfor
moneytransmission,anotherexampleisremittance.Asagateway
operator,youmightbeinterestedinenablingpeopletosendpayments
toanothercountry.Aconsumeropensanaccountonyourgateway
andsendsyoumoneytogointhataccount.Thegatewayoperator
issuesIOUs(moreaboutthoseinthenextsection)totheaccount
holderandthoseIOUsappearintheholdersRipplewallet.The
accountholdercanthantradetheseIOUsforanothercurrency.Inthe
othercountry,apersoncanwithdrawtheseIOUsfromthegateway
andreceivetherealcurrency.Thegatewaymakesmoneybycharging
atransactionfee.Iftheoriginalgatewayswebsiteorservicebecomes
unavailable,theIOUsdonotdisappearfromRipplewallets.Inthe
eventofbankruptcyorotherseriousdisruption,theIOUsmaylose
someoftheirmarketvaluefortheIOUsofcurrencytheyrepresent,but
theycouldberedeemedwhenthegatewaybusinessreturns.The

Copyright2014AndrewWhite

uniquecircumstancesofthegatewaysissuewilldecidewhatrecourse
isavailabletotheIOUholders.
ThechartsonRippleCharts.comcontainthemajorcurrencymarketson
Ripple.ThesearetypicallywrittenintheformofBitstampUSD/XRP
toindicatethattheseIOUsareissuedbytheBitstampgatewayinthe
USDcurrencyandistradingagainstXRP.Anotherexampleisthe
ChinesegatewayRippleCN.TheirIOUsfortheChineseYuanlooklike
this:RippleCNCNY/XRP.BackoveratBitstamp,youwillseethat
BitstampUSDisalsoabletobetradedforBitstampBTC.Gateways
cansetrulesonthefeesoftradesorpoliciesastowhatisallowedto
betradedbutingeneralalltheIOUswillbetradableforallthe
equivalentIOUsonagivengateway.
Aquickwordaboutaddingtrusttoagateway.Sinceanyonecan
createagatewayitiscriticalthatyouonlytrustaproperlyestablished
gateway.Thismeansitisattheveryleastincorporatedandisrunby
publiclyknowncorporateofficers.Ifthegatewayisoperatedinan
anonymousmanner,thatmeansthereisnoaccountabilityiftheservice
disappears.Thisisimportant:inyourRippleWallet,youshouldonly
givetrusttogatewaycompaniesthatyoutrusttobereliableand
responsiblewithyourtokensofvalue,e.g.money.Sinceagatewayis
notusuallyabank(atleastatthetimeofthiswriting),notethatthereis
noFDICstyleinsurancefordepositsmadetoagatewaybusiness.A
gatewaythatmakesanefforttobelegitimatehaspubliclyknownstaff,
abusinessaddress,customersupportdetails,and/oraphonenumber
withpeoplewhoanswerthephoneduringestablishedhoursof
businessoperation.IfaRipplegatewaywebsitedisappears,your
IOUsdonotdisappearfromyourRippleWallet.Theproblemisthat
redeemingthoseIOUsfortheircashvalueisimpossibleunlessa
thirdpartygatewayacceptsthemfortheircashequivalents.Icansum

Copyright2014AndrewWhite

thisupsimply.Whenitcomestoanonymousgateways:donttrust
them.
Astandardsgroupforgatewayshasbeenformedcalledthe
InternationalRippleBusinessAssociation(IRBA),whichoperates
independentlyofRippleLabs.IwilldiscusstheIRBAmorebelowbut
fornowyoushouldknowtheIRBAhasasetofrequirementstomake
surethatthegatewayslistedonIRBAswebsiteathttp://xrpga.orgare
legitimateorganizations,operateusingbestpracticesforbusinesses,
etc.Thereareroughly170membersoftheIRBAatthepresenttime,
includingpeoplewhohaveexpressedtheirinterestinforminga
gatewayforcertainmarketsorareasintheworld.

Consensus

Consensusiswherewestarttogetintothenittygrittytechnicaldetails
ofhowRippleworks.Youdontneedtoknowallofthisinfoifitisnot
rightforyou.Iliketotellpeopleunderstandinghoweverythingworksis
notarequirementtoinvestinaRipplebasedasset.Therearealotof
complexthingsinlifethatdonotrequiredafullunderstandingofhowit
works.Acoupleoftechexamplesincludeareexactlyhowcomputers
workorexactlyhowawebbrowserworks.Weassumethatthe
professionalsthatmakethesetoolsknowwhattheyaredoingandthey
canspareusthegorydetailsandletusmoveontodowhatwewant
todowiththetool.Sowiththatsaid,Ijustwanttomakesurethatyou
understandRippletothelowlevelcodeandprotocolislikewisenota
requirementtounderstandtheideasofRipplesoifthetechnicaldetails
donotinterestyoufeelfreetoskipoverthissection.Ifyouarefamiliar
withBitcoinlikecurrenciesyoumayhaveheardthatBitcoinworks
throughaschemecalledproofofwork.Proofofworkisaprocessin
Copyright2014AndrewWhite

