Ripple is a real-time gross payment system (RTGS), currency exchange, and remittance network created by Ripple companies. Also called the Ripple Transaction Protocol or the Ripple Protocol, is built on a distributed open source internet protocol, the original consensus ledger and cryptocurrency abbreviated as XRP (ripples). Released in 2012, Ripple is intended to enable "secure, instant, and virtually free global financial transactions of any size without any chargeback." Supports tokens representing fiat currency, cryptocurrency, commodity or other value units such as frequent flier miles or moving minutes. In essence, Ripple is based on a shared or public database or ledger, which uses a consensus process that enables payment, exchange, and remittance in a distributed process.
The network can operate without the Ripple company. Among its validators are companies, internet service providers, and the Massachusetts Institute of Technology.
Used by companies like UniCredit, UBS and Santander, Ripple has been increasingly adopted by banks and payment networks as a residential infrastructure technology, with American Banker explaining that "from a bank perspective, ledgers are distributed as the Ripple system has a number superiority over cryptocurrency such as bitcoin. "
As of early June 2018, XRP is the third largest coin by market capitalization.
Video Ripple (payment protocol)
History
Initial development (2004-12)
The introduction of Ripple's payment protocol, Ripplepay, was first developed in 2004 by Ryan Fugger, a web developer in Vancouver, British Columbia. Fugger understood the idea after working on a local exchange trading system in Vancouver, and his intention was to create a decentralized monetary system and could effectively enable individuals and communities to create their own money. The first iteration Fugger of this system, RipplePay.com, debuted in 2005 as a financial service to provide secure payment options to members of online communities through a global network.
This led to the concept of a new system by Jed McCaleb of the eDonkey network, designed and built by Arthur Britto and David Schwartz. In May 2011, they began to develop a digital currency system in which transactions are verified by consensus among network members, not by the mining process used by bitcoin, which relies on a blockchain ledger. The new version of the Ripple system is therefore designed to eliminate bitcoin dependencies on central exchange, use less electricity than bitcoin, and make transactions faster than bitcoin. Chris Larsen, who previously founded a lending company, E-Loan and Prosper, joined the team in August 2012, and together McCaleb and Larsen approached Ryan Fugger with their digital currency idea. After discussing with long-standing members of the Ripple community, Fugger gave up control. In September 2012 the team founded the OpenCoin company, or OpenCoin Inc. OpenCoin_and_Ripple_Labs_ (2012-13) "> OpenCoin and Ripple Labs (2012-13)
OpenCoin began developing a new payment protocol called Ripple Transaction Protocol (RTXP) based on the Ryan Fugger concept. The Ripple protocol allows for instant and direct money transfers between two parties. Thus, the protocol can surround the costs and waiting times of the traditional correspondent banking system, and any type of currency can be exchanged including US dollars, euros, renminbis, Indian rupees, yen, gold and airline miles. To maintain security, OpenCoin programmed Ripple to rely on general ledger being "managed by an independent validate server network that constantly compares their transaction records." Servers can belong to anyone, including banks or market makers. The company also created its own form of digital currency dubbed XRP in a bitcoin-like fashion, using currency to allow financial institutions to transfer money at a cost and a negligible waiting time.
Among OpenCoin's early investors were Andreessen Horowitz and Google Ventures. On July 1, 2013, XRP Fund II, LLC (now called only XRP II) was established as a wholly owned subsidiary of OpenCoin, and is headquartered in South Carolina. The next day, Ripple announces its connection with the bitcoin and Ripple protocols through the Bitcoin Bridge. The bitcoin bracket allows Ripple users to send payments in any currency to bitcoin addresses. Ripple also developed an early partnership with companies such as ZipZap. On September 26, 2013, OpenCoin Inc. changed its name to Ripple Labs Inc., with Chris Larsen left as CEO. On the same day, Ripple's reference servers and clients became free software, released as open source under ISC license terms. Ripple Labs continues as a key contributor to the code for the consensus verification system behind Ripple, which can "integrate with existing bank networks." In October 2013, Ripple partnered further with ZipZap, with a so-called threatening relationship to Western Union in the media.
