What is Pulsation?
Ripple is a digital payment network and blockchain-based protocol that owns the XRP cryptocurrency. Ripple's core process is an asset trading and money transfer system similar to the SWIFT system used by banks and financial intermediaries for international transfers of money and securities in multiple currencies.
The token used for the cryptocurrency is pre-mined and uses the XRP token. Ripple is the name of the company and network, while XRP is the token of the cryptocurrency. The purpose of XRP is to act as an intermediary between two currencies or networks – a settlement time denomination. Ripple was first launched in 2012 and was created by Chris Larson and Jed McCaleb.
Main results
- Ripple is a digital payment network and blockchain-based protocol that owns the XRP cryptocurrency.
- Instead of mining blockchains, Ripple uses a consensus mechanism through a group of bank-owned servers to verify transactions.
- Ripple transactions consume less energy than Bitcoin, are confirmed in seconds and cost much less, while Bitcoin transactions consume more energy, take longer to confirm and have higher transaction costs.
- Ripple (XRP) is one of the most valuable blockchain-based tokens by market capitalization.
- Ripple's payment system is primarily intended for use by banks, but individual investors can speculate on the value of XRP.
Understanding ripple
Ripple is powered by an open source, peer-to-peer, decentralized platform that allows you to transfer money in any form, such as dollars, yen, euros or cryptocurrencies such as Litecoin or Bitcoin. Ripple is a global payment network whose customers are major banks and financial institutions. XRP is used in products to facilitate quick exchanges between different currencies.
Ripple as a digital money transfer network
To understand how the system works, consider a money transfer structure where two parties on either side of a transaction use their preferred intermediaries to receive money. In essence, Ripple works like a digital money transfer service. Hawala is an informal way to transfer money across borders, usually without physically moving the money.
Suppose Lawrence needs to send $100 to Rivera, who lives in another city. Lawrence pays to have Lawrence's local agent Keith sent to the river. Lawrence gives Rivera a secret password that must be answered correctly to get the money into town. Keith communicates the details of the transaction to Asken's river agents: the recipient, the refund and the password. If River gives Asuka the correct password, Asuka will give them $100.
But the money came from Asuka's account, meaning Kate owes Asuka $100 (to be paid later). Asuka can record all of Kate's debts due on the agreed date or make reverse transactions that offset the debt. For example, if Asuka is Martin's agent and Martin transfers $100 to Efios, Kate's agent, this replaces the $100 that is Asuka's because Efios is paid from Kate's account.
While the Ripple network is a bit more complicated than this example, it shows the basics of how the Ripple system works. You can see from the example above that trust is needed to initiate a transaction: trust between Lawrence and Kate, between Kate and Asuka, and between River and Asuka.
Ripple uses an intermediary known as a gateway in the chain of trust between two parties wishing to transact. The portal acts as a credit intermediary that receives and sends funds to public addresses on the Ripple network. Anyone or any company can open a gateway that allows the registrar to act as an intermediary for exchanging currencies, securing transactions and transferring payments over the network.
Digital currency Ripple XRP
Ripple's digital currency, XRP, acts as an intermediary currency for other currencies. It is fiat/crypto-agnostic, making it easy to exchange any currency for another. Each currency in the ecosystem has its own portal, such as CADBluzelle, BTCbitstamp and USDsnapswap. If River needs bitcoin to pay Lawrence for services, Lawrence doesn't need to own bitcoin. It can send a payment to the gateway in Canadian dollars (CAD) and River can receive bitcoins from the gateway. A gateway is not required to start full operation; Multiple logins can be used by creating a chain of trust between users.
Maintaining a balance through a gateway exposes you to a corresponding risk, which is also present in traditional banking. In the event of a gateway default, the user may lose the value of the funds invested in that gateway. Therefore, users who do not trust the gateway can interact with a trusted gateway that is considered "untrusted". Therefore, the IOU is transferred through a trust or credit gateway. Counterparty risk does not apply to bitcoins (and most altcoins) because one user's bitcoins are not a long-term investment or liability of another user.
Investors and potential users of Ripple should be aware that it is the subject of a Securities and Exchange Commission (SEC) lawsuit that began in December 2020. The agency is suing the company and two of its top executives over the sale by 1.3 billion dollars. Securities license in the form of XRP cryptocurrency. The SEC states that XRP is considered a security and therefore may be regulated by the SEC. Ripple says no, XRP is a medium of exchange, a virtual currency used for both international and domestic transactions. The SEC case against Ripple could end in 2023.
How Ripple works
The Ripple network does not work with a Proof of Work (PoW) system like Bitcoin or a Proof of Stake (PoS) system like Nxt. Instead, transactions rely on a consensus protocol to verify account balances and transactions within the system. The consensus seeks to improve the integrity of the system by preventing double spending.
A Ripple user who initiates a transaction with multiple gateways but tries to send $100 to the gateway systems will see the first transaction bounced. Individual distributed nodes decide by consensus which transaction should be executed first. The checks are instantaneous and take about five seconds. Since there is no central authority that decides who can create nodes and verify transactions, the Ripple platform is referred to as decentralized.
Ripple tracks all IOUs in a given currency for any user or login. Credits and transaction flows between Ripple wallets are publicly available in the Ripple Consensus registry. However, while financial transaction history is publicly recorded and available on the blockchain, the information is not linked to the identity or identity of any individual or company. However, public records of all transactions (e.g. blockchain) make data available to measure face value.
Ripple's payment system is primarily intended for use by banks, although individual investors can speculate on the value of XRP.
Special attention
Ripple avoids some of the drawbacks of traditional banking. Transactions on the Ripple network are calculated in seconds (although the platform often processes millions of transactions). Unlike banks, a wire transfer can take days or weeks to process. Ripple's transaction fees are also minimal: the minimum transaction fee required for a standard transaction is 0.0002 XRP, compared to the high fees charged by banks for cross-border payments.
As of May 29, 2023, one XRP was worth approximately 48.13 cents and Ripple was the sixth largest cryptocurrency with a market capitalization of over $25 billion.
Is Ripple better than Bitcoin?
Ripple transactions consume less energy than Bitcoin, are confirmed in seconds and cost much less, while Bitcoin transactions consume more energy, take longer to confirm and have higher transaction costs.
How does the Ripple network work?
Transactions on the Ripple network rely on a consensus protocol to verify the balance of accounts and transactions in the system. It doesn't work with a PoW system like Bitcoin or a PoS system like Nxt. The Ripple deal aims to improve system integrity by preventing double-spend.
How is Ripple different from XRP?
Ripple is a global payment network whose customers are major banks and financial service providers. XRP is a currency developed by Ripple that is used in Ripple products to facilitate quick conversion between different currencies.