`

RippleExplainedGuide
Version1.97

byAndrewWhite
andrew@onemilliongateways.com
twitter@OMGateway

Copyright2014AndrewWhite

HelloandwelcometotheRippleExplainedGuide.Thisbookisonly
foreducationalpurposes,andisnotintendedtoprovideinvestment
advice.

Mygoalforthisbookistobelargelynontechnicaland,astheauthor,
Ifeelacertainresponsibilitytomakesureeveryonewhoreadsthis
booklearnssomethingofvalue.Iapologizeinadvanceifthereis
anythinginthisbookthatistootechnicalortoocomplicated.Ifthereis
apassageinthisguidethatdoesnotseemtomakesenseoristoo
complicatedIaskthatyoudontgiveup,keepreadingandcomeback
toitlater.Takeyourtimewitheachsectionandsupplementyour
learningwithGooglesearchestohelpgettheanswersontermsor
areasofinterest.ThroughoutthetextIincludelinksforyoutofollow
uponforfurtherresearch.Whenyouaredonelearningallthe
informationbelowdontbesurprisedifafterreadingthisguideyou
becomethegotoexpertaboutRippleinyoursocialnetwork!

InmyopiniontheRipplepaymentsystemisoneofthemostexciting
technologiestobedevelopedinrecentyears.Forthefirsttime,
paymentscanbesenttoanyoneintheworldinanycurrencywithina
fewseconds.IdescribeRipplelikeemailformoney.Butevenbetter
thanthatisthatactivitiesthatwereoncethesolepurviewofthe
bankingindustry,suchaslendingormakingpayments,havebecome
democratizedintheRipplesystem.Themyriadopportunitiesand
challengesthesenewoptionsbringtothemassesopenawholenew
setofpossibilitiesforthediscerningentrepreneurorinvestorto
consider.Thisebookpresentsabriefoverviewofbusiness
opportunitiesintheRippleecosystemandwhatrolesyoucanplayin
thisexcitingnewareaoffinance.IhavebeeninvolvedwithRipple
sinceearly2013andIhaveexperiencedallofthedifficultquestionsof
Copyright2014AndrewWhite

tryingtowrapmyheadaroundit.AfterIbegantalkingtopublicabout
itIquicklylearnedthateveryoneasksthesamequestionsandone
waytosatisfythosequestionsistowriteabookaheadoftime.Soon
thatnoteIwanttocoverthemajorcomponentsofRippleasitexists
todayanddivedeeperintoeachtopicbutwithoutgettingintothegritty
details.Sowiththatsaidwithanynewtechnologytherearetradeoffs
betweensophisticationandeaseofuse,newfeaturesand
complications,newcapabilitiesandnewrisks,andRippleisno
different.ThisbookwasstartedinDecember2013inadozenpages.
Overtimeithasexpandedover39pagesandmyintentismakeyou
conversantinthemainareasofRippleandinviteyoutocontinuein
yourownareaofresearch.

Bestwishes,
AndrewWhite

Acknowledgments:Iwouldliketothankthefollowingpeoplewiththeir
helpinthisdocument:FredLaughterforediting,RippleLabsfor
permissiontoreusetheirimages,andtheRipplecommunityfor
makingvaluablefeedbackandsuggestions.

Copyright2014AndrewWhite

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

Copyright2014AndrewWhite

WhyDigitalCurrency?

BeforewegetintoRippleIdliketoprovidesomebackground
informationaboutwhatcurrencyisandwhatishappeningwith
currenciesingeneral.Irecentlygotbackfromaconferencecalled
Money2020andhadadiscussionwithafriendthatexplainedthe
importanceofdigitalcurrencyintermsofhumanhistoryandIthought
Iwouldrelatethatstoryhere.

Beforewebeginweshoulddefinewhatacurrencyis,anditisusually
definedtohavethefollowingsixtraits:Durability,portability,
divisibility,uniformity,limitedsupply,andacceptability.Someoneelse
(Ihavenotbeenabletofindthenameoftheoriginalauthor)explained
theseinthefollowingmanner:

Acceptability:Intermsofaformofcurrencybeingacceptedwithin
society,moneymustbeacceptedbyeveryoneintheeconomy.This
acceptanceisforthepurposeoftheexchangeofmoneyforgoods
anddifferenttypesofservices.

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

Copyright2014AndrewWhite

Durability:Thissimplyreferstothephysicalwearanduseofmoney
overaperiodoftime.Ifsomemoneyiseasilydestroyedordamagedit
islikelythatitisfraudulentandthereforecannotbetrusted.Yet,
moneyismadefromapapersource,sosomewearandtearmustbe
expected.

Limitedsupply:Inorderformoneytoretainitsworth,theremustbea
typeoflimitedsupply.Themoremoneythatisincirculationthelessit
isvaluedbytheeconomy.

Portability:Quitesimplyitisnecessaryformoneytobeeasily
transportedsothatpeoplecancarryitaroundwiththemonadaily
basis.Thisalsoallowsfortheeaseoftransactionsothatmoneycan
betransferredfromoneplacetoanother.

Uniformity:Dependingonthedifferenttypesofcurrencythatare
available,moneywithinthatspecificcurrencymustlookthesame.
Thisalsoallowsformoneytobecountedandmeasuredaccurately.

Analternativewayfordistinguishingthecharacteristicsofmoneyis
thatitiseasilyrecognized.Moneyissubjecttothetypeofcurrency
thatisincirculationwithinaspecificplace,soifitiseasilyrecognized
anditfollowstheabovecharacteristics,thenitislikelytobegenuine.

Forthesereasons,thephysicalmetalgoldhasbeenusedascurrency
forthelastfivethousandyears.Thereasonforthisisthatthegold
metalhascharacteristicsthatmakecounterfeitingitimpossible.For
centuriesalchemistsattemptedtheimpossiblebytransformingbaser
Copyright2014AndrewWhite

