In simplest terms, Ripple is a blockchain-based digital payment network and protocol that began operating collectively with its own cryptocurrency, XRP, in 2012. However, despite its start date being in 2012, Ripple is one of the oldest technologies in the cryptocurrency world, with its concepts dating back even earlier than Bitcoin, which emerged in a whitepaper in 2008. The idea for this payment platform was first introduced by Ryan Fugger, followed by developers like David Schwartz, Jed McCaleb, and Arthur Britto in 2011, who were inspired by Bitcoin but aimed to create a more sustainable system to send "value" without the inefficiencies of crypto mining. In June 2012, they released the XRP Ledger. After a few name changes, it eventually became Ripple Labs, with the digital asset being called XRP Coin.
How Ripple Works:
Ripple operates on a consensus protocol rather than a proof-of-work system like Bitcoin. It verifies account balances and transactions through a consensus logic. This consensus mechanism prevents double-spending and enhances the system's integrity. Each distributed node decides which transaction occurred first, and confirmations are lightning-fast, taking just a few seconds. There's no central authority deciding who establishes nodes or validates transactions.
Ripple tracks all IOUs (I Owe You) in a specific currency for any user or gateway on its blockchain-based network. The Ripple consensus ledger makes IOU credits and transaction flows between Ripple wallets publicly accessible. Although the history of financial transactions is public and recorded on a blockchain, it's not tied to any individual or company's identity or account. However, since every transaction is recorded on a public ledger (blockchain), the information can be anonymized.
Ripple and XRP Relationship:
Despite their close association, people often confuse Ripple and XRP. While these two systems are closely related, their functions are entirely different. Ripple is described as a global payment settlement system and currency exchange network, whereas XRP is the cryptocurrency representing "value" on this blockchain-based network. In summary, Ripple processes transactions globally as a payment settlement system and currency exchange network, while XRP is the cryptocurrency that represents "value" within this ecosystem.
Distinguishing Features of XRP from Other Cryptocurrencies:
1. Centralized: Unlike most other cryptocurrencies, XRP is centralized, with Ripple controlling all ledgers. This centralization has made XRP a preferred choice among banks and financial institutions.
2. No Mining: Unlike many other cryptocurrencies, XRP cannot be mined. All 45.4 billion XRP coins currently in circulation were initially created by Ripple. The remaining portion is held in Ripple's escrow wallets, which can be unlocked gradually to increase the XRP supply.
3. Low Cost: XRP stands out for its low transaction fees and costs. It can process 1,500 transactions per second, in contrast to Bitcoin's 4 transactions per second, resulting in significantly lower transaction costs.
In conclusion, we've discussed what Ripple is, how it works, its relationship with XRP, and its unique features. While it serves similar purposes as other cryptocurrencies, its centralization and lack of mining activity set it apart.
