Formerly known as OpenCoin, Ripple is a private company that is building an exchange and payments network (RippleNet) based on a distributed ledger database (Ledger). Ripple's main goal is to connect banks, payment providers and digital asset exchanges, enabling faster and more cost-effective global payments.
History
Ripple was first conceptualized in 2004 by Ryan Fugger, who developed the first prototype as a decentralized digital monetary system (RipplePay). The system was launched in 2005 and aimed to provide secure payment solutions within a global network.
In 2012, Fugger handed the project over to Jed McCaleb and Chris Larsen who together founded the US-based technology company OpenCoin. From then on, Ripple began to be built as a protocol focused on payment solutions for banks and other financial institutions. In 2013, OpenCoin was renamed to Ripple Labs, which was later renamed to Ripple in 2015.
XRP Ledger (XRPL)
Building on Fugger's work and inspired by the creation of Bitcoin, Ripple implemented the Ripple Consensus Ledger (RCL) in 2012 - alongside its standard cryptocurrency, XRP. Soon after RCL was renamed to XRP Ledger (XRPL).
XRPL functions as a distributed economic system that not only stores all accounting information of network participants but also provides exchange services across multiple currency pairs. Ripple presents XRPL as an open-source, distributed ledger that enables real-time financial transactions. These transactions are guaranteed and verified by network participants through a consensus mechanism.
Unlike Bitcoin, however, the XRP Ledger is not based on a Proof of Work (PoW) consensus algorithm and therefore does not rely on a mining process to verify transactions. Instead, the network achieves consensus through the use of its own custom consensus algorithm – formerly known as the Ripple Protocol Consensus Algorithm (RPCA).
XRPL is managed by a network of independent validation nodes that constantly compare their transaction records. Anyone can not only configure and run a Ripple node, but also choose which other nodes will be part of their communication network. However, Ripple recommends that its customers use a list of trusted and identified participants to validate their transactions. This list is known as the UNL (Unique Node List).
UNL members exchange transaction data with each other until everyone agrees on the current state of the Ledger. In other words, transactions that are agreed upon by an absolute 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, it is a private company that sponsored the development of XRPL as an open source distributed ledger. This means that anyone can contribute to the code and that XRPL can continue even if the company ceases to exist.
RippleNet
In contrast to XRPL, RippleNet is exclusive to the Ripple company and was built under XRPL as an exchange and payments network.
RippleNet currently offers a suite of 3 products designed as a payment solution system for banks and other financial institutions. Currently, RippleNet has three main products: xRapid, xCurrent and xVia.
xRapid
Simply put, xRapid is an on-demand liquidity solution that uses XRP as a global bridge between multiple fiat currencies. Both XRP and xRapid rely on the XRP Ledger, which allows for faster confirmation times and much lower fees when compared to conventional methods.
Let's use a simple example. Bob, from Australia, wants to send R$100.00 to Alice, who is in India. Bob transfers the money through a financial institution called FIN. To be able to carry out this transaction, FIN uses the xRapid solution to create a connection with asset brokers in the country of origin and destination. This way, the company is able to convert Bob's R$100.00 into XRP, which provides the necessary liquidity for the final payment. In a matter of seconds, the XRP is converted into Indian rupees and Alice is able to withdraw the money from the exchange located in India.
xCurrent
xCurrent is a solution designed to provide instant transactions and tracking of international payments between RippleNet members. Unlike xRapid, the xCurrent solution is not based on the XRP Ledger and does not use the XRP cryptocurrency by default. xCurrent is built around the Interledger Protocol (ILP), which was designed by Ripple as a protocol to connect different ledgers or payment networks.
The basic components of xCurrent are:
Messenger – The xCurrent tool provides peer-to-peer (P2P) communication between financial institutions connected on RippleNet. It is used to exchange information about risk and compliance, exchange rates, payment details and expected delivery time of funds.
Validator – The validator is used to cryptographically confirm the success or failure of a transaction and also to coordinate the movement of funds across Interledger. Financial institutions can run their own validator or they can rely on a third-party validator.
Ledger ILP – Interledger Protocol is implemented on existing bank records, bringing Ledger ILP to life. It works as a sub-ledger and is used to track credits, debits and liquidity between the parties involved. Funds are atomically settled, which means they can only be settled instantly, otherwise the process is not completed.
FX Ticker - FX ticker is used to set exchange rates between the parties involved. It tracks the current state of each configured ILP Ledger.
Although xCurrent is primarily designed for fiat currencies, it also supports cryptocurrency transactions.
xVia
xVia is a standardized API-based interface that enables banks and other financial service providers to interact within a single framework - without having to rely on multiple integrations with payment networks. xVia allows banks to create payments through other partners connected to RippleNet and also allows them to attach invoices or other information to their transactions.
Conclusion
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 an exchange system that focuses on global payment solutions for banks and other financial institutions.
RippleNet can be implemented on top of existing banking infrastructure as a way to complement and improve the traditional payment system. xCurrent enables cheap, real-time payments using all financial institutions, xRapid uses XRP as a borderless currency to provide on-demand liquidity pools, and xVia facilitates integration and communication for all RippleNet participants .
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