Ripple is a real-time gross settlement system (RTGS), currency exchange, and remittance network developed by Ripple Labs. Also known as the Ripple Transaction Protocol (RTXP), it operates on an open-source distributed Internet protocol, leveraging a consensus ledger and a native cryptocurrency called XRP.
Introduced in 2012, Ripple aims to enable "secure, instant, and nearly free global financial transactions of any size without chargebacks." It supports tokens representing fiat currencies, cryptocurrencies, commodities, or other units of value (e.g., airline miles, mobile minutes).
Key Features
1. Consensus Ledger
- Ripple uses a shared public database validated by independent servers to ensure transaction integrity.
- Eliminates the need for mining, reducing energy consumption compared to Bitcoin.
2. XRP Cryptocurrency
- 100 billion XRP were pre-mined at launch, with no additional creation allowed.
- Acts as a bridge currency for transactions involving illiquid currency pairs.
- Divisible to six decimal places (smallest unit: "drop").
3. Speed and Cost
- Transactions settle in 4–5 seconds with minimal fees (~0.00001 XRP per transaction).
- Banks use Ripple to avoid traditional correspondent banking delays.
4. Adoption by Financial Institutions
- Partners include Santander, UniCredit, and UBS.
- Western Union and Commonwealth Bank of Australia have piloted Ripple for cross-border payments.
How Ripple Works
User Trust Lines
- Participants set trust limits to facilitate IOUs (e.g., Bank A trusts Bank B up to $1M).
Pathfinding
- The protocol finds the most efficient route for transactions, even converting currencies via XRP if needed.
Liquidity Pools
- Market makers (hedge funds, FX desks) provide liquidity for less-traded currency pairs.
Historical Milestones
- 2004: Ryan Fugger creates RipplePay, a decentralized monetary system prototype.
- 2012: Ripple Labs (formerly OpenCoin) formalizes RTXP and introduces XRP.
- 2015: Fined $700K by FinCEN for AML violations; enhanced compliance measures implemented.
- 2017: Ripple becomes the third-largest cryptocurrency by market cap.
FAQs
Q1: How is Ripple different from Bitcoin?
- Bitcoin: Decentralized, mined, store of value.
- Ripple: Enterprise-focused, pre-mined, optimized for bank transactions.
Q2: Can XRP be mined?
- No. All XRP was created at launch, with Ripple Labs controlling ~60% (as of 2015).
Q3: Why do banks prefer Ripple?
- Lower costs, faster settlements, and regulatory compliance vs. public blockchains.
👉 Explore Ripple’s official site for developer tools and case studies.
Future Outlook
Ripple continues expanding its global payment infrastructure, targeting $500B+ in annual transaction volume. Critics highlight centralization risks due to Ripple Labs’ control over XRP supply.
Last updated: June 2024
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