whichcomputerscooperateonsolvingahardmathproblemthat
initiallynoneofthemknowtheanswerto.Whentheanswerisfound,
thecomputerthatsolvestheproblemisawardedablock,anaward
ofBitcoin(25atthetimeofthiswriting)andtheblockisdistributed
alongtoalltheothercomputerswithacopyofallthetransactionsthat
tookplaceinthepriorblock.Thisiswhatallowstransactionstotake
place.Intechnicalterms,thissolvesanimportantproblemofhowto
solvethedoublespendingproblem.Adoublespendissomeone
spendingthesameunitsofcurrencytwice.Ifeveryonethoughtthey
couldjustusespreadsheetstocreateacryptocurrency,theywould
soonfindthatsomeonewouldcheatbymanuallychanginghowmany
paymentsweresent.Anotherproblemthissolvesisreferredtoin
academiccirclesastheByzantineGeneralsproblemwhichishowto
communicatealonguntrustworthypaths.Thisproblemhasexistedfora
longtimeandonewayofsolvingitwasreleasedtothepublicin2008
bySatoshiNakomoto,theanonymouscreatorofBitcoin.In2011Jed
McCalebwasthinkingofwaystosolvesomeoftheproblemswiththe
proofofworksystem.Inparticular,Jedwantedtosolvetheslow
transactiontimeofBitcoin.Waitingforcomputerstosolvetheproofof
workproblemonBitcoincantaketenminutesorhoursintimeandthat
waittimeisnotgoodformerchantsorconsumersusingthesystem.
WhathecameupwasanewapproachcalledConsensus.Ifthe
majorityofcomputersonadigitalcurrencynetworkcouldagreethata
transactionhappenedtherewouldbenoreasontodoubtthata
transactiontranspired.Theproofofworksystemreliesonseveral
computersagreeingthatatransactionoccurred,whichiscalled
confirmations.Afterenoughconfirmationsoccuritcanbereasonably
beassumedthatatransactiondidinfacttakeplace.Withaconsensus
basedapproach,transactionscouldtakeplaceinsecondsratherthan
minutes.Therecanalsobealotmoretransactionssincethe
Copyright2014AndrewWhite

computationalcostofthissystemislow.Thisbringsustoanother
problemthathaslongbeenanacademicpuzzle,theByzantineGenerals'
Problem.Thisproblemasks,howdotwogeneralscometoan
unanimousagreementwhentheyareseparatedbydistancesthat
createobstaclestocommunication?

OneanswertothisproblemisdonewiththeRipplesoftware,the
networkissetuptovalidateatransactionif80%ofvalidatornodes
agreeatransactiontookplace.

NextImgoingtoextensivelyquoteRippleLabsChiefCryptographer
DavidSchwartzwhohasalottosayonthisimportanttopic:The
numberwasdeterminedbysimulation.Ifyousetthethresholdtoolow,
theconsensusprocesscompletesveryquicklybutmorefrequently
doesn'tactuallyreachconsensus.Ifyousetthethresholdtoohigh,the
consensusprocesstakesmuchlonger,butonlyveryrarelyfailsto
actuallyreachconsensus.(Whenyousay,"Ibelievethere'sa
consensus",youcan'tactuallybe100%surethereisinfacta
consensusornobodycandeclareaconsensusfirst.)Theconclusion
thatnoconsensushasbeenreachedisavalidconclusionandcan
resultduetopoortopologyorByzantinefailure.Certaintyisalways
withrespecttosomethingthathasoccurredinthepast.Itisnot
possibletoknowwithcertaintythepresentstatewithoutobservingat
morepointsthanwillnormallybepossible.
Soeachserverrunsoutaheadofwhatitknowsforcertain,applying
transactionsandattemptingtoreachconsensusonthem.Whenandif
Copyright2014AndrewWhite

aconsensusisinfactproduced,theserverlaterdeterminesthiswith
certainty,andthuscanadvancewhatitknowsforcertain.
Essentially,theconsensusprocessproducesastreamofsigned
messagescalled"validations"fromwhichit'spossibletodeterminewith
certaintywhetheraconsensushadactuallybeenreachedatsome
pointinthepast.
ItispossibletocreateUNLtopologiesthatfrequentlyfailtoreach
consensus.TheplanistohaveRippleserversbuildtheirUNLsusingan
algorithmthatmakessuchtopologiesexceedinglyunlikely.
Evenwithaperfecttopology,twotypesofByzantinefailuresare
possible.
One,whichisnotthatuncommon(oneoutofevery200roundsorso),
isalocalfailure.Inorderforaconsensustoeverarise,someonehas
todeclareaconsensus.Andforthattohappen,someonemustdeclare
aconsensusfirst.Whenthathappens,whoevermakesthatdeclaration
can'tknowforcertainthatotherswilldeclarethatsameconsensus(or
theywouldhavealreadydoneso,andsohewouldn'tbefirst).Soit's
alwayspossiblethathedeclaresthewrongconsensus.
Inthiscase,theserverthatsufferedtheByzantinefailurequickly
discoversthattheothervalidatorshavebuiltadifferentledgerthanit
didanditbeginsitsresynchronizationprocess.Otherserverswillstill,
fromthevalidations,whichledgerwasthemajorityledger.
AmuchlesscommontypeoffailureiscompleteByzantinefailure.In
thiscase,severalserversdeclaredifferentconsensusesandthereis
Copyright2014AndrewWhite

