Overview
Ripple is a blockchain-based digital payment network.The Ripple Network is a network which is mainly used for global financial transactions. Ripple was established in 2012 by Ripple Labs Inc. to enable faster and more secure money transfers between banks. The Ripple Consensus Protocol Ledger (XRPL), which runs on the Ripple Blockchain, was developed by Ripple to facilitate these quicker transactions. Apart from keeping track of transactions and accounting data, XRPL functions as a distributed economic system that offers exchange services for several currency pairs. Ripple advertises XRPL as an open-source distributed ledger with real-time transaction processing capabilities. By using a consensus method and network participants, these transactions are protected and validated. In this blog, we will talk about Ripple.
Index
1 What is Ripple?
2 History of Ripple?
3 How Does Ripple Work?
4 Ripple as a Transaction For Currency
5 How is Ripple different from Bitcoin?
6 Advantages of Ripple (XRP) cryptocurrency
7 Dis-Advantages of Ripple(XRP) cryptocurrency
8 Conclusion
What is Ripple?
- The payment network and protocol known as Ripple were created by Arthur Britto, David Schwartz, and Ryan Fugger. It was created and made available in 2012 by the same-named firm to facilitate “secure, quick, and free global financial transactions.”Many people classify it as a cryptocurrency since it is based on ideas very similar to Bitcoin’s. However, unlike Bitcoin, the source code of Ripple’s technology is owned privately by the business, which means it cannot be verified by anyone else. The network operates without the Ripple Company. Organisations, Internet Service Providers(ISPs) and the Massachusetts College of Technology are some of the validators. A lot of banks utilise Ripple as the foundation for their settlement infrastructure, and for the past several years, its native coin, XRP (ripples), has continuously been in the top 5 cryptocurrencies by market value.
- Ripple is an extremely well-known network. By market capitalization, Ripple(XRP) is currently one of the biggest cryptocurrency platforms. However, Ripple Labs, a company that invented Ripple and its native cryptocurrency token XRP, had been since 2012 and was one the first innovators in the blockchain industry, earlier than the Ethereum network and even before Bitcoin.XRP was created as a bridge currency to help with financial transactions and the network was created to be faster, cheaper, and more scalable than Bitcoin. The blockchain ledger is centralised, and there is no XRP mining since the XRP digital token is specifically designed to meet the needs of banks and other financial companies as a reliable worldwide payment system.
- Ripple is a digital currency system in which transactions are verified by consensus on the network, rather than the mining method utilised by Bitcoin, which is based on blockchain ledgers. As an outcome, this new version of the Ripple system was meant to eliminate Bitcoin’s requirement on centralised exchanges, consume less electricity than Bitcoins, and process transactions significantly faster than cryptocurrency. Ripple Transaction Protocol (RTXP) allows for the direct and instant sending of money between two parties. Therefore, the protocol may reduce the costs and wait times associated with the traditional banking system, among which any currencies, including USD, euros, RMB, yen, gold, airline miles, and rupees, can be exchanged.
- Ripple is built to depend on a common ledger that is “managed by a network of independent validating servers that constantly compare their transaction records” to ensure security. Servers can be owned by anyone, including banks and market makers. The company also developed its digital currency, nicknamed XRP, like bitcoin, to allow financial institutions to transfer money with minimal fees and wait time. “Ripple does for payments what SMTP did for email,” according to the Consultative Group to Assist the Poor (CGAP), “allowing the systems of different financial institutions to communicate directly.”
History of Ripple?
- Ripple, the company behind XRP, has undergone several rebranding initiatives over the past few years. It all started when Ryan Fugger, a web developer from Canada, created RipplePay. It was developed to be a secure payment option for online consumers globally. Fugger sold his technology to Jed McCaleb, David Schwartz, and Arthur Britto in 2012. To overcome some of Bitcoin’s drawbacks, these three engineers adapted this technology to include a distributed ledger.With these changes, they hoped to utilize less electricity than Bitcoin and process transactions in a faster way. The company they launched was originally called OpenCoin. In 2013, it changed its name to Ripple Labs, then in late 2015, it became Ripple.
How Does Ripple Work?
- Ripple differs strongly from other cryptocurrencies even in terms of technology. First of all, a blockchain is not used to power the Ripple network. Second, the creation of new XRP units and transaction validation are not dependent on mining. On the Ripple network, transactions are instead processed by validating servers, which continually compare the data they receive and process with a common ledger. Ripple enables faster transaction speeds while consuming less energy and computer power as a result. The validating servers of Ripple employ the HashTree consensus algorithm. The fundamental distinction between the Ripple network and a Proof-of-Work blockchain is that consensus is established by comparing only one value that is produced by summing the ledger’s data, rather than all of the data. Banks and other financial institutions as well as private people operate these independent validation servers.
