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Definitions

Ripple Client

Software that manages accounts that involve lines of credit between parties, and uses the ripple server to route payments
Software that authenticates itself to a ripple server via username/password, digital certificate, ssh public key, or similar
Simple example: A bank could "ripple enable" its online banking web interface to permit accountholders to send ripple payments as an alternative payment mechanism, alongside the standard online checking functionality.
- Broadly speaking, the bank is a ripple client, and has some means of authenticating itself to its ripple server(s).
- In a more precise technical sense, when a bank customer logged into online banking initiates a ripple payment, and the online banking software interacts with the ripple server, this is bank software acting as a ripple client.
- The web browser bank customers use to access their online checking, and through this make ripple payments, is *not* a ripple client -- it is a client of the bank's web server software. Bank customers don't have a user/password to authenticate themselves to the ripple server; the bank does. The password that bank customers do have, which allows them to access their online banking, is a different password from the one the bank uses to interact with its ripple server.
Note: the bank with "ripple parallel to online checking" scenario described above is not very likely to arise anytime soon, though it could conceivably happen if ripple becomes very popular. Inter-LETS payments, online accounting software direct payments, online currency conversions, and other scenarios are more plausible -- see Ripple Usage Examples ?. The bank example was used only because this is a scenario we think the greatest number of people are familiar with, whereas not that many people know what a LETS system is.
Potential Ripple Clients

Party

Something or someone that uses ripple to send, receive, and route payments
Parties can be individuals, or collectives such as a group of friends, an agricultural coop, businesses, governments, banks, etc.

User

Users authenticate themselves to a ripple client via username/password, or some other authentication scheme
Obvious example is people, but could also be a bot or some automated process that knows how to authenticate itself.

A party might have many users, or a user might have many parties. The ripple server doesn't know anything about users or parties, only nodes.

Users,Parties, and Nodes

A Node

has credit relationships (lines of credit) with other nodes
can be a payment endpoint, either payer or recipient
can be a payment intermediary, receiving value from one node and passing it along to another in a Credit Exchange as part of a payment chain
A ripple party might well send and receive all ripple payments via a single node, but a party might also have reasons to register multiple nodes
Users, Parties, and Nodes)

A Credit Relationship

exists between two nodes, say node A and node B
describes a line of credit that node A has with node B, and the reciprocal line of credit node B has with node A
has a specific unit of value, such as USD, Euro, or oz. of gold
has an account for each node, each containing the following data:
- balance, the amount of debt owed by the other node
- max balance, a limit on debt that can be owed by the other node
- min balance, a limit on debt that can be owed to the other node
  - Consider the balance for Node A, for a credit relationship connecting A<->B. Assuming the debt balance starts at 0$, an upper limit of $50 and a lower limit of (-$25) means that Node B has a credit limit of $50 with Node A, while Node A's self-imposed issuance limit is $25. (Node A doesn't want to allow itself to go deeper into debt than $25 with Node B.)
  - Balances can start at any number, they need not start at 0.
  - All three quantities can be reset arbitrarily by either node, for its side of the accounting
  - It doesn't matter if two nodes at opposite ends of a credit relationship disagree about the exact amount of debt they've recorded is owed by the other. In fact, Node A could have recorded that Node B owes it money in its account, while Node B has recorded that Node A owes it money on its own account. As long as A's credit limit exceeds the amount of money it believes B owes, and B's credit limit exceeds the amount of money it believes A owes, the ripple server can use this credit relationship in a payment exchange for payment routing in either direction. Ripple does payment routing, not account reconciliation.
Two nodes connected by a credit relationship are called neighbours.
Two nodes may have more than one credit relationships connecting them, for instance to allow for credit relationships in more than one currency
Credit Relationship Example
To do: Credit Relationship Example With Disputed Balance ?

A Credit Exchange

is a payment flow from one credit relationship to another, that passes through a node
is a link in a payment chain, say Node A -> Node B -> Node C, where B and C are the previous and successor nodes, and the ultimate payer / payment recipient are at the start and end of the chain: Payer -> ..... -> A -> B -> C -> ..... Recipient
when routing in the same currency, Node B can charge a transaction fee, or can be friendly and choose not charge a fee
when routing between two different currencies, Node B has some conversion rate between the currencies
In either case, node-specific exchange rates are used for the above conversion functions. So Node B has an exchange rate table stored for routing payments between all of its neighbors
Credit Exchange Example