metalslikeleadintogoldbutwiththemoremodernscienceof
chemistryitquicklybecameunderstoodthatthiswasimpossible.
Howeverusinggoldasthesolecurrencyisproblematicforeconomic
reasons.Forofallitcanhavesubstantialweight.Itshardor
expensivetosecure.Sendingittosomeoneelseisdifficulttodo
securely.Andtheresimplyisntenoughofitfortheworldsexpanding
populationasonlyaconsistentamountcaneverbeminedoutofthe
earth.Thusitbecamepopularinrecentcenturiestorepresentgoldin
papermoney.Toassurepeopleoftheintrinsicvalueofthepaperbills,
thefacevalueofthedollarswasbackedbycertainamountsofgoldor
silverwaspromisedtothenoteholder.Howeverasmostpeople
know,thiscreatesanadditionalproblemasconterfeitingpapermoney
iseasy.Famously(orinfamouslyaccordingtosome)in1972,Richard
NixontooktheUnitedStatesoffthegoldstandardandpeggedthe
valueoftheUSdollartoanewmeasureofeconomicfitnesscalledthe
GrossNationalProduct(butwewontgetintoallthereasonsforthat).
WiththeGNPthevalueofthedollarbegantobecreatedindigital
systems.Inthepresentdaythishasevolvedsomuchthatsome
economistsbelievethatelectronicsystemsmakeup95%ormoreof
allmonetarytransactions.Thishasbeengoodforsocietybecauseit
makesthecostofusingmoneylowerforeveryone(andthatsagood
thing).Creditcardsareoneofthemostfrequentlyusedtoolsfordoing
this.CreditcardswereinventedinthetimebeforetheInternet
(WesternUnionstartedacardprogramin1921!).Howeverasmost
peopleknowtheunderlyingproblemsofearliergenerationsof
currency,fraudulentuseofthetoolisaveryexpensiveproblemthat
theincumbentplayershavenotbeenabletofixandabout1%ofall
creditcardtransactionsarefraudulent.In2009,Bitcoinsrelease
solvedtheissueofhowtomakeadigitalcurrencyandbepractically
impossibletocounterfeit.Bitcoinusessomespecialapplicationsof
Copyright2014AndrewWhite

mathandcryptographytomakecounterfeitingitnearlyimpossible.
Thisiswonderfulformerchantssincethehighcostsofhandling
fraudulenttransactionsiseliminated.Understandthatthenear
impossibilityofbeingcounterfeitedisthekeyfundamentalreasonfor
thegrowthofBitcoinstylecurrenciesonline.Itisnearlyimpossibleto
counterfeitforreasonsthatwillbeexplainedlaterbutthemainreason
isduetotherelianceonaparticularmathfunctionofcryptography,
moredetailscanbefoundintheFAQattheendofthisbook.
Proponentsofdigitalcurrenciesthatunderstandthisclaimthatthis
makesdigitalcurrenciesabetterstoreofvalueandexchangethan
gold,whichisanaweinspiringleapinhumanprogressifthepremise
holdstobetrueforasufficientlylongperiodoftime.Onlytimewilltell
iftheclaimstandsuptoscrutiny.Nowthatweunderstandthebasic
reasonstojustifyapeertopeerdigitalcurrency,soonwewilllearn
howtobuildapeertopeerexchangeusingRipple.

RippleLabs

Firstletsstartwithadefinitionofterms.Rippleisthenameofanew
paymentstechnology.Rippleisdevelopedbyacompanynamed
RippleLabsInc.inSanFrancisco.Originallythecompanywas
formedasOpencoinIncin2012,andlaterreformedin2013byChris
Larsen,JedMcCaleb,DavidSchwartz,andafewothers.RippleLabs
ownstheintellectualpropertyoftheRippleprotocolandtheRipple
namebutthecodeandprogramsthatmakeupRippleareavailable
forfreeforanyonetodownload,useandmodifyastheyseefit.Ripple
LabssoftwareisextendedbyacommunityofRippleenthusiasts
aroundtheworldwhoarepassionateaboutmakingthetechnology
Copyright2014AndrewWhite

moreuseful.Thesepeopleprovideessentialfeedbacktoproduct
teamsandengineersleadingtheoverallimplementationofRipples
development.TheknowninvestorsinRippleLabsincludeGoogle
Ventures,AndressonandHorowitz,LightspeedVentures,Bryan
Bradford,andothers.AsofOctober2014,RippleLabshasastaffof
60peopleledbyCEOChrisLarsen.Mr.LarsenistheformerCEOof
ELoanandlaterProsper.com,bothofwhichwerepioneering
companiesinpeertopeerlending.
Asanoutsider,IcantsayanythingdefinitiveaboutRippleLabs
specificbusinessstrategies.Buttheiractionsshowthattheyare
committedtoincreasingthevalueoftheRipplenetwork.Theydothis
throughavarietyofstrategiestoshowthepublicthatRippleprovides
abettersystemforpaymentsthanthealternatives.Oneofthewaysof
accomplishingthisisbymakingusefulsoftwareandgivingitawayfor
free.ThesourcecodeofthesoftwarefromRippleLabscanberead
andusedbyprogrammersatnocharge,whichisanopeninvitationfor
curiousengineersandprogrammerstomakecontributionstothecode
andexpeditethedevelopmentofthecorefunctionality.Thisalso
providesavaluablesafetymechanism.Sincemoreeyescanlookat
theunderlyingcode,potentialissuescanbeidentifiedandfixedearly,
beforebecomingaseriousissue.RippleLabscangiveawaythe
softwareforfreebecausethecorevaluepropositionofRippleisthat
anopenpaymentnetworkthatanyonecanuseandimproveismore
valuablethanaclosedalternative.Sofartheplanseemstobe
workingwellandRippleisstartingtomakebigwaves.

Copyright2014AndrewWhite

IfwelookatthehierarchyoffinancialservicesintheUnitedStates,
RippleisdesignedtoreplacetheAmericanClearinghouse(ACH)
paymentsettlementsystem.ACHwasinventedinpreInterneteraand
isamajordragontheefficiencyofmovingmoney.Anothersystem
thatEuropeanswouldbefamiliariscalledSwift.Swiftisanewer
protocolforpaymentmessaginganditworksalotbetterthanACHbut
theproblemisthatUSbanksdontuseitdomestically.Swiftisfaster
thanACH,sameornextdaypaymentsisthenormandother
countrieslikeChinaandMexicouseasimilarsystem.Butwhereas
Swiftisspecificallyapaymentmessagingprotocolandnotapayment
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.Underthe
hoodthenameistiedtothepublicnameoftheRippleaddressthat
beginswiththelowercaserandlookslikethis:
r3CxMDQFX1Atq1vQN5sqVsjm3rawGSwd32(note:donationstothe
authorarewelcome!).

