In a recent experiment, Barreiro et al (2011 Nature 470 486) demonstrated the fundamental building blocks of an open-system quantum simulator with trapped ions. Using up to five ions, dynamics were realized by sequences that combined single- and multi-qubit entangling gate operations with optical pumping. This enabled the implementation of both coherent many-body dynamics and dissipative processes by controlling the coupling of the system to an artificial, suitably tailored environment. This engineering was illustrated by the dissipative preparation of entangled two- and four-qubit states, the simulation of coherent four-body spin interactions and the quantum non-demolition measurement of a multi-qubit stabilizer operator. In this paper, we present the theoretical framework of this gate-based ('digital') simulation approach for open-system dynamics with trapped ions. In addition, we discuss how within this simulation approach, minimal instances of spin models of interest in the context © IOP Publishing Ltd and Deutsche Physikalische Gesellschaft.