noclearmajorityledger.Inthisrarecase,thenetworkasawholemust
reconvergebeforeatrueconsensuswillemerge.Ripplehasan
algorithmtodoexactlythis.Serverswillseetheconflictingvalidations
andknowwithcertaintythattherewasnoactualconsensus.
OntheRippleforumrecently,amathematicallymindedmemberasked
DavidthefollowingquestionHowdoesRipplesolveByzantine
Generals'Problemsuchasnosolutionunlessn3t+1,n=numberof
processesinthesystemandt=numberoftraitors?

SohowRipplesolvestheByzantineGeneralsproblemissimple.The
consensusprocessispermittedtofailbecauseitdoessoharmlessly.
Iftheconsensusprocessformsaledgeronwhichthereactuallyisno
consensus,thentherewillbeinsufficientvalidationsandtheconsensus
processwillrepeat.ToputitinByzantineGeneralstermsifyougetto
thebattleandtheotherarmiesaren'tthere,youjuststartover,nothing
catastrophichappens.Inotherwords,keeptryinguntilthevast
majorityofmessagesagreeatransactionisaccurate.Perhapsnot
surprisinglythissimplebutelegantsolutionhaswideranging
ramifications.

AndwiththatwecanwrapourreviewofhowConsensusworks.For
moreinformationpleasecheckouttheRipplewikipagesat
https://ripple.com/wikiorhttps://ripple.com/wiki/How_it_works

Validators

Copyright2014AndrewWhite

SincewearediscussingthetechnicaldetailsofhowRippleworks,for
completenessIjusttomentionValidatornodesandwhattheydo.

TheRipplewikihasthistosayaboutvalidatorsTheRippleprotocol
dependsonacollectionofvalidatorswhoparticipateintheconsensus
processandproducesignedledgerswhichgetbroadcastintothepeer
topeernetwork.Clientsandpeerscollectanddependonthesesigned
ledgerstodeterminewhatistheconsensusledger,orthe"true"state
oftheledger.CrucialtothesecurityofthenetworkisthateachRipple
serverchoosetopayattentiontoasufficientlylargediversesetof
validatorswhoarenotcolludingtodefraud.When80%ofvalidator
nodesagreethataedgerisvaliditgetssignedandconfirmedacross
theentireRipplenetwork.Thisisanalternativesolutiontothe
ByzantineGeneralsproblemfirstsolvedbyBitcoinwithmining.

CurrencyIOUs

IOUs(Ioweyouspronouncedhowitisspelled,eyeohu)are
creditsandarewhatmostpeoplewilluseonRipple.IOUsstandforI
oweyou(something).WearemostfamiliarwithIOUsfromour
bankingorinvestorstatementthatismailedmonthlybyfinancialservice
providers.AnIOUisapromisethatacertainamountoffundsthatthe
IOUissuercontrolsarefundsinyouraccount.Therealityisthatthe
IOUholderhasatotalamountoffundsthatitcontrolsand,fromthis
total,theyuseadatabasetoorganizewhattheyowetheircustomers
andthenumberdisplayedtoyouistheIOU.IOUsonRipplenetwork
operateonthesameprinciple,butinsteadofabankingorinvestment
Copyright2014AndrewWhite

entitycreatinganddisplayingtheIOUtoyou,anIOUontheRipple
networkisanassetcreatedbyaRipplegatewayindicatingIpromise
toredeemyouaspecificamountofthiscurrencyasset.Ifyou
receivedapaymentforUSdollars,youwouldseethedepositofthe
USDIOUsinyourRippleWallet.

IOUsarewhatmakeRippletheemailofcurrencies.Theemail
protocoldoesnotcarewhoyouaresendingamessageto,orthe
contentofyouremailandRippleworksthesameway.Thesenderand
recipientofanemailislikethesenderandreceiverofRipplewallets,
themessageinanemailissimilartowhatcurrencyandhowmuch
issentinthetransaction(themessage,inouremailanalogy).Thefinal
lessonyoushouldtakeawayfromthisisthatanIOUhasnovalue
whenitisnotbackedbyanassetthatcanberedeemed.