Focus on the banking market (2014-17 )
In 2014, Ripple Labs is involved in several development projects related to the protocol, releasing eg iOS client app for iPhone that allows iPhone users to send and receive any currency via their mobile phones. This Ripple Client application no longer exists. In July 2014, Ripple Labs proposed Codius, a project to develop a new smart contract system called "agnostic programming language."
Since 2013, the protocol has been adopted by more and more financial institutions to "[offer] alternative shipping options" to consumers. Ripple allows cross-border payments to retail customers, companies and other banks, and Larsen is quoted as saying that "Ripple simplifies the [exchange] process by making point-to-point and transparent transfers where banks do not have to pay as per bank fees." The first bank to use Ripple is the Fidor Bank in Munich, which announced a partnership in early 2014. Fidor is an online-only bank based in Germany. That September Cross River Bank based New Jersey and Kansas-based CBW Bank announced they would use the Ripple protocol. In December Ripple Labs began working with Earthport's global payment service, combining Ripple software with the Earthport payment service system. Earthport clients include banks such as Bank of America and HSBC, and operate in 65 countries. This partnership marks the first use of the network of Ripple protocols. In December 2014 alone, the XRP price rose more than 200%, helping Ripple outperform lithecoin to become the second largest crypto currency, and set Ripple's market capitalization to nearly half a billion dollars. On December 29, 2017, XRP briefly became the second largest cryptocurrency, with a market capitalization of 73 billion USD.
In February 2015, Fidor Bank announced that it would use the Ripple protocol to implement a new real-time international money transfer network, and by the end of April 2015 it was announced that Western Union planned to "experiment" with Ripple. At the end of May 2015, Commonwealth Bank of Australia announced it would experiment with Ripple related to intrabank transfers. Since 2012, representatives of Ripple Labs have expressed support for government regulations from the crypto currency market, claiming that the rules help businesses grow. On May 5, 2015, FinCEN fined Ripple Labs and XRP II US $ 700,000 for violating the Bank Secrets Act, based on the addition of the Crime of Financial Crimes to act in 2013. Ripple Labs approves remedial measures to ensure compliance in the future , which includes an agreement to transact only XRP and "Ripple Trade" activities through a registered money service business (MSB), among other agreements such as enhancing Ripple Protocol. The upgrade will not change the protocol itself, but instead will add monitoring of AML transactions to the network and improve transaction analysis. By 2017, the current server release (known as rippled) is version 0.70.1.
2015 and 2016 marked the expansion of Ripple (company) with the opening of offices in Sydney, Australia in April 2015 and the opening of European offices in London, United Kingdom in March 2016 and then in Luxembourg in June 2016. Many companies have subsequently announced experiments and integration with Ripple.
On June 13, 2016, Ripple obtained a virtual currency license from the New York State Department of Financial Services, making it the fourth company with BitLicense.
On August 19, 2016, SBI Ripple Asia announced the establishment of a consortium of Japanese banks in a new network that would use Ripple technology for payment and settlement. The consortium was officially launched on October 25, 2016 with 42 member banks. As of July 2017, 61 Japanese banks have joined, representing over 80% of total banking assets in Japan.
On September 23, 2016, Ripple announced the creation of the first interbank group for global payments based on distributed financial technology. In April 2017, members of the network known as Global Payments Steering Group (GPSG) are Bank of America Merrill Lynch, Canadian Imperial Trading Bank, Mitsubishi UFJ Financial Group, Royal Bank of Canada, Santander, Standard Chartered, UniCredit, and Westpac Banking Companies. The Group will "oversee the creation and maintenance of Ripple payment transaction rules, formal standards for activities using Ripple, and other actions to support the implementation of Ripple's payment capabilities."
