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Can someone smarter than me please give me step-by-step instructions on how to make money taking advantage of the disproportional BTC values across exchanges? I think using ripple could make the turnaround time faster but I'm not sure.

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    There are multiple distinct types of arbitrage possible with Ripple (there may or may not be financial terms for these, I'm a software developer not a finance person).

    Within Ripple

    Ripple has a built-in exchange between any pair of currency+issuer. Depending on market conditions it's possible to find arbitrage opportunities that can executed near instantaneously.

    For example, given USD issued by gw1 (an example Ripple gateway) and CAD issued by gw2 and the various order books (USD/gw1:CAD/gw2, USD/gw1:XRP, CAD/gw2:XRP, etc) a trader may discover that they can trade USD/gw1 for XRP, then XRP for CAD/gw2, and finally CAD/gw2 back to USD/gw1 and get more than they started with. With Ripple this can be executed by a series of trade offers that are fully processed within seconds limiting the risks; or even by a single payment transaction with a custom path routing through the appropriate order books executing atomically (note: doing fully circular payments to do this in a single transaction is currently possible but non-trivial).

    Since Ripple itself attempts to find the cheapest path possible for each payment made, such arbitrage opportunities may be short lived for currencies with large volumes of payments (e.g. someone making a CAD payment using their USD should automatically take the best USD:CAD or USD:XRP:CAD offers as appropriate and vise versa).

    Between Ripple and a Ripple Gateway operating as an Exchange

    Several Ripple gateways are existing Bitcoin exchanges and as such have their own established markets and order books, often with better spreads and volume than the internal Ripple order book for the same currencies. Depending on the speed and reliability of the Ripple gateways' issuing/redeeming process this can be a low risk arbitrage opportunity.

    For example, Bitstamp was one of the first Ripple gateways for BTC and USD and has a good volume of BTC:USD trade on their own exchange. A user with BTC sitting in their Bitstamp exchange account can move some of that to BTC/Bitstamp within Ripple, trade to USD/Bitstamp, move that back to their Bitstamp exchange account and use Bitstamp's exchange to trade that back into BTC. The speed at which this can occur is dependent on Bitstamp's Ripple integration; when functioning well it only takes a minute or so but there can also be long delays occasionally (Ripple is in beta and any specific integration such as Bitstamp's can experience issues).

    In addition to taking existing trade offers within Ripple (to limit the overall time of the above cycle and lower risk) traders can place offers on Ripple and on Bitstamp to capture larger differences in the spread over longer time periods but at the risk of price changes.

    Inter Gateway Arbitrage using external paths

    This is likely a general case that covers the original question.

    A trader can profit on price differences between different gateways by moving funds between the gateways outside of Ripple. For example, the USD/SnapSwap:XRP market may be consistently trading at different prices from the USD/Bitstamp:XRP market. A trader with a US bank account may find it profitable to send an international USD wire transfer to Bitstmap, transfer that to USD/Bitstamp, trade to USD/SnapSwap (either directly of via XRP) and redeem that back to their US bank account. Since this uses the existing banking system it can be slow and expensive so it would only be profitable if the USD/SnapSwap and USD/Bitstamp markets differed significantly (which it often does).

    Another example of this is a Canadian user wiring USD funds to Bitstamp and then trading into CAD/RippleUnion which they extract to their Canadian bank account. Recently the CAD/ru:USD/bs orders on Ripple have differed enough from the banks' exchange rate to cover the banking fees and make such a transfer profitable (if slow).

    Specifically what the original question appears to be asking about is an example of this where the two gateways are also Bitcoin exchanges. For example, Bitstamp and The Rock Trading. Without Ripple an arbitrage trader can move Bitcoin between their Bitstamp and TheRock exchange accounts fairly easily and cheaply but it's usually expensive and slow to move their USD. With Ripple, someone can quickly move their USD to/from each gateway from/to USD/Bitstamp or USD/TheRock within Ripple. As long as the market on Ripple has sufficient liquidity they may then be able to trade USD/Bitstamp:USD/TheRock (or do a conversion payment in which Ripple will search for the cheapest conversion path, possibly USD/Bitstamp:XRP then XRP:USD/TheRock for example). This allows such a user to move USD between the exchanges very fast (but possibly not any cheaper, it all depends on the current Ripple markets).

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