Copyright2014AndrewWhite


ThisisanexampleofwhataRIpplelookslikeavailableat
https://www.rippletrade.com

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

Sothewalletisalwaysavailableonawebpageandhasthefollowing
functionality:wallettransactionhistory,anaddressbook,asectionto
sendandreceivepayments,andasectionofthewalletforyouto
makecurrencytrades.Andthatisaboutit.
ItisimportanttonotethatRipplewalletsarenotinsuredbythe
FederalDepositInsuranceCorporation(FDIC),whichwascreatedby
theU.S.governmenttoprotectconsumersfrombankfailures.
Formostconsumers,thepowerofRipplepaymentshappenswhen
paymentsaresentacrossthenetworkwithinafewseconds.To
anyoneaccustomedtotheslowandcumbersomeprocessof
Copyright2014AndrewWhite

traditionalpaymentnetworks,thisisanincredibleadvancein
paymentstechnology.Nolongerdopeopleneedtowaitfordaysfora
bankwiretransfertobecompleted,orweeksforacreditcard
paymenttobeprocessedwithRipple,havingtowaitforpayment
processingisathingofthepast.Eveninareaswithmodernbanking
systems(likeEuropeandChina)withsamedaybanktransfers,the
existingpaymentsystemisstillarelativelyslowandcostlyprocess
thatcreatesanunnecessarydragontheeconomy.Justimaginewhat
kindoflowcostnewserviceswillbecomeavailablewithRippleto
merchants,consumers,andinvestorsacrosstheentireglobal
economy.
Asfarasmostusersareconcerned,theRipplewalletisalsowhere
magichappensinitsroleinredefiningthepaymentexperience
aroundtheworld.Tobehonest,inmyopinion,walletsarenotallthat
interestingvisually,orconceptually,norshouldtheybeparticularly
interesting.Theyaredesignedtobeassimpleaspossiblehence
thereisntmuchtoseeordoinaRipplewallet(withtheexceptionof
trading).
Advancedconceptwarning!IliketodescribeRipplewalletsusingthe
followingexamplebutitisnotapreciseanalogy.Ijustmentionedthat
RipplewalletsarenotFDICinsuredbecausetheyarenotissuedbya
U.S.charteredbank.Allowmeartisticlicensewiththefollowing
analogy:aRipplewalletiskindoflikeabankaccountbutyouasthe
walletowner(accountowner)areempoweredtocontrolhowmuch
moneyyoutrusttobeheldbyyourvariousbanklikeentities
(gateways,moreaboutthemlater).
RippleWalletsaregreatbecausewhentheycanstoreormake
paymentsinanycurrency.Theauthorcantthinkofanyotherwallet
evercreatedthatisabletoacceptanycurrencyevercreated,
includinggovernmentissuedcurrenciesandprivatecurrencies!For
Copyright2014AndrewWhite

thefirsttimeinhistory,digitalwalletuserscanholdanycurrencyever
issued.ThisisaBigIdeathatmaytakeyearstobewidely
understood,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.TheRipple
concepthasbeenaroundpriortoRippleLabs.Itwasfirstworkedon
in2004andlateronin2011thecoreteamaroundRippleLabswas
formedwhothenreleasedittothepublicinthebeginningof2013.
EverytimeyouuseRipple,areallytinyamountisdeletedtomake
surethenetworkdoesnotgetoverloadedbypaymentmessages.The
logicisthataverageconsumersmightonlyneedtousearelatively
fewRipplesacrosstheirentirelifetime.Ripplewasreleasedwitha
hardlimitof100billionunitsofXRPtoeverexist.The100billion
numberwasjudgedtobelargeenoughtobeusefulfortheRipple

Copyright2014AndrewWhite

networkforhundredsofyears,andquantifiableenoughtoprovidea
businessmodelforRippleLabs.
OnceRippleswerecreatedthenextstepwastofigureoutthebest
wayonhowtodistributetheminthemosteffectivemanner.Itis
criticaltotheRippleLabsbusinessstrategythatXRPbedistributedto
awidenumberofmarketparticipantswhointendtouseRippleasa
systemforpayments,currencytrading,orassetissuance.Acool
featureofXRPisthatasthenativecurrency(Ilikethetermmeta
currencybutitisnotascompletelyobviousastowhatthatmeans),
XRPcanbespenttosend(orreceive)anyothercurrencyofferedfor
saleinsidetheRipplenetwork.RippleLabsalsosellsbulkquantities
forlargeordersandgivesawaysmalleramountsforfree.Inlargepart
theirtargetmarketarebankstouseXRPtomakeinterbankpayments
andfacilitateinternationaltrade.

SonowthatwehavecoveredabitofhowmuchXRPthereis,whatit
isusedfor,andRippleLabsroleinthedistributionofXRP,letsmove
ontoinvestmentopportunitiesinthespace.

TherearedifferentinvestmentstrategiesinvolvingRipplesandalarge
numberofpeopletradethemagainstothercurrenciesforspeculation.
Beforegettingintothevariouschoicesavailable,Iwouldsuggest
wouldbeinvestorsaskthemselvesafewquestionssuchas:

AmItechnicallyproficientenoughtohandledigitalcurrenciesonmy
own?
DoIalwaysfollowbestpracticesforcomputersecurity?

Copyright2014AndrewWhite

ShouldIrelyonareputableconsultant,broker,orhedgefundto
managemyinvestment?
AmIwellversedinthenatureofonlinescams,walletsecurityissues,
andlegalissuesbeforebuying?
ShouldIuseXRPasahedgeagainstmyotherinvestments?
Youranswerstothesebasicquestionsshouldhelppointyouinthe
directionthatsrightforyou.Itdoesnthelptobelessthanentirely
honestwithyourself,sobecandidandassessyourstrengthsand
weaknessesbeforemakinganyinvestment.
Investorsmustbeawarethatthereareinherentrisksassociatedwith
digitalassets.Theftsandscamsareanunfortunatebutinevitable
aspectofonlineofferingsandtheinvestormustalwaysperformdue
diligencebeforetrustingotherswiththeirmoney.Evenifan
investmentisnotfraudulent,thereisnoguaranteethatthevalueof
theinvestmentwillyieldprofits.Youarecompletelyonyourownon
thisone.RippleLabscannotandwillnotcommentontheinvestment
fitnessofRipple,XRP,orthevalueandsafetyofclaimsmadeby
nonRippleLabsstaff.Duediligenceistheprocessofinvestigatinga
proposedinvestment,andtheresponsibilityforduediligenceis
entirelyuptoyou.Beappropriatelyskepticalandcautiousinallyour
dealings.
Atfirsttheywereworthnothingatmarketrates,butXRPhassteadily
increasedinvaluethroughasteadilyincreasingnumberofservices
builtforit.AlthoughthepriceofXRPhasbeenrelativelystable,itis
notimmunefromdrasticpriceswingssimilartoapennystock.
Althoughcurrentlyvaluedforlessthanapenny,Ripplesarereally
onlyusefulformakingtransactionsontheripplenetworkbut
speculatorsontheRipplenetworkliketotradeitagainstotherassets.

Copyright2014AndrewWhite

Becautioushoweverasonrareoccasionsthevaluehaschanged
hundredsorthousandsofpercentaday.

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

Asgatewayscompeteformarketshare,Ifullyexpectthatmore
gatewayswillbelaunchedthattheywillincreasinglyofferinnovative
rewardsprogramslikeairlinemiles,coupons,andpremiumservice
discounts.

