The concept of Ripple
Ripple is a privately held company that built a payment and transaction network (RippleNet) on a distributed ledger database (XRP ledger). Its predecessor was OpenCoin. Ripple's main goal is to connect banks, payment service providers and digital asset exchanges to achieve faster and more economical global payments.
History of Ripple
The first idealization of Ripple was done by Ryan Fugger, who also developed the first prototype of Ripple, the decentralized digital payment system RipplePay. The system was put into use in 2005, and its purpose is to provide secure payment solutions for the global network.
In 2012, Fugger handed over the project to Jed McCaleb and Chris Larsen, and co-founded the American technology company OpenCoin with them. Since then, Ripple has begun to develop as an open source payment protocol focusing on payment solutions for banks and other financial institutions. In 2013, OpenCoin was renamed Ripple Labs, and in 2015 it was renamed Ripple again.
Ripple Ledger (XRPL)
Based on Fugger's work and inspired by Bitcoin, Ripple developed the Ripple Consensus Ledger (RCL) in 2012 and launched its native cryptocurrency XRP (Ripple Coin). The Ripple Consensus Ledger was later renamed the XRP Ledger.
XRPL, which operates as a distributed economic system, will not only store all financial information of network participants, but also provide trading services across multiple currency pairs. In addition, XRPL launched by Ripple will also serve as an open source distributed ledger that can realize real-time financial transactions. At the same time, there is also a consensus mechanism to safeguard and verify transactions.
Unlike Bitcoin, the XRP Ledger is not based on the PoW consensus algorithm, so it does not rely on the mining process to verify transactions. Instead, the network achieves consensus by using its own consensus algorithm, called the Ripple Consensus Algorithm (RPCA).
XRPL is managed by a network of independent validating nodes that constantly verify transaction records. Anyone can set up and run a Ripple validating node, and they can also choose the validating node. However, Ripple recommends that its customers choose nodes from a certified trusted list to verify their transactions. This list of trusted nodes is called the Unique Node List (UNL).
UNL nodes exchange transaction data with each other until they reach a consensus on the current state of the ledger. In other words, transactions recognized by the vast majority of UNL nodes are considered valid transactions, and consensus is reached when all nodes apply the same transaction to the ledger.
According to the Ripple official website: Ripple is a private company that developed the open source distributed ledger XRPL. The open source ledger means that anyone can contribute a node, and even if Ripple ceases to exist, XRPL will continue to operate.
RippleNet
Unlike XRPL, RippleNet is Ripple's exclusive payment and transaction network built on XRPL.
RippleNet currently provides three payment solution systems for banks and financial institutions, namely xRapid, xCurrent and xVia.
xRapid
Simply put, xRapid is an on-demand liquidity solution that uses XRP (Ripple) to build a global currency bridge. Both XRP and xRapid rely on the XRP ledger, which allows transactions to be completed faster and at lower costs.
Let's take a simple example. Bob from Australia wants to send $100 to Alice in India through the financial institution FIN. To execute the transaction, the financial institution FIN uses the xRapid solution to create a connection between the source and destination countries. In this way, FIN can convert Bob's $100 into XRP (Ripple), which provides the necessary liquidity for the final payment. Finally, within a few seconds, XRP can be converted into Indian rupees, and Alice can withdraw the funds from the asset exchange in India.
xCurrent
xCurrent is a solution that provides instant settlement and tracking of cross-border payments for RippleNet users. Unlike xRapid, the xCurrent solution is not based on the XRP ledger and does not use the XRP cryptocurrency by default. xCurrent is built on the Inter-ledger Protocol (ILP), which is a protocol designed by Ripple to connect different ledgers or payment networks.
The four basic components of xCurrent are:
Messenger — xCurrent Messenger will enable the exchange of information between connected RippleNet financial institutions. This includes information such as risk and compliance, fees, exchange rates, payment details, and fund delivery time.
Validator - A validator cryptographically confirms the success or failure of a transaction and coordinates the flow of funds across ledgers. Financial institutions can run their own validators or rely on third-party validators.
ILP Ledger - When ILP is implemented in an existing bank ledger, an ILP ledger is formed. The ILP ledger is a sub-ledger that will be used to track the credits, debits, and liquidity of the parties to the transaction. The ILP ledger enables the parties to settle funds atomically, which means that the transaction is either settled in a timely manner or terminated immediately.
FX Ticker - The FX Ticker is used to define the exchange rate between trading parties. It will also track each ILP ledger that has been set up.
Although xCurrent is primarily designed for fiat currency transactions, it can also support cryptocurrency transactions.
xVia
xVia is an API-based standardized interface that will allow banks and other financial service providers to interact within the same structure without relying on multi-payment network integration. xVia will allow banks to create payments with other partner banks (which are already connected to RippleNet) and allow banks to attach invoices or other information to transactions.
Summarize
While Bitcoin is hailed as the number one cryptocurrency and Ethereum is recognized as the creator of smart contracts, we can think of the Ripple network as a currency exchange system focused on global payment solutions.
RippleNet can be implemented on top of existing banking infrastructure to complement and improve traditional payment systems. xCurrent will enable cost-effective and real-time payments across financial institutions, xRapid will use the borderless currency XRP as an on-demand liquidity pool, and finally xVia will facilitate integration and communication between RippleNet participants.
