Three Minutes to Understand Mainstream Currency: Ripple (XRP)

II. The Origin of Ripple

To outsiders, Ripple may seem like a latecomer, but in reality, the Ripple project originated long before Bitcoin. In 2004, Ryan Fugger launched the first implementation of Ripple. Its goal was to create a decentralized virtual currency system that allows anyone to create their own currency. Money in the Ripple network is represented as 'debt', and all transactions are reflected as changes in account balances. Its operation is similar to a bank's clearing system: when making interbank transfers, the actual settlement of funds between banks is delayed as much as possible until night, at which point banks calculate their settlement amounts with other banks. It is possible for funds waiting to be transferred from one bank to perfectly offset the funds that bank is supposed to transfer out, meaning it doesn't actually need to transfer any funds; even if they cannot fully offset, the actual amount settled is generally much smaller than the total amount of customer wire transfers.

The original intention of the Ripple project was to establish a distributed P2P clearing network: everyone is their own bank, able to issue and accept loans, while also acting as a lending channel (for example, if A wants to borrow money from B, and they do not know each other but both know C, then C can act as a channel for A and B; C first borrows money from B and then lends it to A, indirectly allowing A to borrow from B). The project was largely supported by the efforts of Ryan Fugger alone and achieved some success. However, Ripple has always had a limited number of users, only popular among a few isolated circles, and the reason is simple: the design of Ripple is based on personal relationships and trust chains. For a person to use the Ripple network for remittances or loans, they must already have friends in the network; otherwise, it is impossible to establish a trust chain between that user and others.

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