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 (Ledger XRP). Ripple's primary goal is to connect banks, payment providers, and digital asset exchanges, enabling faster and more cost-effective global payments.
History
Ripple was first idealized in 2004 by Ryan Fugger, who developed the first prototype of Ripple as a decentralized digital monetary system (RipplePay). The system went live in 2005 and was intended to provide secure payment solutions within a global network.
In 2012, Fugger handed the project over to Jed McCaleb and Chris Larsen, and together they founded the American technology company OpenCoin. 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 rebranded to Ripple Labs, which was later rebranded to Ripple, in 2015.
The XRP Ledger (XRPL)
Based on the work of Fugger and inspired by the creation of Bitcoin, Ripple implemented the Ripple Consensus Ledger (RCL) in 2012, along with its native cryptocurrency XRP. The RCL was later renamed to XRP Ledger (XRPL).
The 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 introduces XRPL as a distributed open source ledger that enables real-time financial transactions. These transactions are secured and verified by network participants through a consensus mechanism.
However, unlike Bitcoin, the XRP Ledger does not rely on a Proof of Work consensus algorithm and therefore does not rely on a mining process to verify transactions. Instead, the network reaches a consensus by using its own custom consensus algorithm, formerly known as the Ripple Protocol Consensus Algorithm (RPCA).
The XRPL is managed by a network of independent validator nodes that constantly compare their transaction records. Anyone can not only set up and run a Ripple validator node, but also choose which nodes to trust as validators. However, Ripple recommends its customers use a list of identified and trusted participants to validate their transactions. This list is known as the Unique Node List (UNL).
UNL nodes exchange transaction data with each other until all of them agree on the current state of the ledger. In other words, transactions agreed upon by a large majority of UNL nodes are considered valid and consensus is achieved 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 founded the development of XRPL as an open source ledger. This means that anyone can contribute to the code and that XRPL can continue even if the company ceases to exist.
RippleNet
Unlike XRPL, RippleNet is exclusive to the Ripple company and was built on top of XRPL as a payment and exchange network.
Currently, RippleNet offers a suite of 3 products that is designed as a payment solution system for banks and other financial institutions. Currently, RippleNet has three main products: xRapid, xCurrent, and xVia.
xRapid
In short, xRapid is an on-demand liquidity solution that uses XRP as a global bridge currency between various fiat currencies. Both XRP and xRapid rely on the XRP ledger, which allows for 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 complete the transaction, FIN uses the xRapid solution to create a connection with asset exchanges in both the origin and destination countries. This way, the company can convert Bob's $100 to XRP, providing the liquidity needed for the final payment. Within seconds, the XRP is converted to Indian rupees and Alice can withdraw the money from the asset exchange located in India.
xCurrent
xCurrent is a solution designed to provide instant settlement and tracking of cross-border 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 based on the Interledger Protocol (ILP), which was designed by Ripple as a protocol to connect different ledgers or payment networks.
The four basic components of xCurrent are:
Messenger – The xCurrent messenger provides peer-to-peer communication between financial institutions connected to RippleNet. It is used to exchange information on risks and compliance, commissions, FX 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 transfer of funds through the Interledger. Financial institutions can run their own validator or they can rely on a third-party validator.
ILP Ledger – The Interledger protocol is implemented on existing bank ledgers, creating the ILP ledger. The ILP ledger functions as a subsidiary ledger and is used to track credits, debits and liquidity between transacting parties. Funds are settled atomically, meaning they are settled instantly or not applied at all.
FX Ticker – The FX ticker is used to define exchange rates between transacting parties. Tracks the current status 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 allows banks and other financial services providers to interact within a single framework, without having to rely on multiple payment network integrations. xVia allows banks to create payments through other banking partners that are 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 Ripple network as a currency exchange system that focuses on global payment solutions for banks and other financial institutions.
RippleNet can be deployed on top of existing banking infrastructure as a way to complement and enhance the traditional payment system. xCurrent enables profitable real-time payments across financial institutions, xRapid uses XRP as a borderless bridging currency to provide on-demand liquidity funds, and xVia facilitates the integration and communication of all RippleNet participants.
Stay tuned for more content and don't forget to check out our videos on Binance Academy!