Pathfinding

PathfindingisanotheroneofthetechnicaldetailsthatIincludefor
completenessandisfairlyselfexplanatory.ThisishowRipplefinds
waystomakethebestavailablepayment.Thepriceonatransaction
feecanvaryinRipplebasedonthebestpossibleexchangerateonthe
orderbooksofRipplecurrencies.AsthisdiagramfromRippleLabs
illustrates:

Copyright2014AndrewWhite

Pathfindingisofmostinteresttomarketmakersandtechnicaltypesto
beabletoservemarketactivity.Itisimportanttonotethatalthough
Rippleisfastitisslowenoughastomakehighfrequencytrading
impossibleandapartofthereasonwhythatisisbecauseofthetime
ittakesPathfindingtowork,afewsecondsistooslowforHFTtobe
effective.

Traders

AnyonewithaRipplewalletcantradethedigitalcurrencyassetson
Ripple.SendingapaymentofanysortusingtheRipplenetworkis
Copyright2014AndrewWhite

equivalenttomakingatradeontheforeignexchange(alsoknownas
forexandFX)currencymarkets.

Eachcurrencyhasathreeletterabbreviation,andeachcurrencytrade
isexpressedasapairthatincludesthebasecurrencyandacounter
currency.Eachcurrencypair(USD/XRPorEUR/JPYorCNY/BTC,
etc.)issupportedbyagatewaythathasanorderbookofbuyersand
sellersofaparticularcurrencypair.Thedailytradingvolumeonthe
Ripplemarketisgrowingrapidly.Atthetimeofthiswriting(March
2014),themostpopularcurrenciestradedareChineseYuan(CNY),
USD,andBTC.

Automatedtradingisapopularchoiceforinvestorswiththetechnical
knowhowtoworkwithprogrammingscriptstomakeatradingbot.
ThesebotsconnecttotheRipplenetworkandlookatthebidsand
asksincertaincurrenciesandtradeaccordingtouserdefined
parameters.Mostofthesebotsrequireafairamountoftechnical
knowledgeandskilltosetupanduse.Althoughtherearenoalgorithmic
tradingservicesavailabletoinvestorsatthemoment,theseareknown
Copyright2014AndrewWhite

tobeindevelopment.Tradeandforgetbotscanbeextremely
valuableastheyworkforyouaroundtheclockwithouttiringor
miscalculating.

Offmarkettradingcanalsobeverylucrative.Findingamarketthat
wantsXRPbutdoesnothavetheknowhowhowtogetitisan
excellentwaytobuildabusinessandincreaseRippleadoption.Ifyou
wanttoengageinoffmarkettrading,pleasegetinformedoflocallaws
beforebeginning.IntheUnitedStates,tociteoneexample,
transactionsgreaterthan$10,000needtobereportedtotheFederal
FinancialCrimesNetwork(FinCen).

MarketMakers

Marketmakersarepeoplewhoprovideliquidity(i.e.,money)between
gatewaystoallowpaymentsthroughapathwayofcurrenciestobe
made.Muchlikehowaroadprovidesapathforacartoreachits
destination,apathwayistherouteatransactiontakestocompletea
payment.Althoughthereareafewwaystobecomeamarketmaker,
theeasiestiswithasimpleorderintheRipplewalletforthesame
currencybetweenthetwoormoregatewaysyouwanttomarketmake
for.Itshouldbenotedthatanyonecanbeamarketmakerbutithelps
tohavealotofcapitaltomakeitmoreworthwhileforthemarketsyou
aretryingtosupport.

Enterprises

Copyright2014AndrewWhite

TheRippleecosystemislikelytoseepowerfulwaves(ha!)ofnew
servicesdevelopedtotakeadvantageofthenewfoundpossibilities
thatRippleprovides.Themostobviousareaatthetimeofwritingis
gatewayservices.Merchantservices,remittanceoptions,charities,
experimentalhobbies,andcommoditiesalsoareallpromisingareasfor
innovatorstoplacetheirstake.

Anumberofinterestingcompanieshaveformedbasedentirelyonthe
Rippleprotocol.CompaniessuchasFortuneHarbor,Coinst,
RippleWise,SnapSwap,andothersareleadingthewayintermsof
innovationandprovingthattheRipplesystemisaviablebusiness
model.CompaniesolderthanRipplehavealsosignedontousethe
service,mostnotabletodateisBitcoinexchangeBitstamp.

CreatingorinvestinginanewcompanyintheRippleecosystemisan
attractiveoptiontotheinvestorfamiliarwithmanagingequityassets.
Rippleissonewandtheopportunitiesitofferssolargelyuntapped,
thatthedooriswideopenforenterprisingindividualsandstartupsto
makeasubstantialimpactwithlittlestartupcosts.Ifthisissomething
thatinterestsyouinpursuingabusinessIstronglyencourageyoutodo
so.ComplementaryservicesthataddvaluetotheRipplenetworkis
somethingRippleLabsisveryinterestedinsupportingandyoushould
letthemknowaboutitonceyouarereadytolaunch.