Thereareanumberofservicesavailabletopeoplewhowanttocreate
andoperateagateway.Iftheyhaveastrongtechnicalbackground,
theycanusuallysetoneupthemselves.Iftheydonthavethe
technicalskills,theycanuseahostedwallet(moreonthatina
moment)oruseconsultants.Iftheyareseriousaboutgettingintothe
Copyright2014AndrewWhite

gatewaybusiness.Inthefuture,cloudbasedoptionswillbeavailable
suchasOMGsOneMillionGatewayshostedservice.

BecauseofRipplesdesign,anyonewithaRipplewalletcan
technicallybecomeagateway.

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

Copyright2014AndrewWhite


ThisisanexampleofagatewayserviceloginpageusingSnapSwapInc.asan
example.

Hereiswhatabasicgatewayaccountexperiencelookslike.

Gatewaysasabusinesshaveafewdifferentbusinessmodels
availabletoguidethem.Oneexampleisagatewayprimarilyusedfor
moneytransmission,anotherexampleisremittance.Asagateway
operator,youmightbeinterestedinenablingpeopletosend
paymentstoanothercountry.Aconsumeropensanaccountonyour
Copyright2014AndrewWhite

gatewayandsendsyoumoneytogointhataccount.Thegateway
operatorissuesIOUs(moreaboutthoseinthenextsection)tothe
accountholderandthoseIOUsappearintheholdersRipplewallet.
TheaccountholdercanthantradetheseIOUsforanothercurrency.In
theothercountry,apersoncanwithdrawtheseIOUsfromthe
gatewayandreceivetherealcurrency.Thegatewaymakesmoneyby
chargingatransactionfee.Iftheoriginalgatewayswebsiteorservice
becomesunavailable,theIOUsdonotdisappearfromRipplewallets.
Intheeventofbankruptcyorotherseriousdisruption,theIOUsmay
losesomeoftheirmarketvaluefortheIOUsofcurrencythey
represent,buttheycouldberedeemedwhenthegatewaybusiness
returns.Theuniquecircumstancesofthegatewaysissuewilldecide
whatrecourseisavailabletotheIOUholders.
ThechartsonRippleCharts.comcontainthemajorcurrencymarkets
onRipple.ThesearetypicallywrittenintheformofBitstampUSD/
XRPtoindicatethattheseIOUsareissuedbytheBitstampgateway
intheUSDcurrencyandistradingagainstXRP.Anotherexampleis
theChinesegatewayRippleCN.TheirIOUsfortheChineseYuanlook
likethis:RippleCNCNY/XRP.BackoveratBitstamp,youwillseethat
BitstampUSDisalsoabletobetradedforBitstampBTC.Gateways
cansetrulesonthefeesoftradesorpoliciesastowhatisallowedto
betradedbutingeneralalltheIOUswillbetradableforallthe
equivalentIOUsonagivengateway.
Aquickwordaboutaddingtrusttoagateway.Sinceanyonecan
createagatewayitiscriticalthatyouonlytrustaproperlyestablished
gateway.Thismeansitisattheveryleastincorporatedandisrunby
publiclyknowncorporateofficers.Ifthegatewayisoperatedinan
anonymousmanner,thatmeansthereisnoaccountabilityifthe
servicedisappears.Thisisimportant:inyourRippleWallet,you
shouldonlygivetrusttogatewaycompaniesthatyoutrusttobe
Copyright2014AndrewWhite

reliableandresponsiblewithyourtokensofvalue,e.g.money.Since
agatewayisnotusuallyabank(atleastatthetimeofthiswriting),
notethatthereisnoFDICstyleinsurancefordepositsmadetoa
gatewaybusiness.Agatewaythatmakesanefforttobelegitimate
haspubliclyknownstaff,abusinessaddress,customersupport
details,and/oraphonenumberwithpeoplewhoanswerthephone
duringestablishedhoursofbusinessoperation.IfaRipplegateway
websitedisappears,yourIOUsdonotdisappearfromyourRipple
Wallet.TheproblemisthatredeemingthoseIOUsfortheircashvalue
isimpossibleunlessathirdpartygatewayacceptsthemfortheircash
equivalents.Icansumthisupsimply.Whenitcomestoanonymous
gateways:donttrustthem.
Astandardsgroupforgatewayshasbeenformedcalledthe
InternationalRippleBusinessAssociation(IRBA),whichoperates
independentlyofRippleLabs.IwilldiscusstheIRBAmorebelowbut
fornowyoushouldknowtheIRBAhasasetofrequirementstomake
surethatthegatewayslistedonIRBAswebsiteathttp://xrpga.orgare
legitimateorganizations,operateusingbestpracticesforbusinesses,
etc.Thereareroughly170membersoftheIRBAatthepresenttime,
includingpeoplewhohaveexpressedtheirinterestinforminga
gatewayforcertainmarketsorareasintheworld.

Consensus

Consensusiswherewestarttogetintothenittygrittytechnicaldetails
ofhowRippleworks.Youdontneedtoknowallofthisinfoifitisnot
rightforyou.Iliketotellpeopleunderstandinghoweverythingworks
isnotarequirementtoinvestinaRipplebasedasset.Therearealot
ofcomplexthingsinlifethatdonotrequiredafullunderstandingof
Copyright2014AndrewWhite

howitworks.Acoupleoftechexamplesincludeareexactlyhow
computersworkorexactlyhowawebbrowserworks.Weassumethat
theprofessionalsthatmakethesetoolsknowwhattheyaredoingand
theycanspareusthegorydetailsandletusmoveontodowhatwe
wanttodowiththetool.Sowiththatsaid,Ijustwanttomakesurethat
youunderstandRippletothelowlevelcodeandprotocolislikewise
notarequirementtounderstandtheideasofRipplesoifthetechnical
detailsdonotinterestyoufeelfreetoskipoverthissection.Ifyouare
familiarwithBitcoinlikecurrenciesyoumayhaveheardthatBitcoin
worksthroughaschemecalledproofofwork.Proofofworkisa
processinwhichcomputerscooperateonsolvingahardmath
problemthatinitiallynoneofthemknowtheanswerto.Whenthe
answerisfound,thecomputerthatsolvestheproblemisawardeda
block,anawardofBitcoin(25atthetimeofthiswriting)andthe
blockisdistributedalongtoalltheothercomputerswithacopyofall
thetransactionsthattookplaceinthepriorblock.Thisiswhatallows
transactionstotakeplace.Intechnicalterms,thissolvesanimportant
problemofhowtosolvethedoublespendingproblem.Adouble
spendissomeonespendingthesameunitsofcurrencytwice.If
everyonethoughttheycouldjustusespreadsheetstocreatea
cryptocurrency,theywouldsoonfindthatsomeonewouldcheatby
manuallychanginghowmanypaymentsweresent.Anotherproblem
thissolvesisreferredtoinacademiccirclesastheByzantine
Generalsproblemwhichishowtocommunicatealonguntrustworthy
paths.Thisproblemhasexistedforalongtimeandonewayofsolving
itwasreleasedtothepublicin2008bySatoshiNakomoto,the
anonymouscreatorofBitcoin.In2011JedMcCalebwasthinkingof
waystosolvesomeoftheproblemswiththeproofofworksystem.In
particular,JedwantedtosolvetheslowtransactiontimeofBitcoin.
WaitingforcomputerstosolvetheproofofworkproblemonBitcoin
Copyright2014AndrewWhite