Maps Ripple (payment protocol)
Drafts
Ripple's website describes the open-source protocol as "the basic infrastructure technology for interbank transactions - a neutral utility for institutions and the financial system." This protocol allows banks and non-bank financial services companies to incorporate Ripple protocols into their own systems, and therefore allow their customers to use the service. Currently, Ripple requires two parties for a transaction: first, a financial institution arranged "saving funds and balance issues on behalf of the customer." Secondly, "market makers" such as hedge funds or currency trading desks provide liquidity in the currency they want to trade. In essence, Ripple is based on public databases or shared ledgers whose contents are decided by consensus. In addition to the balance, the ledger stores information about offers to buy or sell currencies and assets, creating the first distributed exchange. The consensus process allows payment, exchange, and remittance in a distributed process. According to CGAP in 2015, "Ripple makes payments for what SMTP does for email, allowing different financial institution systems to communicate directly."
At Ripple, users make payments between each other using cryptographically signed transactions in fiat currency or Ripple currency (XRP). For transactions with XRP, Ripple can use internal cash book, while for payments in other assets, Ripple ledger only records the amount owed, with assets represented as debt obligations. Since Ripple initially only kept records in the ledger and lacked enforcement power in the real world, trust was necessary. However, Ripple is now integrated with various user verification protocols and bank services. Users must determine which other users they trust and how many. When non-XRP payments are made between two mutually trusting users, the balance of the shared credit line is adjusted, subject to the limits set by each user. To send assets between users who have not established trust relationships directly, the system tries to find a path between two users so that each path links are between two users with a trust relationship. All balances along the way are then adjusted simultaneously and atomically. The mechanism of making payments through a trusted partner network is called 'rippling'. It has in common with the ancient hawala system.
Design features
Gateways
Gateway is any person or organization that allows users to enter money and take money from the pool of Ripple liquidity. Gateway accepts currency deposits from users and issues balances into Ripple's distributed ledger. Furthermore, the gateway redeems the balance of the ledger against the deposits they hold when the currency is withdrawn. In practice, gateways are similar to banks, but they share a global ledger known as the Ripple protocol. Depending on the type and extent of user interaction with the gateway, the gateway may have an anti-money laundering (AML) policy or know your customers (KYC) requiring identification verification, address, nationality, etc. To prevent criminal activity. Popular gates per 2017 include Bitstamp, Kraken, Gatehub, Ripple Fox, Tokyo JPY, Mr. Ripple, RippleChina, and The Rock Trading.
Trustlines and ripples
Users must 'expand trust' to the Ripple gateway that stores their deposit. The creation of this trustline guide shows the Ripple network that users are comfortable with the risks of the gateway partners. Furthermore, the user should put a quantitative limit on this trust and create a similar limit for each currency on the deposit at the gateway. For example, if a user deposits US $ 50 and BTC2.00 in The Rock Trading, the user must trust at least both currencies to the gateway to make money available on the Ripple network. When a user has allowed multiple gateways in the same currency, there is an advanced option to allow "ripple," which subjects a user's balance of the currency to switch (or ripple) between gateways. Although their total balances do not change, users get little transit costs to provide inter-gateway liquidity.
Credit eligibility
Similar to the reasons during the Era of Free Banking in the United States, the value of a currency may vary significantly depending on the gateway credit eligibility. The nonprofit trade association, Ripple International Business Association (IRBA), provides integrated procedures and disclosure standards for gateways. As of June 2015, fifteen businesses have met or exceeded the IRBA standard.
Consensus ledger
Ripples rely on a common shared book, which is a distributed database that stores information about all Ripple accounts. Network "is managed by an independent validate server network that constantly compares their transaction records." Servers can belong to anyone, including banks or market makers. Although the Ripple protocol is freeware, Ripple Labs continues to develop and promote the Ripple protocol, which confirms financial transactions through a distributed network of servers. Ripple Labs is currently assisting banks in integrating with the Ripple network. The new ledger is created every few seconds, and the last closed booklet is the perfect record of all Ripple accounts as determined by the network server. Transactions are any proposed changes to the ledger and can be introduced by any server to the network. The server is trying to reach a consensus on a series of transactions to apply to the ledger, creating a new 'last closed book'.