DueDiligenceQuestions

Investorsshouldbeaskingthemselvessomehardquestionsandhave
honestanswersbeforebeginningtoinvestinRipple.Herearesome
basicsforyoutoconsider:
Copyright2014AndrewWhite


HowwelldoIunderstandRipple?
WhatdoInotunderstandaboutRipple?
Whataretherisksinvolved?
WhatarethelegalandregulatoryissuesimpactingRippleinmy
countryofresidence?

WhatdoIknowabouttheprincipalsintheenterpriseinwhichImight
invest?
DoIunderstandallthecounterpartyrisks?
WhathappensiftheRipplesoftwarebecomesfundamentallybroken
andcantbefixed?

Whoarethemajorcustomersandtheapplicationsrelatedto
investmentopportunities?

Whatarehistoricalandprojectedgrowthrates?
Whatistheexpectedmarkettimingofnewproducts,services,or
enhancements?

Alongwiththesespecificinvestorquestions,Iwantedtosharethislist
ofbestpracticesfromtheRipplewiki:

Youmustprotectyourself:

RippleLabsInc.doesnotendorse,qualify,orguaranteethe
performanceofanymerchantorgateway.
Donottrustservicesoperatedanonymously,youhavenorecourseif
theyfailtodeliverontheirpromises.

Copyright2014AndrewWhite

DonotenteryourRippleusernameandpasswordonanysiteyoudo
nottrustwithyourfunds.

DonotenteryourRippleusernameandpasswordonanysitethat
doesnotusehttps.Youcanusuallytellwhenasiteuseshttpswhen
yourwebbrowserhasagreenlocknexttothewebsiteaddressinthe
addressbar.

Donotuseaclientprovidedbyanentityyoudonotfullytrust.You
musttrustyourclientprovidertobehonest,secure,competent,upto
date,andperhapsmore.

ForlongtermstorageofXRPorIOUsinacoldwalletconsider
usingtheDesktopClient.
Youshoulduseapasswordsolongandrandomyoucannot
rememberit(onlystoreandcopyitsecurely).

IntheFuture

Thefuturewillcertainlybringmanyexcitingandinterestingareasfor
Rippleinvestorstoconsider.Inparticular,Imexcitedforthetimewhen
optionstradingbecomesmorewidelyavailable(whichwilllikelybe
easierwiththeadventofsmartcontractslaterin2015).Smart
Contractscouldbecomethekillerappformathbasedcurrencies.For
example,byusingsomeparticularmathfunctionsitispossibletoissue
sharesforacompanyorraisefunds.InJuly2014RippleLabs
announcedCodius,anewprojecttoenablesmartcontracts.Codius
willallowpeopletocreateoffersorcontractsacrossforanydigital
ledgersystemsothattheycanallbenefit.Theydothisthroughsome
innovativedesignchoicesthatallowpeopletomakeusefulapplications
withanypreexistingprogramminglanguage.IspokewithStefan
ThomastheCTOofRippleLabswhoexplainedtomethatthedesign
Copyright2014AndrewWhite

wasinformedfromtheexamplethatbusinesslogicanddatastorage
(databasesordecentralizedledgerslikeBitcoin)aretwoseparate
topics.Everywebserviceinexistenceusesadatabasetostore
informationandbusinesslogicontopofthedatabasetodecidewhat
goesintoit.Ishouldprobablymentionacomputersciencetermthat
willbehelpfultounderstandwhythisdesigndecisionwastaken.
Computersrunsoftwareinoneoftwoways.Oneisdeterministic,code
executesinthesamewayeverytime.Theotherisnondeterministic
whichmeansitcanexecutedifferentlyeverytime.Whatisgoodabout
thisapproachisthatitmakesCodiuscompletelyplatformneutral.Any
programminglanguagecanuseitandanydigitalassetsystemcanuse
itsapproach.CodiususesanotherconceptcalledSmartOracles.A
smartoracleisanythingthatcanbeaskedaquestionanda
nonbiasedanswerisreturning.Oneexamplecouldbeaskingthestock
marketwhatthepriceofagivenstockis.Anotherexampleisasking
theBitcoinnetworkifacertaintransactionhappened.Theimportant
thingtounderstandisthatCodiusisneutralastowhomyouaskyour
verifiedquestionsandhowyoudoit.Youmightwanttomakea
contractonstockfuturesandhedgeonthepriceofBitcoinandorthe
temperatureofDalyCity,ifalltheanswersadduptothethresholdof
truthaswritteninyourcontractthetermswillbemetandthecode
executes.Thisisverydifferentfromeveryothersystemoutthereand
somethingthatcreativepeoplewillmakeamazingapplicationswith.

TheCodiusapproachtosmartcontractsfreesdevelopersfrombeing
lockedintoanyonesystemwhichistheHolyGrailfornextgeneration
financialandbusinessapplications.Tolearnmoreonthesubjectof
smartcontracts,IhighlysuggestathoroughreadingofGreatChains
ofNumbersbyTimSwanson.

Copyright2014AndrewWhite

NewservicesforRipplewalletsarecomingoutallthetimeincluding
ShiftPaymentswhoarereleasingacreditcardthattiesintoaRipple
walletinlate2014.