cantaketenminutesorhoursintimeandthatwaittimeisnotgoodfor
merchantsorconsumersusingthesystem.Whathecameupwasa
newapproachcalledConsensus.Ifthemajorityofcomputersona
digitalcurrencynetworkcouldagreethatatransactionhappened
therewouldbenoreasontodoubtthatatransactiontranspired.The
proofofworksystemreliesonseveralcomputersagreeingthata
transactionoccurred,whichiscalledconfirmations.Afterenough
confirmationsoccuritcanbereasonablybeassumedthata
transactiondidinfacttakeplace.Withaconsensusbasedapproach,
transactionscouldtakeplaceinsecondsratherthanminutes.There
canalsobealotmoretransactionssincethecomputationalcostof
thissystemislow.Thisbringsustoanotherproblemthathaslong
beenanacademicpuzzle,theByzantineGenerals'Problem.Thisproblem
asks,howdotwogeneralscometoanunanimousagreementwhen
theyareseparatedbydistancesthatcreateobstaclesto
communication?

OneanswertothisproblemisdonewiththeRipplesoftware,the
networkissetuptovalidateatransactionif80%ofvalidatornodes
agreeatransactiontookplace.

NextImgoingtoextensivelyquoteRippleLabsChiefCryptographer
DavidSchwartzwhohasalottosayonthisimportanttopic:The
numberwasdeterminedbysimulation.Ifyousetthethresholdtoo
low,theconsensusprocesscompletesveryquicklybutmore
frequentlydoesn'tactuallyreachconsensus.Ifyousetthethreshold
toohigh,theconsensusprocesstakesmuchlonger,butonlyvery
rarelyfailstoactuallyreachconsensus.(Whenyousay,"Ibelieve
Copyright2014AndrewWhite

there'saconsensus",youcan'tactuallybe100%surethereisinfacta
consensusornobodycandeclareaconsensusfirst.)Theconclusion
thatnoconsensushasbeenreachedisavalidconclusionandcan
resultduetopoortopologyorByzantinefailure.Certaintyisalways
withrespecttosomethingthathasoccurredinthepast.Itisnot
possibletoknowwithcertaintythepresentstatewithoutobservingat
morepointsthanwillnormallybepossible.
Soeachserverrunsoutaheadofwhatitknowsforcertain,applying
transactionsandattemptingtoreachconsensusonthem.Whenandif
aconsensusisinfactproduced,theserverlaterdeterminesthiswith
certainty,andthuscanadvancewhatitknowsforcertain.
Essentially,theconsensusprocessproducesastreamofsigned
messagescalled"validations"fromwhichit'spossibletodetermine
withcertaintywhetheraconsensushadactuallybeenreachedat
somepointinthepast.
ItispossibletocreateUNLtopologiesthatfrequentlyfailtoreach
consensus.TheplanistohaveRippleserversbuildtheirUNLsusing
analgorithmthatmakessuchtopologiesexceedinglyunlikely.
Evenwithaperfecttopology,twotypesofByzantinefailuresare
possible.
One,whichisnotthatuncommon(oneoutofevery200roundsorso),
isalocalfailure.Inorderforaconsensustoeverarise,someonehas
todeclareaconsensus.Andforthattohappen,someonemust
declareaconsensusfirst.Whenthathappens,whoevermakesthat
Copyright2014AndrewWhite

declarationcan'tknowforcertainthatotherswilldeclarethatsame
consensus(ortheywouldhavealreadydoneso,andsohewouldn't
befirst).Soit'salwayspossiblethathedeclaresthewrong
consensus.
Inthiscase,theserverthatsufferedtheByzantinefailurequickly
discoversthattheothervalidatorshavebuiltadifferentledgerthanit
didanditbeginsitsresynchronizationprocess.Otherserverswillstill,
fromthevalidations,whichledgerwasthemajorityledger.
AmuchlesscommontypeoffailureiscompleteByzantinefailure.In
thiscase,severalserversdeclaredifferentconsensusesandthereis
noclearmajorityledger.Inthisrarecase,thenetworkasawhole
mustreconvergebeforeatrueconsensuswillemerge.Ripplehasan
algorithmtodoexactlythis.Serverswillseetheconflictingvalidations
andknowwithcertaintythattherewasnoactualconsensus.
OntheRippleforumrecently,amathematicallymindedmember
askedDavidthefollowingquestionHowdoesRipplesolveByzantine
Generals'Problemsuchasnosolutionunlessn3t+1,n=number
ofprocessesinthesystemandt=numberoftraitors?

SohowRipplesolvestheByzantineGeneralsproblemissimple.The
consensusprocessispermittedtofailbecauseitdoessoharmlessly.
Iftheconsensusprocessformsaledgeronwhichthereactuallyisno
consensus,thentherewillbeinsufficientvalidationsandthe
consensusprocesswillrepeat.ToputitinByzantineGeneralstermsif
yougettothebattleandtheotherarmiesaren'tthere,youjuststart
over,nothingcatastrophichappens.Inotherwords,keeptryinguntil
Copyright2014AndrewWhite

thevastmajorityofmessagesagreeatransactionisaccurate.
Perhapsnotsurprisinglythissimplebutelegantsolutionhaswide
rangingramifications.

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

Validators

SincewearediscussingthetechnicaldetailsofhowRippleworks,for
completenessIjusttomentionValidatornodesandwhattheydo.

TheRipplewikihasthistosayaboutvalidatorsTheRippleprotocol
dependsonacollectionofvalidatorswhoparticipateintheconsensus
processandproducesignedledgerswhichgetbroadcastintothepeer
topeernetwork.Clientsandpeerscollectanddependonthese
signedledgerstodeterminewhatistheconsensusledger,orthe
"true"stateoftheledger.Crucialtothesecurityofthenetworkisthat
eachRippleserverchoosetopayattentiontoasufficientlylarge
diversesetofvalidatorswhoarenotcolludingtodefraud.When80%
ofvalidatornodesagreethataedgerisvaliditgetssignedand
confirmedacrosstheentireRipplenetwork.Thisisanalternative
solutiontotheByzantineGeneralsproblemfirstsolvedbyBitcoin
withmining.