The consensus process is distributed, and the consensus goal is for each server to apply the same set of transactions to the current ledger. The server continues to receive transactions from other servers on the network, and the server determines which transactions will be applied based on whether a transaction comes from a particular node in a unique node list (UNL). Transactions approved by "supermarkoritas" from colleagues are considered validated. If supermajority is not in consensus, "this means that the transaction volume is too high or the network latency is too large for the consensus process to produce a consistent proposal," then the consensus process is again attempted by the node. Each round of consensus reduces disagreement, until the supermarkets are reached. The expected result of this process is that the disputed transaction is removed from the proposal while the widely accepted transactions are included. While users can assemble their own UNL nodes and have full control over which nodes they trust, Ripple Labs recognizes that most people will use UNL standards supplied by their clients.
Ledger Security
In early 2014, a rival company called the Stellar Foundation suffered a network crash. The company brought in David Mazieres, chief scientist Stellar and head of the secure computing group Stanford University, to conduct a review of Stellar's consensus system, similar to Ripple's. Mazieres states the Stellar system is unlikely to be safe when it operates with "more than one node validation," arguing that when consensus is not reached, a ledger fork occurs with parts of the network that do not approve of the received transaction. The Stellar Foundation then claims that there is a "congenital weakness" in the consensus process, a claim according to Magnate Finance, "Ripple strongly denies." The head of Ripple Labs cryptographer David Schwartz denied Mazieres's findings and stated that Stellar had misapplied the consensus system, because "the protocol provides security and fault tolerance with the assumption of a properly configured validator." The company further writes that after examining Stellar's information, they have concluded "that there is no threat to the continued operation of the Ripple network."
Use as payment/forex system
Ripples allow users or businesses to cross-currency transactions in 3 to 5 seconds. All accounts and transactions are cryptographically safe and algorithmically verified. Payments can only be authorized by the account holder and all payments are processed automatically without a third party or intermediary. Ripple validates accounts and balances instantly for payment transmissions and sends payment notifications with very little latency (within seconds). Payment can not be canceled, and there is no chargeback. XRP can not be frozen or seized. While in 2014 anyone can open an account in Ripple, by 2015 the identity verification procedure has been applied. Ripple's search flow algorithm looks for the fastest and cheapest path between two currencies. In the case of users who want to send payments from USD to EUR, this could be a "one-hop" line directly from USD to EUR, or it could be a multi-hop line, probably from USD to CAD to XRP to EUR. Path finding is designed to find the cheapest conversion cost for users. On May 14, 2014, Ripple's gateway allows for a limited amount of fiat currency (USD, EUR, MXN, CAD, CHF, CNY, AUD), some crypto currency (BTC, XRP, NMC, NXT, PPC, XVN, SLL) and some commodities (gold, silver, platinum).
Bitcoin Bridge
The bitcoin bridge is the link between the Ripple ecosystem and the bitcoin. This bridge allows to pay bitcoin users directly from Ripple account without having to hold any digital currency. In addition, every trader receiving bitcoin has the potential to receive any currency in the world. For example, a Ripple user might prefer to keep money in USD instead of bitcoin alone. A merchant, however, may want payment in bitcoin. The bitcoin bridge allows Ripple users to send bitcoins without having to use a central exchange like BTC-e to get it. Bitstamp acts as a gateway for the Ripple payment protocol, among other exchanges.
Privacy
While the transaction information in the ledger is public, the payment information is not. It is thus difficult for anyone to associate transaction information with a particular user or company.