Likeanyactiveprotocol,Ripplefacesintensescrutinytoidentifyand
correctanyinefficienciesaswellasforwaystheprotocolcanbe
improved.Ripple(andCodius)issuchadisruptivenewtechnologythat
itsfullimpactonbusinessandsocietywillnotbeknownformany
years.Thedaywillcomewhenpeoplewillbesoaccustomedtoa
multicurrencywalletthattheywillaskwhydidntIthinkofthat?In
myopinionwearewitnessingthedawnofadisruptivetechnologyas
bigasanadvancementasdigitalstockmarketsorpapercurrencies.

ImportantRippleInfrastructure

BeyondRippleLabsthereareanumberofimportantresourcesand
servicesthatisavailabletotheRipplecommunity.Foremostabout
thosearecommunityforumswhereissuesrelatedtoRippleare
discussed.ThemostactiveoftheseareXRPTalkranbyacommunity
memberinFranceandtheRippleLabsForum.Acoupleofnew
serviceshavecomeintobeingrecentlythatareusefulaswell,LibreTax
fortaxesintheU.S.andCoinistforpublicreviewsofgatewayservices.
ThemostwellknownRipplegatewayrightnowisBitstamp,theworlds
largestBitcoinexchange.Thereareavarietyofotherprojectsunder
developmentrightnow.Thereareatleastfourventurecapitalbacked
companiescreatedspecificallyfortheRippleecosystemthatIknow
of.ThereisalsoalotofdiscussionaboutwaystoimprovetheRipple
worldwithnewfeaturesandmoreservices.Itisgoingtobeanexciting
Copyright2014AndrewWhite

fewyearsforimportantinnovationstobebroughttomarket.For
technicalinfrastructure,Iexpecttoseemoreservicestoenterthe
markettoserveasenginestodrivethegrowthofdigitalassetsand
usefulthingsthatcanbedonewiththem.MyowncompanyOneMillion
GatewaysInc.wasestablishedtohelpthesecompaniesreachtheirfull
potential.

FAQs

HowisRippledifferentfromBitcoin?

Thetwoarecompletelydifferent.ThemostbasicansweristhatRipple
isnotdesignedtobeusedasjustacurrency.Insteaditisapayments
protocol.ThedifferenceisbetweenBitcoinbeingap2pvirtualcurrency
andRippleasap2pexchange.Bitcoinusestheproofofwork
mechanismcommonlyknownasminingtogenerateBitcoinandor
verifythevalidityoftransactions.Instead,Rippleusesasystemcalled
consensus.ThisfundamentaldifferencewithBitcoinmeansthatthey
workdifferentlyandthattheyaredesignedfordifferentpurposes.
BitcoinorothercurrenciesarenotcompetitionforRipple.My
understandingisthatRippleLabswantstoseeotherpaymentsystems
settledortradedonRippleandnotcompetewiththem.

Iheardthatminingdigitalcurrenciesrequiresanincredibleamountof
electricity,isRipplesimilar?

Thankfullyno.Ripplerequiresnomoreelectricitytorunsecurelythana
normalhighendcomputerserver.ThemegatonsofCO2and

Copyright2014AndrewWhite

megawattsofelectricityandpowerbillsusedbyotheralternativesis
notanissuewithRipple.

IheardthatRippleisapreminedcurrency,isthattrue?

Theanswerisbothyesandno.Ripplewasnotcreatedorreleased
asacurrencyplatformthatusedminingtogeneratethecurrencyand
verifytransactions.Peoplethatmineorbelieveintheideathatmining
isfairduetotheequalprobabilityofbeingrewardedfordoingthe
proofofwork.Thereisnothingwrongwiththatopinion.However
Ripplesuccessfullysolvedsomeoftheinherentandfundamental
problemsthatminingbringstoadigitalcurrency:theslownessof
transactions,the51%attackproblem,blockchainsplits,etc.In
definingtheutilityofcrosscurrencypayments,afundamentaldesign
principleisthatlongdelaysforpaymentsisnotacceptable.Letsface
it,nobodywantstheuncertaintyofwaitingforapaymenttoconfirm
andRipplecanmaketradingthosekindsofassetsfasterandmore
secure.

DoanybanksuseRipple?

Atthetimeofthiswritingthereareafewbankswhohaveclaimedthey
willbeusingtheRippleprotocol.

Whatarevalidators?TheRipplenetworkreliesondedicated
computerscalledvalidatorstoconfirmthattransactionsarevalid,why
isthis?

Copyright2014AndrewWhite

Validatorsarethelightweightwaytoverifythattransactionsarevalid
comparedtotheheavyweightuseofcryptocurrencymining
algorithms.Theyarelightweightbecauseyouonlyneedafew
computersdoingthis(insteadofthousandsintraditionaldigital
currencies).Bydesign,RippleLabscreatedtheRipplenetworktorely
onvalidatorsthattheyrunandtheyknowcanbetrustedtomakesure
thattransactionsarevalid.Themajorityofthevalidatorsthata
gatewaytrustsmustbetrustworthy.Ifthemajorityofthembecome
maliciousorconspireagainstthegateway,theycanmakefraudulent
paymentsagainstthegateway.Thewaytomitigatethisthreatisby
usingcommunityacceptedtrustednodessuchasthoserunbyRipple
Labs.