Copyright2014AndrewWhite

CurrencyIOUs

IOUs(Ioweyouspronouncedhowitisspelled,eyeohu)are
creditsandarewhatmostpeoplewilluseonRipple.IOUsstandforI
oweyou(something).WearemostfamiliarwithIOUsfromour
bankingorinvestorstatementthatismailedmonthlybyfinancial
serviceproviders.AnIOUisapromisethatacertainamountoffunds
thattheIOUissuercontrolsarefundsinyouraccount.Therealityis
thattheIOUholderhasatotalamountoffundsthatitcontrolsand,
fromthistotal,theyuseadatabasetoorganizewhattheyowetheir
customersandthenumberdisplayedtoyouistheIOU.IOUson
Ripplenetworkoperateonthesameprinciple,butinsteadofa
bankingorinvestmententitycreatinganddisplayingtheIOUtoyou,
anIOUontheRipplenetworkisanassetcreatedbyaRipplegateway
indicatingIpromisetoredeemyouaspecificamountofthiscurrency
asset.IfyoureceivedapaymentforUSdollars,youwouldseethe
depositoftheUSDIOUsinyourRippleWallet.

IOUsarewhatmakeRippletheemailofcurrencies.Theemail
protocoldoesnotcarewhoyouaresendingamessageto,orthe
contentofyouremailandRippleworksthesameway.Thesender
andrecipientofanemailislikethesenderandreceiverofRipple
wallets,themessageinanemailissimilartowhatcurrencyand
howmuchissentinthetransaction(themessage,inouremail
analogy).Thefinallessonyoushouldtakeawayfromthisisthatan
IOUhasnovaluewhenitisnotbackedbyanassetthatcanbe
redeemed.

Copyright2014AndrewWhite

Pathfinding

PathfindingisanotheroneofthetechnicaldetailsthatIincludefor
completenessandisfairlyselfexplanatory.ThisishowRipplefinds
waystomakethebestavailablepayment.Thepriceonatransaction
feecanvaryinRipplebasedonthebestpossibleexchangerateon
theorderbooksofRipplecurrencies.AsthisdiagramfromRipple
Labsillustrates:

Copyright2014AndrewWhite

Pathfindingisofmostinteresttomarketmakersandtechnicaltypesto
beabletoservemarketactivity.Itisimportanttonotethatalthough
Rippleisfastitisslowenoughastomakehighfrequencytrading
impossibleandapartofthereasonwhythatisisbecauseofthetime
ittakesPathfindingtowork,afewsecondsistooslowforHFTtobe
effective.

Traders

AnyonewithaRipplewalletcantradethedigitalcurrencyassetson
Ripple.SendingapaymentofanysortusingtheRipplenetworkis
equivalenttomakingatradeontheforeignexchange(alsoknownas
forexandFX)currencymarkets.

Eachcurrencyhasathreeletterabbreviation,andeachcurrency
tradeisexpressedasapairthatincludesthebasecurrencyanda
countercurrency.Eachcurrencypair(USD/XRPorEUR/JPYor
Copyright2014AndrewWhite

CNY/BTC,etc.)issupportedbyagatewaythathasanorderbookof
buyersandsellersofaparticularcurrencypair.Thedailytrading
volumeontheRipplemarketisgrowingrapidly.Atthetimeofthis
writing(March2014),themostpopularcurrenciestradedareChinese
Yuan(CNY),USD,andBTC.

Automatedtradingisapopularchoiceforinvestorswiththetechnical
knowhowtoworkwithprogrammingscriptstomakeatradingbot.
ThesebotsconnecttotheRipplenetworkandlookatthebidsand
asksincertaincurrenciesandtradeaccordingtouserdefined
parameters.Mostofthesebotsrequireafairamountoftechnical
knowledgeandskilltosetupanduse.Althoughthereareno
algorithmictradingservicesavailabletoinvestorsatthemoment,
theseareknowntobeindevelopment.Tradeandforgetbotscanbe
extremelyvaluableastheyworkforyouaroundtheclockwithouttiring
ormiscalculating.

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

MarketMakers

Marketmakersarepeoplewhoprovideliquidity(i.e.,money)between
gatewaystoallowpaymentsthroughapathwayofcurrenciestobe
Copyright2014AndrewWhite

made.Muchlikehowaroadprovidesapathforacartoreachits
destination,apathwayistherouteatransactiontakestocompletea
payment.Althoughthereareafewwaystobecomeamarketmaker,
theeasiestiswithasimpleorderintheRipplewalletforthesame
currencybetweenthetwoormoregatewaysyouwanttomarketmake
for.Itshouldbenotedthatanyonecanbeamarketmakerbutithelps
tohavealotofcapitaltomakeitmoreworthwhileforthemarketsyou
aretryingtosupport.

Enterprises

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

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

CreatingorinvestinginanewcompanyintheRippleecosystemisan
attractiveoptiontotheinvestorfamiliarwithmanagingequityassets.
Rippleissonewandtheopportunitiesitofferssolargelyuntapped,
Copyright2014AndrewWhite

thatthedooriswideopenforenterprisingindividualsandstartupsto
makeasubstantialimpactwithlittlestartupcosts.Ifthisissomething
thatinterestsyouinpursuingabusinessIstronglyencourageyouto
doso.ComplementaryservicesthataddvaluetotheRipplenetwork
issomethingRippleLabsisveryinterestedinsupportingandyou
shouldletthemknowaboutitonceyouarereadytolaunch.

DueDiligenceQuestions

Investorsshouldbeaskingthemselvessomehardquestionsandhave
honestanswersbeforebeginningtoinvestinRipple.Herearesome
basicsforyoutoconsider:

HowwelldoIunderstandRipple?
WhatdoInotunderstandaboutRipple?
Whataretherisksinvolved?
WhatarethelegalandregulatoryissuesimpactingRippleinmy
countryofresidence?

WhatdoIknowabouttheprincipalsintheenterpriseinwhichI
mightinvest?
DoIunderstandallthecounterpartyrisks?
WhathappensiftheRipplesoftwarebecomesfundamentallybroken
andcantbefixed?

Whoarethemajorcustomersandtheapplicationsrelatedto
investmentopportunities?

Whatarehistoricalandprojectedgrowthrates?

Copyright2014AndrewWhite

Whatistheexpectedmarkettimingofnewproducts,services,or
enhancements?

Alongwiththesespecificinvestorquestions,Iwantedtosharethislist
ofbestpracticesfromtheRipplewiki:

Youmustprotectyourself:

RippleLabsInc.doesnotendorse,qualify,orguaranteethe
performanceofanymerchantorgateway.
Donottrustservicesoperatedanonymously,youhavenorecourse
iftheyfailtodeliverontheirpromises.

DonotenteryourRippleusernameandpasswordonanysiteyou
donottrustwithyourfunds.