Market maker
Every user in Ripple can act as a market maker by offering arbitration services such as providing market liquidity, intra-gateway currency conversions, rippling, etc. Market makers can also be hedge funds or currency trading desks. According to the Ripple website, "with holding balances in multiple currencies and connecting to multiple gateways, market makers facilitate payments between users where there is no direct trust, allowing exchange at the gates." With sufficient market builders, the search algorithm creates a market that is almost frictionless and allows users to pay each other over networks in multiple currencies, without assuming unwanted foreign exchange risks.
Ripple can be used to trade or convert currency, to send money in one currency and the recipient to receive it in another currency. For example, a user can pay with USD and the recipient may choose to receive money in other currencies, including bitcoin and XRP.
Open API
Ripple Labs built the protocol to be friendly to the developer community, and the resulting feature includes APIs for its payment network, based on the popular REST API standard. One of the earliest extensions by third-party developers was the Ripple extension to Magento's ecommerce platform, which enabled Magento to read Ripple public ledger and create invoices. There is a Ripple Wallet payment option developed for retail situations as well.
XRP
XRP is the original currency of the Ripple network. The current XRP can be divided into 6 decimal places, and the smallest unit is called a drop with 1 million drops equivalent to 1 XRP. There are 100 billion XRPs made at the start of Ripple, with no longer allowed to be made in accordance with the protocol rules. Thus, the system is designed in such a way that XRP is an asset by reducing the available inventory. Depending on no third party for redemption, XRP is the only currency in the Ripple network that does not involve an opponent's risk, and it is the only genuine digital asset. Other currencies in the Ripple network are debt instruments (ie obligations), and are in the form of balances. Ripple network users are not required to use XRP as a store of value or a medium of exchange. Each Ripple account is required, however, to have a small reserve of 20 XRP (US $ 19.80 on December 26, 2017). The purpose for this requirement is discussed in the anti-spam section.
Distribution
Of the 100 billion created, 20 billion XRP is retained by the creators, who are also the founders of Ripple Labs. The creators give the remaining 80% of the total to Ripple Labs, with XRP intended "to incentivize market-maker activities to improve XRP liquidity and strengthen overall XRP market health." Ripple Labs also has a short 2013 giveaway under 200 million XRP (0.2% of all XRPs) with a portion of the amount awarded for charities like Computing for Good initiative, which began offering XRP as a voluntary exchange of time on projects research. In March 2015, 67% of Ripple Labs' original 80% was retained by the company, with Ripple Labs stating that "we will engage in a distribution strategy that we expect will result in a stable XRP exchange rate or strengthening against other currencies." In May 2017, to reduce concerns surrounding XRP supplies, Ripple is committed to placing 55 billion XRP (88% of its XRP holdings) into a cryptographically-secured escrow. Escrow will allow them to use up to 1 billion every month and return whatever is not used at the end of each month to the back of the escrow queue in the form of an additional month contract, starting the process everywhere. The number of XRPs distributed and their movements can be tracked through the Ripple Charts site.
As a bridge currency
One of the specific functions of XRP is as a bridge currency, which can be required if there is no direct exchange available between two currencies at a given time, for example when trading between two currency pairs that are rarely traded. In a network currency exchange, XRP is traded free against other currencies, and its market price fluctuates against the dollar, euro, yen, bitcoin, etc. Ripple's design focus is as a currency exchange and distributed RTGS, as opposed to emphasizing XRP as an alternative currency. In April 2015, Ripple Labs announced that a new feature called autobridging has been added to Ripple, with the intent of making it easier for market makers to transact between non-traded currency pairs. This feature is also intended to expose more networks to better liquidity and FX levels.
As an anti-spam measure
When a user performs financial transactions in a non-genuine currency, Ripple charges a transaction fee. The purpose of cost is to protect against network flood by making too expensive an attack for hackers. If Ripple is completely free to access, the opponent may broadcast a large number of "ledger spam" (ie fake accounts) and "transaction spam" (ie fraudulent transactions) in an attempt to overload the network. This can cause the size of the ledger to become out of control and disrupt the network's ability to quickly complete a legitimate transaction. So, to engage in trading, each Ripple account is required to have a small reserve of 20 XRP, (US $ 4,96 per December 5, 2017), and transaction fees ranging from 0,00001 XRP (US $ 0,000002 per December 5, 2017) spent on every trade. This transaction fee is not collected by anyone; XRP is destroyed and no longer exists. Transaction costs increase if the user posts a trade at a very large rate (thousands per minute), and moves after a period of inactivity.