IheardsomeoneforgottheirpasswordorhadtheirRipplecoins
stolen,arethosecoinsorwalletsinaccessibleforever?

Yes,unfortunatelytheyareinaccessibleforever.NeitherRippleLabs
noranyoneelsecanrestoreyourpasswordorrecoverstolencoins.
PaymentsinRippleareirreversibleduetohowsomeofthelowlevel
mathfunctionswork(formoreinformationontheunderlying
technologies,youcanresearchpublickeycryptographyand
messagesigning).

Iwanttoknowmoreabouthowtosetupagateway,wheredoIstart?

https://ripple.com/wiki/index.php?title=Ripple+for+Gatewaysisagood
resource.Iwouldalsolovetotalktoyouaboutyourideaandhelpyou
becomesuccessful.
Copyright2014AndrewWhite


WhatisaSecretKey?

YourwalletsSecretKeyisyoursecretentranceintoyourwalletif
youeverforgetyourpassword.Onatechnicallevel,yourSecretKey
canalsobeusedaspartofaprogramtodothingsforyousuchas
runningatradingbot.SecretKeysarenamedsecretbecausethey
mustbeabsolutelyunavailabletoanyonebutthosetrustedtoaccess
theaccount.IfsomeonegetsyourSecretKey,theycandowhatever
theywantwithyourassets.Ifyouarehavereasontobelievesomeone
hasgainedunauthorizedknowledgeofyourSecretKey,youshould
createanewwalletandsendyourassetsovertothenewwalletas
soonaspossible.

WhatkindofventurecapitalorincubatorsareavailabletoRipple
developers?

TherecentlylaunchedCrosscoinVenturesisagoodstartingpointfor
Rippledevelopersseekingfunding.Headedbyentrepreneurialstartup
andVCveterans,Crosscoinhastheenviablepositionofbeinglocated
inthesameofficebuildinginSanFranciscoasRippleLabs.Lookfora
numberofhighqualityandinnovativeservicestoemergefromthe
Crosscoinaccelerator.

WhatisthebesttechnicalresourceforRipple?

ThebestRippledocumentationresourceislocatedat
https://ripple.com/wiki/Developerscanalsocheckout
Copyright2014AndrewWhite

http://dev.ripple.com/Forfurtherinformation,Isuggestconnectingwith
thedevelopersontheIRCchannelontheFreenodenetwork#ripple.

IwanttolearnmoreaboutConsensus,wheredoIfindmoreinfo?

TheConsensusWhitepaperreleasedinAugust2014:
http://dev.ripple.com/consensuswhitepaper.html

IdontlikehowRippleLabsdoesXYorZ,whatdoyouhavetosay
aboutthat?

RippleLabsisaveryyoungstartup.Expectationsforthisserviceare
high,perhapstoohigh.Ittakestimetobuildworldclassteams,and
staffingresourcesarealwayslimited.GiveyourissuesometimeandI
amcertainthatyouwilleventuallyseeimprovementstotheissueyou
areconcernedwith.

Whataresoftwareforks?

Softwareforkshappenwhenonegroupofsoftwaredevelopers
decidestotakethesourcecodefromaprojectandmaketheirown
possiblyincompatiblechangesfromthepriorversionofthesoftware.
Thiscanhappenforvariousreasonsbutthemostlikelyreasonisthat
onegroupofdevelopersdisagreedwiththedirectionaprojectwas
going.Thiscanbeeitheragoodorabadthing.Itisbadwhenit
dividesthenumberofpeopleworkingonaproject.Itcanbegood
whentheforkedsoftwaremakesimprovementstheotherdevelopers
werenotwillingtomake.AlternativeversionsofRippleareexpectedto
Copyright2014AndrewWhite

bereleasedinthefutureandthisisgoodfortheRippleprotocolsince
newideascanbetestedindifferentnetworks.

Whataregoodcommunityresourcesforgettinganswerstomy
additionalquestions?

Myfavoriteresourceistheforumathttps://ripple.com/forum/butthe
mostpopularcommunityforumishttps://xrptalk.org/

HowdoesRippleLabssellRipples?Dotheysellontheopenmarket?

AccordingtoDirectorofCommunicationsMonicaLongtheydonot:
RippleLabsisn'tandhasneversoldXRPintheopenmarket.Wesell
theportionofXRPreservedforbusinessoperationsthroughdirect
wholesalepurchasesonameasuredbasis.Whatwe'veseenrecently
isawholesalebuyersellingasignificantvolumeinmarket.We've
changedthetermsofwholesalepurchasingtolimitmarketimpactin
thefuture.