DonotenteryourRippleusernameandpasswordonanysitethat
doesnotusehttps.Youcanusuallytellwhenasiteuseshttpswhen
yourwebbrowserhasagreenlocknexttothewebsiteaddressinthe
addressbar.

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

ForlongtermstorageofXRPorIOUsinacoldwalletconsider
usingtheDesktopClient.
Youshoulduseapasswordsolongandrandomyoucannot
rememberit(onlystoreandcopyitsecurely).

IntheFuture

Copyright2014AndrewWhite

Thefuturewillcertainlybringmanyexcitingandinterestingareasfor
Rippleinvestorstoconsider.Inparticular,Imexcitedforthetime
whenoptionstradingbecomesmorewidelyavailable(whichwilllikely
beeasierwiththeadventofsmartcontractslaterin2015).Smart
Contractscouldbecomethekillerappformathbasedcurrencies.For
example,byusingsomeparticularmathfunctionsitispossibleto
issuesharesforacompanyorraisefunds.InJuly2014RippleLabs
announcedCodius,anewprojecttoenablesmartcontracts.Codius
willallowpeopletocreateoffersorcontractsacrossforanydigital
ledgersystemsothattheycanallbenefit.Theydothisthroughsome
innovativedesignchoicesthatallowpeopletomakeuseful
applicationswithanypreexistingprogramminglanguage.Ispokewith
StefanThomastheCTOofRippleLabswhoexplainedtomethatthe
designwasinformedfromtheexamplethatbusinesslogicanddata
storage(databasesordecentralizedledgerslikeBitcoin)aretwo
separatetopics.Everywebserviceinexistenceusesadatabaseto
storeinformationandbusinesslogicontopofthedatabasetodecide
whatgoesintoit.Ishouldprobablymentionacomputerscienceterm
thatwillbehelpfultounderstandwhythisdesigndecisionwastaken.
Computersrunsoftwareinoneoftwoways.Oneisdeterministic,
codeexecutesinthesamewayeverytime.Theotheris
nondeterministicwhichmeansitcanexecutedifferentlyeverytime.
WhatisgoodaboutthisapproachisthatitmakesCodiuscompletely
platformneutral.Anyprogramminglanguagecanuseitandanydigital
assetsystemcanuseitsapproach.Codiususesanotherconcept
calledSmartOracles.Asmartoracleisanythingthatcanbeasked
aquestionandanonbiasedanswerisreturning.Oneexamplecould
beaskingthestockmarketwhatthepriceofagivenstockis.Another
exampleisaskingtheBitcoinnetworkifacertaintransaction
happened.TheimportantthingtounderstandisthatCodiusisneutral
Copyright2014AndrewWhite

astowhomyouaskyourverifiedquestionsandhowyoudoit.You
mightwanttomakeacontractonstockfuturesandhedgeontheprice
ofBitcoinandorthetemperatureofDalyCity,ifalltheanswersadd
uptothethresholdoftruthaswritteninyourcontractthetermswill
bemetandthecodeexecutes.Thisisverydifferentfromeveryother
systemoutthereandsomethingthatcreativepeoplewillmake
amazingapplicationswith.

TheCodiusapproachtosmartcontractsfreesdevelopersfrombeing
lockedintoanyonesystemwhichistheHolyGrailfornextgeneration
financialandbusinessapplications.Tolearnmoreonthesubjectof
smartcontracts,IhighlysuggestathoroughreadingofGreatChains
ofNumbersbyTimSwanson.

NewservicesforRipplewalletsarecomingoutallthetimeincluding
ShiftPaymentswhoarereleasingacreditcardthattiesintoaRipple
walletinlate2014.

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

ImportantRippleInfrastructure
Copyright2014AndrewWhite


BeyondRippleLabsthereareanumberofimportantresourcesand
servicesthatisavailabletotheRipplecommunity.Foremostabout
thosearecommunityforumswhereissuesrelatedtoRippleare
discussed.ThemostactiveoftheseareXRPTalkranbyacommunity
memberinFranceandtheRippleLabsForum.Acoupleofnew
serviceshavecomeintobeingrecentlythatareusefulaswell,
LibreTaxfortaxesintheU.S.andCoinistforpublicreviewsof
gatewayservices.ThemostwellknownRipplegatewayrightnowis
Bitstamp,theworldslargestBitcoinexchange.Thereareavarietyof
otherprojectsunderdevelopmentrightnow.Thereareatleastfour
venturecapitalbackedcompaniescreatedspecificallyfortheRipple
ecosystemthatIknowof.Thereisalsoalotofdiscussionaboutways
toimprovetheRippleworldwithnewfeaturesandmoreservices.Itis
goingtobeanexcitingfewyearsforimportantinnovationstobe
broughttomarket.Fortechnicalinfrastructure,Iexpecttoseemore
servicestoenterthemarkettoserveasenginestodrivethegrowthof
digitalassetsandusefulthingsthatcanbedonewiththem.Myown
companyOneMillionGatewaysInc.wasestablishedtohelpthese
companiesreachtheirfullpotential.

FAQs

HowisRippledifferentfromBitcoin?

Thetwoarecompletelydifferent.ThemostbasicansweristhatRipple
isnotdesignedtobeusedasjustacurrency.Insteaditisapayments
protocol.ThedifferenceisbetweenBitcoinbeingap2pvirtual
currencyandRippleasap2pexchange.Bitcoinusestheproofof
workmechanismcommonlyknownasminingtogenerateBitcoin
Copyright2014AndrewWhite

andorverifythevalidityoftransactions.Instead,Rippleusesasystem
calledconsensus.ThisfundamentaldifferencewithBitcoinmeans
thattheyworkdifferentlyandthattheyaredesignedfordifferent
purposes.BitcoinorothercurrenciesarenotcompetitionforRipple.
MyunderstandingisthatRippleLabswantstoseeotherpayment
systemssettledortradedonRippleandnotcompetewiththem.

Iheardthatminingdigitalcurrenciesrequiresanincredibleamountof
electricity,isRipplesimilar?

Thankfullyno.Ripplerequiresnomoreelectricitytorunsecurelythan
anormalhighendcomputerserver.ThemegatonsofCO2and
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
Copyright2014AndrewWhite

andRipplecanmaketradingthosekindsofassetsfasterandmore
secure.

DoanybanksuseRipple?

Atthetimeofthiswritingthereareafewbankswhohaveclaimed
theywillbeusingtheRippleprotocol.

Whatarevalidators?TheRipplenetworkreliesondedicated
computerscalledvalidatorstoconfirmthattransactionsarevalid,why
isthis?

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

IheardsomeoneforgottheirpasswordorhadtheirRipplecoins
stolen,arethosecoinsorwalletsinaccessibleforever?