Reception
Since its debut, the Ripple protocol has received considerable attention in both the financial and mainstream press. Ripple has recently been mentioned in an industry article by The Nielsen Company, the Bank of England Quarterly Bulletin, NACHA, and KPMG, with many articles examining Ripple's influence on the internationalization of the banking industry. In April 2015, American Banker confirmed that "from a bank perspective, ledgers distributed like the Ripple system have a number of advantages over cryptocurrency such as Bitcoin." Writing the Federal Reserve Bank of Boston, "the adoption of a distributed network, such as Ripple, can help the [banking] industry realize faster processing, as well as greater efficiency for global payments and correspondent banking." Writing for Esquire about Ripple as a payment network by 2013, Ken Kurson said that "major financial services brands should feel about Ripple as perceived by Napster's record label." The New York Times Dealbook website shows in 2014 that "[Ripple] won something that has proven elusive for the virtual currency: the involvement of a more important player in the financial system." In August 2015, Ripple has been awarded as Technology Pioneer by the World Economic Forum.
Comparison with competition
Although XRP is the third in the market capitalization for bitcoin as a digital currency, many members of the press have described Ripple as an upcoming rival for bitcoin. At the end of 2014, Bloomberg called bitcoin as a "failed" digital currency, after the bitcoin currency fell 54 percent in value in one year. Ripple is described as a significant competitor, partly due to the real-time international money transfer. Bill Gates supports this view and mentions the Ripple system when asked about bitcoin in 2014, stating "there is a lot of bitcoin or Ripple and variants that can be done to make money move between countries easier and get costs down dramatically But bitcoin will not dominant. "About Ripple's allowance of every electronic value holder, Vice President of St. Louis Federal Reserve and professor at Simon Fraser University, David Andolfatto, declared in 2014 that" Ripple is a currency-agnostic protocol. "Ripple is the winner. "For the manufacture and development of the Ripple (RTXP) protocol and the Ripple/Exchange payment network, the Massachusetts Institute of Technology (MIT) recognizes Ripple Labs as one of 50 Smartest Companies 2014 in the February 2014 edition. MIT Technology Review
Reaction to XRP
The reaction to XRP is polarized in the crypto currency community. Bitchein advocates have criticized XRP for being "pre-mined", because XRP is built directly into the Ripple protocol and does not require mining. Also, the Ripple Labs distribution of the limited number of initial XRP currencies has met with a number of controversies, and in particular the 20% founders retirees are seen as a high percentage. However, Esquire replied in 2013 that "if it is sneaky, then so does any company that has ever gone public while retaining most of its shares." Much of the controversy was resolved after the announcement that founders Jed McCaleb and Arthur Britto would sell their XRP at a mediate rate for several years, "a move that should add stability and restore confidence in the XRP market." CEO Chris Larsen in turn donated 7 billion XRPs to the Ripple Foundation for Financial Innovation, with XRP being "locked up" and donated over time. By 2016, of the 20% initially allocated to the founders, nearly half have been donated to nonprofit and charities.
Ripple has also been criticized for not being completely decentralized, or just using some core validation nodes for transaction consensus, compared to Bitcoin and Ethereum in five digits. Bitcoin developer Peter Todd noted, ".. Ripple's technical documentation does not make any of these risks clear - no where they explain in detail how nodes can fall from consensus with each other if their UNLs (Unique Node List) do not match."
See also
- List of online payment service providers
- List of cryptocurrencies
Quote
External links
- Ripple.com
Source of the article : Wikipedia
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