What is Ripple?

Ripple, also known as XRP, is a unique cryptocurrency in the sense that it isn’t mineable and is used as a means of exchange, rather than storage of wealth. It was envisioned to facilitate transfers of money across borders making them fast and cheap. Another feature is the implementation of smart contracts. The developers are in close contact with many banks and businesses, understanding their needs and further improving on the project. The currency supply is fixed at roughly 1 billion, and new coins are issued by Ripple themselves. The smallest unit is 1 millionth XRP or 1 Drop.

“Ripple was designed from the very beginning to essentially be a replacement for SWIFT (a leading money transfer network) or to otherwise replace the settlement layer between major financial institutions,” says Pat White, CEO of Bitwave.

It serves as a trusted agent between two parties in a transaction as the network can quickly confirm that the exchange went through properly. Ripple can facilitate exchanges for a variety of fiat currencies and cryptocurrencies, such as Bitcoin, to name one example.

Whenever users make a transaction using the network, the network deducts a small amount of XRP, a cryptocurrency, as a fee.

“The standard fee to conduct transactions on Ripple is set at 0.00001 XRP, which is minimal compared to the large fees charged by banks for conducting cross-border payments,” says El Lee, board member of Onchain Custodian.

History and Evolution

Back in May 2011, Jed McCaleb began the development of the digital currency now known as Ripple. In August 2012, he hired Chris Larsen and together they continued improving the project with the implementation of the Ripple Protocol (RTXP) alongside the Ripple Exchange Network. The 11th of April 2013 was the official launch date for the project, while later that year the company rebranded to RippleLabs. Since then, it has grown reaching milestones such as becoming the 4th company to receive a BitLicense license from New York’s Financial Department. It also created a joint venture with major banks (Bank of America, UniCredit, Royal Bank of Canada etc.) for further improving global transfers. The developer team also implemented new tools such as xCurrent, xRapid and xVia while having more than 100 financial institutions testing their international payments technology.

Ripple Blockchain

XRP’s blockchain is centralized with the company as a central authority. This is done to provide more control and accountability. The main goal is to offer cost-effective, real-time transfers of funds for financial institutions and businesses around the globe.

Proof of Correctness is the consensus algorithm used, alongside a proprietary hashing function called RPCA (Ripple Proof of Correctness Algorithm). The way it works is by using validators, which determine the order of transactions and thus avoiding double spending. As there is no mining involved, there are no blocks and new XRP coins are issued based on a smart contract that’s valid from the launch of the network.

What Is XRP?

XRP is a cryptocurrency that runs on the XRP Ledger, a blockchain engineered by Jed McCaleb, Arthur Britto and David Schwartz. McCaleb and Britto would go on to found Ripple and use XRP to facilitate transactions on the network.

You can buy XRP as an investment, as a crypto to exchange for other cryptocurrencies or as a way to finance transactions on the Ripple network.

Notably, XRP’s blockchain operates a little differently than most other cryptos. Other cryptocurrencies open their transaction ledgers and verification processes to anyone who can solve complex equations quickly. But transactions are secure as the majority of ledger holders must agree with the verification for them to be added.

XRP’s Ripple network somewhat centralizes things and uses a consensus protocol: While anyone can download its validation software, it maintains unique node lists that users can select to verify their transactions based on which participants they think are least likely to defraud them.

As new transactions come in, the validators update their ledgers every three to five seconds and make sure they match the other ledgers. If there’s a mismatch, they stop to figure out what went wrong. This allows the network to securely and efficiently validate transactions, which gives it an edge over other cryptocurrencies like Bitcoin.

“Bitcoin transaction confirmations may take many minutes or hours and are typically associated with high transaction costs,” says Lee. “XRP transactions are confirmed around four to five seconds at a much lower cost.”

Understanding Ripple

Ripple operates on an open-source and peer-to-peer decentralized platform that allows for a seamless transfer of money in any form, whether it's dollars, yen, euros, or cryptocurrencies, like litecoin or bitcoin. Ripple is a global payments network and counts major banks and financial services amongst its customers. XRP is used in its products to facilitate quick conversion between different currencies.

How Ripple Works

The Ripple network does not run with a proof-of-work (PoW) system like bitcoin or a proof-of-stake (PoS) system like Nxt. Instead, transactions rely on a consensus protocol in order to validate account balances and transactions on the system. The consensus works to improve the integrity of the system by preventing double-spending.

A Ripple user that initiates a transaction with multiple gateways, but attempts to send the same $100 to the gateway systems, will have all but the first transaction deleted. Individual distributed nodes decide by consensus which transaction was made first. The confirmations are instant and take roughly five seconds. Since there’s no central authority that decides who can set up a node and confirm transactions, the Ripple platform is described as decentralized.

Ripple keeps track of all IOUs in a given currency for any user or gateway. IOU credits and transaction flows that occur between Ripple wallets are publicly available on the Ripple consensus ledger. But even though financial transaction history is publicly recorded and made available on a blockchain, the data is not linked to the ID or account of any individual or business. However, the public record of all dealings (i.e., the blockchain) makes the information susceptible to de-anonymization measures.

Tracking RIPPLE