Formerly known as OpenCoin, Ripple is a private company that is building a payment and exchange network (RippleNet) on top of a distributed ledger database (XRP Ledger). Ripple's main goal is to connect banks, payment systems and digital asset exchanges to enable faster and more efficient global payments.


History

Ripple was first idealized in 2004 by Ryan Fugger, who developed the first prototype of Ripple as a decentralized digital money system (RipplePay). The system was launched in 2005 and was intended to provide secure payment solutions in the global network.

In 2012, Fugger handed over the project to Jed McCaleb and Chris Larsen, and together they founded OpenCoin, a technology company in the US. From that moment on, Ripple began to be built as a protocol focused on payment solutions for banks and other financial institutions. In 2013, OpenCoin was renamed Ripple Labs, which was later renamed Ripple in 2015.

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What is XRP Ledger (XRPL)

Building on Fugger's work and inspired by the creation of Bitcoin, Ripple deployed the Ripple Consensus Ledger (RCL) in 2012 alongside its native cryptocurrency XRP. RCL was later renamed XRP Ledger (XRPL).

XRPL works as a distributed economic system that not only stores all account information of network participants, but also provides exchange services for multiple currency pairs. Ripple presents XRPL as an open-source distributed ledger that enables real-time financial transactions. These transactions are secured and verified by network participants using a consensus mechanism.

However, unlike Bitcoin, the XRP Ledger is not based on a Proof of Work consensus algorithm and therefore does not rely on a mining process to verify transactions. Instead, the network achieves consensus by using its own consensus algorithm, formerly known as the Ripple Protocol Consensus Algorithm (RPCA).

XRPL is governed by a network of independent validator nodes that constantly compare transaction records. Anyone can not only configure and run a Ripple validator node, but also choose which nodes to trust as validators. However, Ripple recommends that its customers use a list of identified trusted participants to verify transactions. This list is known as the unique node list (UNL).

Nodes in the UNL exchange transaction data with each other until they all agree on the current state of the registry. In other words, transactions agreed upon by the vast majority of UNL nodes are considered valid, and consensus is reached when all these nodes apply the same set of transactions to the ledger.

According to Ripple's official website, Ripple is a private company that pioneered the development of XRPL as an open source distributed ledger. This means that anyone can contribute to the code and that XRPL can continue to operate even if the company ceases to exist.


RippleNet

Unlike XRPL, RippleNet is an exclusive development of Ripple and was built on top of XRPL as a payment and exchange network.

RippleNet currently offers a suite of three products designed as a payment solution for banks and other financial institutions. RippleNet has three main products: xRapid, xCurrent and xVia.


xRapid

xRapid is an on-demand liquidity solution that uses XRP as a global intermediate currency between multiple fiat currencies. Both XRP and xRapid rely on the XRP Ledger, which provides faster confirmation times and much lower fees compared to conventional methods.

Let's take a simple example. Bob from Australia wants to send $100 to Alice who lives in India. Bob transfers the money through a financial institution called FIN. To execute the transaction, FIN uses the xRapid solution to establish a connection with asset exchanges in both the origin and destination countries. In this way, the company can convert $100 of Bob into XRP, which provides the necessary liquidity for the final payment. Within seconds, XRP is converted to Indian Rupees and Alice can withdraw money from an asset exchange located in India.


xCurrent

xCurrent is a solution designed to instantly settle and track cross-border payments between RippleNet participants. Unlike xRapid, the xCurrent solution does not use the XRP Ledger or the XRP cryptocurrency. xCurrent is built on top of the Interledger Protocol (ILP), which was developed at Ripple as a protocol for connecting different ledgers or payment networks.


The four main components of xCurrent are:

  1. Messenger: xCurrent messenger provides P2P communication between connected RippleNet financial institutions. It is used to share information about risk and eligibility, fees, exchange rates, payment information and expected delivery times.

  2. Validator: Used to cryptographically confirm the success or failure of a transaction and to coordinate the movement of funds into Interledger. Financial institutions can use their own validator or rely on a third-party validator.

  3. ILP Ledger: The Interledger Protocol is used in existing bank ledgers that form the ILP Ledger. The ILP Ledger functions as an auxiliary ledger and is used to track credits, debits and liquidity between parties to a transaction. Funds are calculated atomically, meaning they are either calculated instantly or not calculated at all.

  4. FX Ticker: Used to determine exchange rates between parties to a transaction. It tracks the current status of each ILP Ledger.

Although xCurrent is primarily designed for fiat currencies, it also supports cryptocurrency transactions.


xVia

xVia is a standardized API-based interface that allows banks and other financial service providers to interact within a single framework without relying on the integration of multiple payment networks. xVia allows banks to create payments through other banking partners connected to RippleNet, and allows them to attach accounts or other information to their transactions.


Results

While Bitcoin is known as the first cryptocurrency and Ethereum is recognized for creating a platform for smart contracts, we can consider the Ripple network as a currency exchange system focused on global payment solutions for banks and other financial institutions.

RippleNet can be implemented on top of existing banking infrastructure to complement and enhance the traditional payment system. xCurrent enables efficient real-time payments between financial institutions, xRapid uses XRP as an intermediate cross-border currency to provide liquidity pools on demand, and xVia facilitates the integration and communication of all RippleNet participants.

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