- The open-source protocol is described on Ripple’s website as “basic infrastructure technology for interbank transactions – a neutral utility for financial institutions and systems.” The technology enables banks and non-bank financial services firms to integrate the Ripple protocol into their systems, allowing their clients to access the service. Currently, Ripple requires two parties for a transaction to take place: first, a “regulated financial institution” that stores cash and issues balances on behalf of consumers. Second, “market makers” such as hedge funds or currency trading desks provide liquidity in the currencies that they wish to trade. Ripple is built around a shared, public database or ledger whose contents are decided by consensus. In addition to the balances, the ledger records offer to purchase as well as sell currencies and advantages, and that led to the first distributed exchange. The consensus mechanism enables distributed payments, exchanges, and transfers.Users send payments to each other on Ripple by using cryptographically signed transactions denominated in either cash or Ripple’s internal currency (XRP).
- Ripple can use its internal database for XRP-denominated transactions, but for payments denominated in other assets, the Ripple ledger only records the amounts owed with assets represented as debt obligations(loans). Because Ripple initially just stored records in its ledger and non-real-world legal power, trust was necessary. Ripple, on the other hand, is now integrated with a variety of user authentication procedures and bank services. Users must specify which other users they trust and how much. When two users who trust each other make a non-XRP payment, the balance of the mutual credit line is modified, subject to the restrictions determined by each user. To send assets between users who have not directly created a trust relationship, the system attempts to find a path between the two users in which each link is between two users who do have a trust relationship. The path’s balances are then altered concurrently and atomically. The term ‘rippling’ refers to the process of making payments through a network of trustworthy acquaintances. It is analogous to the ancient hawala system. Ripple’s code is open source and freely available to the public, which implies that anyone can set up a Ripple instance.
Ripple as a Transaction For Currency
- XRP is the Ripple network’s native currency that operates only within the Ripple system. As Bitcoin operates on the Blockchain, XRP exists natively within the Ripple protocol as a counterparty-free currency. Because XRP is an asset rather than a redeemable balance, consumers do not need to trust any one financial institution to trade or exchange it. All other currencies on the Ripple network require some level of confidence because they each have an issuer or owner from whom the currency may be redeemed (this includes BTC(Bitcoins) on the Ripple network).XRP is now divisible to six decimal places, and the smallest unit is called a drop, with one XRP equaling one million drops.
- Ripple’s beginnings observed the creation of 100 billion XRP, with no more permitted under the protocol’s regulations. As a result, the system was designed to make XRP a rare asset with diminishing available supply. XRP is the only currency in the Ripple network that is not dependent on a third party for exchange, and it is the only native digital asset. Other currencies on the Ripple network are debt instruments (i.e. liabilities) that exist as balances. Ripple network users are not required to utilise XRP as a store of value or a medium of exchange. However, each Ripple account must have a tiny reserve of 20 XRP (US$19.80 as of December 26, 2017).
- One of XRP’s unique characteristics is as a bridge currency, which can be useful when no direct exchange is available between two currencies at a given time, such as when trading between two rarely traded currency combinations. XRP is freely traded against other currencies within the network’s currency exchange, and its market price varies versus dollars, euros, yen, bitcoin, and so on. Ripple’s design focus is on currency exchange and distributed RTGS(real-time gross settlement), rather than XRP as an alternative currency.
- Ripple Labs announced in April 2015 the addition of a new feature called auto bridging to Ripple, to make it easier for market makers to transact between rarely traded currency pairs. The functionality is also meant to expose a larger portion of the network to liquidity and better FX rates. Ripple charges a transaction fee when a user executes a financial transaction in a non-native currency. The fees are intended to protect against network flooding by making attacks too costly for hackers. If Ripple was entirely open, enemies might broadcast massive volumes of “ledger spam” (false accounts) and “transaction spam” (fake transactions) to overload the network. This could lead to the ledger becoming unmanageable and interfering with the network’s capacity to handle legal transactions quickly.
How is Ripple different from Bitcoin?
- Now you may be thinking that Bitcoin is the currency of blockchain what is Ripple(XRP)? How is it different from Bitcoin? Although both Bitcoin and Ripple (XRP) are cryptocurrencies, they differ in certain ways.
- So let’s Understand that there are differences between Ripple(XRP) and Bitcoin.
Advantages of Ripple (XRP) cryptocurrency
- Transactions with XRP are quick and affordable.
- Financial institutions are already utilising Ripple’s payment network.
- Small business workers and consumers can utilise XRP for safe money transfers.
- XRP is a bridge currency used for international money transfers.
Dis-Advantages of Ripple(XRP) cryptocurrency
- The consensus protocol used by Ripple probably needs to be more secure for handling cryptocurrency transactions.
- Many of Ripple’s financial associates utilise RippleNet exclusively rather than its XRP coin.
- Due to the SEC lawsuit and the fact that Ripple is operated by a private corporation, it has generated criticism.
- It’s challenging to buy XRP in the United States.
Conclusion
According to the current Ripple payment system deployment, although Ripple utilises a decentralised consensus protocol, the current Ripple deployment is not decentralised and offers Ripple Labs unconditional power over the fate and security of all Ripple transactions.Furthermore, the adoption of XRP as a cryptocurrency is heavily reliant on the use of RippleNet technology by financial and non-financial institutions. When compared to Bitcoin, XRP is unquestionably more efficient in terms of speed, security, computing power, and so forth.