is a trust based system the right way to go in redefining the global transaction system?
Yes. Think about what happens when you buy Bitcoins. You deposit money into MtGox, and you receive "MtGox USD IOUs". Which really means that they have your money and all you have is an entry in a database. Now you buy some Bitcoins on MtGox. You aren't receiving Bitcoins, you are getting "MtGox BTC IOUs". Still, all you have is an entry in a database. Only when you withdraw your Bitcoins, or wire the U.S. dollars, from MtGox do you get back something which is not an IOU (although some might call the USD an IOU).
Ripple works exactly the same way. The difference is that when you deposit your money into a gateway, you have control over those IOUs. You can send them to other people, hold them, or exchange them for other IOUs (or XRPs).
With Ripple you first extend trust to a gateway (this is like depositing money at MtGox). Then, you can withdraw those funds as IOUs into the Ripple network and use them to perform transactions in a decentralized way. It's a great system.