IhavesomethingIwanttodiscusswithRippleLabs,whatisthebest
wayformetodoso?

Talktothebusinessdevelopmentteamatpartners@ripple.comorthe
developerrelationsteamatdevelopers@ripple.com.

Copyright2014AndrewWhite

Iwanttostartacurrencyissuinggateway,butIhavenoexperience
andnocapital,howdoIgetstarted?

FirstofallIapplaudyourenthusiasmforRippleandaddingvaluetothe
network.HoweverIwouldadviseagainststartingagatewayonyour
own.Gatewaysarepowerfultoolsandwithnobackgroundin
compliance,regulations,orthetechnicalriskswithusingRippleyou
wouldbedoingyourcustomersadisservicestartingoutwithno
experience.Iwouldsuggestyoufindsomeequallyexcitedpartners
withexperienceinthepaymentsindustryordigitalcurrenciesbefore
movingforward.

Glossary

BitcoinAproofofworkdigitalcurrencycreatedin2009.The
benefitsofBitcoinisthatitisnearlyimpossibletocounterfeit(i.e.,
makefakeBitcoin)whichmakesitusefulforonlinepayments.Bitcoin
solvedtwolongstandingacademicproblems,thedoublespend
problemandtheByzantineGeneralsproblemthatallowsittoworkin
asecure,decentralizedmanner.

CodiusThisisatechnologyneutralframeworkforcreatingsmart
contracts.Moreinfocanbefoundathttp://codius.org/

DueDiligenceistheprocessofthoroughresearchbeforemaking
investments.

Copyright2014AndrewWhite

EnterprisesincludebusinessstartupsintheRippleecosystem,such
asnewgatewayservices,merchantservices,remittanceoptions,
charities,experimentalhobbies,andcommoditiesallarepromising
areasforbusinessinnovatorsandearlystageinvestors.

Gatewayaserviceproviderthatenableuserstodepositmoneyinto
andwithdrawmoneyoutoftheirgatewayaccountsontheRipple
network.Intechnicaltermsagatewayisanassetissuer.

GatewaydGatewaydisanopensourceserverthatmakesbuilding
applicationsontopofrippleeasier.Formoreinformationpleasesee
https://gatewayd.org/

RipplestheRipplenetworksnativecurrency,representedbythe
lettersXRP.InordertousetheRipplenetworkXRPmustbeused.
EachtransactiondeletesatinyamountontheRippleledgerforever.

RippleClientThisisthesoftwarethatisusefulforuserexperiences
onwebservicessuchasawallet.

RippleLabs,Inc.ownstheintellectualpropertyoftheRippleprotocol,
andpromotesRippleswideruseandgreaterusefulness.

RippleserverAlsoknowsasrippled,thisisthesoftwarethat
connectsallrippleserverstogetherintoadecentralizednetwork
aroundtheworld.Gatewayoperatorsneedtouseoneinordertohave
theirserviceusetheRippleprotocol.
Copyright2014AndrewWhite


IOUisapromisethatacertainamountoffundsthattheIOUissuer
controlsarefundsinyouraccount.AnIOUontheRipplenetworkisan
assetcreatedbyaRipplegatewayindicatingIpromisetoredeemyou
aspecificamountofthiscurrencyasset.

TraderpeoplewhousetheirRippleWalletstoexchangecurrencies
(govt.issuedcurrencieslikeUSD,CNY,etc.anddigitalcurrencieslike
XRP,BTC,etc.),functionallysimilartotradesmadeontheForeign
Exchange(FX)currencymarkets.

MarketMakersprovideliquidity(i.e.,money)thatallowspaymentsto
followapathwaybetweengateways.

StellarARippleclonefundedbyStripe.com.Themaindifferencewith
RippleisthatStellartokensareaninflationaryassetinsteadofa
deflationaryone.

Validatorsdedicatedcomputernodesthatconfirmatransactionis
validthroughtheConsensusprocess.Validatorsarethekeyto
transactionverificationthresholdbeingreachedandonlyneedtobe
usedbyexpertsorpeoplerunningprofessionalgateways.

Walletthedigitalaccountwhereindividualshold,access,anduse
theirdigitalcurrenciesinRipple.

WalletVaultAwalletvault,alsocalledawalletblobistheencrypted
storageofRipplewalletsecrets.Thewalletvaultiscreatedinsucha
Copyright2014AndrewWhite

waythattheservicehostingthewalletblobcannotreadthecontentsof
thedataorcompromiseintegrity.

AbouttheAuthor

AndrewWhiteservesasthefounderofOneMillionGatewaysInc.a
digitalcurrencyconsultingcompany.HealsoservesasSecretaryat
theInternationalRippleBusinessAssociation,whichisthepremier
organizationofmerchantsandbusinessesthatusetheRippleprotocol.
AndrewhasbeenactiveforyearsintheBitcoincommunitiesinSan
FranciscoandtheBayArea,andbeganusingXRPsoonafterits
introduction.

Copyright2014AndrewWhite

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