Ripple

Ripple, in blockchain, refers to a decentralized network that allows users to conduct seamless transactions in different currencies on a global network. The primary purpose of this platform is to authorize the users (and financial institutions) to depend on a network that facilitates global payments.

It works on a protocol that is similar to the SWIFT system. Yet, it focuses more on a crypto-based blockchain ecosystem. Plus, it also allows easy and quick transfer of assets in any form, including fiat currencies. These transfers utilize XRP tokens in return.

• Ripple refers to a blockchain platform that enables seamless transfers of both cryptocurrency and fiat money on a global network.
• It was initially conceived as RipplePay by programmer Ryan Fugger in 2004. In 2012, Fugger sold the project to Arthur Britto, Jeb McCaleb, Chris Larsen, and David Schwartz.
• The platform operates on the XRP Ledger (XRPL), which serves as a distributed ledger similar to a blockchain. It does not rely on consensus mechanisms like Proof of Stake or Proof of Work.
• Instead, it employs the Unique Node List (UNL) to validate transactions. Transactions receiving a majority of votes (at least 80%) from nodes are added to the ledger.

Ripple network is a peer-to-peer platform that allows users to conduct transactions on a global level in different currencies. They can send funds in physical currencies like dollars, euros, plus cryptos across borders. The platform uses the XRP ledger to keep track of these transactions. It is the official blockchain of this network that processes financial transactions. This electronic, distributed database ensures the data gets stored in an immutable way. However, it does not have any consensus mechanism, unlike Bitcoin and Ethereum.

The XRP blockchain has its native consensus called XRPL. It ensures that the transactions approved by nodes become a part of the agreement. Here, network nodes and validators constitute this consensus. So, when a node receives a transaction, it communicates it to the Unique Node List (UNL), which is a subset of the other nodes present. Once UNL receives them, the nodes vote on the validity of the transactions in each round.

It includes around 35 validators that validate them using the Ripple Protocol Consensus Algorithm (RPCA). If the transactions receive a maximum yes (or positive votes), they move to the next round. They must verify transactions between three to five seconds. However, if the majority fails to constitute 80% of the votes, it gets rejected.

Once validated, they are permanently stored in the blockchain. In return, nodes receive a reward in the form of XRP. However, these tokens are already mined in advance, unlike Bitcoin. It means this network has pre-mined the coins and supplied them to the market. On validation, the nodes receive some of them. Likewise, some of the Ripple value is also burned (destroyed) as a part of transaction cost. It also discourages any spam or fake transactions. For instance, in August 2023, more than $10 million in Ripple value was burned to maintain liquidity.

After understanding the platform's mechanism, let us look at the timeline of the network for better understanding:

• 2004 to 2012: The origins of the Ripple network trace back to 2004 when Canadian programmer Ryan Fugger introduced RipplePay. It was a payment solution designed for global transfers within a secure network, albeit without the incorporation of cryptocurrencies.
• 2012 to 2017: In 2012, the Ripple network as we know it today was officially established by developers Arthur Britto and David Schwartz, with the involvement of Jed McCaleb and Chris Larsen. It marked the introduction of the XRP blockchain, which could handle approximately 1,500 transactions per second. However, in 2013, Jed McCaleb left Ripple and founded Stellar, a rival blockchain network. During this period, Ripple underwent a significant transformation, renaming itself from OpenCoin to Ripple Labs. The developers allocated 80 billion XRP to support the digital currency. In 2014, XRP was launched on the network. The value of XRP surged, and by December 2017, it reached $3.84.
• 2018 to 2020: In 2018, Ripple Labs established the XRPL Foundation to facilitate the growth and expansion of the Ripple network. They secured $6.5 million in funding for further development and ecosystem support. During this time, Ripple acquired a European market presence through the acquisition of the trading firm Algrim.

However, a significant downfall occurred after this Ripple news in 2020. The US Securities and Exchange Commission (SEC) filed a case against the network for its unregistered digital asset. Yet, in 2021, the payment-inclusive blockchain network won the Ripple lawsuit.

Let us look at the examples of Ripple to comprehend the concept better.

Example #1

Suppose Luis is a crypto merchant who deals in crypto tokens for his business purposes. Likewise, whenever he sends a payment to his suppliers, Luis utilizes the Ripple platform. In the past month, he received materials worth $2000 for his bakery from Kevin. However, the latter wanted his payment in euros. As a result, he logged in to the platform and performed a cross-currency exchange. So, when Luis added $2000 to his crypto wallet, the platform converted USD to XRP and again converted XRP to EUR. In this process, the transaction cost incurred was also less than other platforms. As a result, Luis could make his payment securely and efficiently.

In this case, if Luis had opted for other payment options, the transaction fee would have been higher. Likewise, even direct conversion from USD to EUR would have been expensive for him. In conclusion, Ripple's efficient cross-currency exchange capabilities allowed Luis, a crypto merchant, to make secure and cost-effective international payments, highlighting one of the platform's advantages.

Example #2

On October 9, 2023, Kristina Campbell, the Chief Financial Officer of Ripple, embarked on a new chapter in her career by stepping down from her position at the cryptocurrency payment platform. Although her departure coincides with Ripple's ongoing legal battles, initiated by a lawsuit filed by the United States Securities and Exchange Commission (SEC) in December 2020, the specific reasons for her exit remain undisclosed.

Instead of dwelling on regulatory complexities, Campbell expressed her excitement for a fresh opportunity in the healthcare sector as she joined the virtual healthcare provider Maven Clinic. Ripple reached a significant legal milestone earlier when, in July, a federal judge determined that XRP didn't fall under the category of securities when sold to retail investors. This decision was upheld in October following an SEC appeal. While Ripple enjoys this legal respite, its legal tussle with the SEC is scheduled to commence in April 2024, signifying the company's resilience through legal challenges and transitions in leadership.

Following are the advantages and disadvantages of Ripple explained below:

Although Ripple and Swift provide similar facilities, they have distinct characteristics. So, let us look at the differences between them:

This article has been a guide to what is Ripple. Here, we explain it along with its history, examples, advantage, disadvantages, and comparison with Swift. You may also find some useful articles here -

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