Copyright2014AndrewWhite

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.

WhatisaSecretKey?

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

WhatkindofventurecapitalorincubatorsareavailabletoRipple
developers?
Copyright2014AndrewWhite

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

WhatisthebesttechnicalresourceforRipple?

ThebestRippledocumentationresourceislocatedat
https://ripple.com/wiki/Developerscanalsocheckout
http://dev.ripple.com/Forfurtherinformation,Isuggestconnecting
withthedevelopersontheIRCchannelontheFreenodenetwork
#ripple.

IwanttolearnmoreaboutConsensus,wheredoIfindmoreinfo?

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

IdontlikehowRippleLabsdoesXYorZ,whatdoyouhavetosay
aboutthat?

RippleLabsisaveryyoungstartup.Expectationsforthisserviceare
high,perhapstoohigh.Ittakestimetobuildworldclassteams,and
staffingresourcesarealwayslimited.GiveyourissuesometimeandI
Copyright2014AndrewWhite

amcertainthatyouwilleventuallyseeimprovementstotheissueyou
areconcernedwith.

Whataresoftwareforks?

Softwareforkshappenwhenonegroupofsoftwaredevelopers
decidestotakethesourcecodefromaprojectandmaketheirown
possiblyincompatiblechangesfromthepriorversionofthesoftware.
Thiscanhappenforvariousreasonsbutthemostlikelyreasonisthat
onegroupofdevelopersdisagreedwiththedirectionaprojectwas
going.Thiscanbeeitheragoodorabadthing.Itisbadwhenit
dividesthenumberofpeopleworkingonaproject.Itcanbegood
whentheforkedsoftwaremakesimprovementstheotherdevelopers
werenotwillingtomake.AlternativeversionsofRippleareexpected
tobereleasedinthefutureandthisisgoodfortheRippleprotocol
sincenewideascanbetestedindifferentnetworks.

Whataregoodcommunityresourcesforgettinganswerstomy
additionalquestions?

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

HowdoesRippleLabssellRipples?Dotheysellontheopenmarket?

AccordingtoDirectorofCommunicationsMonicaLongtheydonot:
RippleLabsisn'tandhasneversoldXRPintheopenmarket.Wesell
Copyright2014AndrewWhite

theportionofXRPreservedforbusinessoperationsthroughdirect
wholesalepurchasesonameasuredbasis.Whatwe'veseenrecently
isawholesalebuyersellingasignificantvolumeinmarket.We've
changedthetermsofwholesalepurchasingtolimitmarketimpactin
thefuture.

IhavesomethingIwanttodiscusswithRippleLabs,whatisthebest
wayformetodoso?

Talktothebusinessdevelopmentteamatpartners@ripple.comorthe
developerrelationsteamatdevelopers@ripple.com.

Iwanttostartacurrencyissuinggateway,butIhavenoexperience
andnocapital,howdoIgetstarted?

FirstofallIapplaudyourenthusiasmforRippleandaddingvalueto
thenetwork.HoweverIwouldadviseagainststartingagatewayon
yourown.Gatewaysarepowerfultoolsandwithnobackgroundin
compliance,regulations,orthetechnicalriskswithusingRippleyou
wouldbedoingyourcustomersadisservicestartingoutwithno
experience.Iwouldsuggestyoufindsomeequallyexcitedpartners
withexperienceinthepaymentsindustryordigitalcurrenciesbefore
movingforward.

Glossary

Copyright2014AndrewWhite

BitcoinAproofofworkdigitalcurrencycreatedin2009.The
benefitsofBitcoinisthatitisnearlyimpossibletocounterfeit(i.e.,
makefakeBitcoin)whichmakesitusefulforonlinepayments.Bitcoin
solvedtwolongstandingacademicproblems,thedoublespend
problemandtheByzantineGeneralsproblemthatallowsittowork
inasecure,decentralizedmanner.

CodiusThisisatechnologyneutralframeworkforcreatingsmart
contracts.Moreinfocanbefoundathttp://codius.org/

DueDiligenceistheprocessofthoroughresearchbeforemaking
investments.

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

Gatewayaserviceproviderthatenableuserstodepositmoneyinto
andwithdrawmoneyoutoftheirgatewayaccountsontheRipple
network.Intechnicaltermsagatewayisanassetissuer.

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

Copyright2014AndrewWhite

RipplestheRipplenetworksnativecurrency,representedbythe
lettersXRP.InordertousetheRipplenetworkXRPmustbeused.
EachtransactiondeletesatinyamountontheRippleledgerforever.

RippleClientThisisthesoftwarethatisusefulforuserexperiences
onwebservicessuchasawallet.

RippleLabs,Inc.ownstheintellectualpropertyoftheRipple
protocol,andpromotesRippleswideruseandgreaterusefulness.

RippleserverAlsoknowsasrippled,thisisthesoftwarethat
connectsallrippleserverstogetherintoadecentralizednetwork
aroundtheworld.Gatewayoperatorsneedtouseoneinordertohave
theirserviceusetheRippleprotocol.

IOUisapromisethatacertainamountoffundsthattheIOUissuer
controlsarefundsinyouraccount.AnIOUontheRipplenetworkisan
assetcreatedbyaRipplegatewayindicatingIpromisetoredeemyou
aspecificamountofthiscurrencyasset.

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

MarketMakersprovideliquidity(i.e.,money)thatallowspaymentsto
followapathwaybetweengateways.
Copyright2014AndrewWhite


StellarARippleclonefundedbyStripe.com.Themaindifference
withRippleisthatStellartokensareaninflationaryassetinsteadofa
deflationaryone.

Validatorsdedicatedcomputernodesthatconfirmatransactionis
validthroughtheConsensusprocess.Validatorsarethekeyto
transactionverificationthresholdbeingreachedandonlyneedtobe
usedbyexpertsorpeoplerunningprofessionalgateways.

Walletthedigitalaccountwhereindividualshold,access,anduse
theirdigitalcurrenciesinRipple.

WalletVaultAwalletvault,alsocalledawalletblobisthe
encryptedstorageofRipplewalletsecrets.Thewalletvaultiscreated
insuchawaythattheservicehostingthewalletblobcannotreadthe
contentsofthedataorcompromiseintegrity.

AbouttheAuthor

AndrewWhiteservesasthefounderofOneMillionGatewaysInc.a
digitalcurrencyconsultingcompany.HealsoservesasSecretaryat
theInternationalRippleBusinessAssociation,whichisthepremier
organizationofmerchantsandbusinessesthatusetheRipple
protocol.AndrewhasbeenactiveforyearsintheBitcoincommunities
Copyright2014AndrewWhite

inSanFranciscoandtheBayArea,andbeganusingXRPsoonafter
itsintroduction.

Copyright2014AndrewWhite