Overview
Ripple is more known for its digital payment protocol than its cryptocurrency, XRP. Ripple operates on an open-source and decentralized peer-to-peer platform that allows for a seamless transfer of money in any form, whether USD, Yen, litecoin, or bitcoin. Ripple’s system is entirely different – XRP coins can’t be created. Unlike bitcoin, XRP coins are not mined. Ripple minted the entire supply when the network was launched, and Ripple intermittently releases portions of the supply from an escrow and sells them on the open market.
How Does Ripple Work?
The Ripple network does not run with a proof-of-work system like bitcoin or a proof-of-stake system like Nxt. Instead, transactions rely on a consensus protocol in order to validate account balances and transactions on the system. Ripple carries out customer transactions through an internal ledger, while Ripple Labs, the parent company, manages the release of its coins. The major advantage of Ripple is the transactions are not limited to XRP. Through Ripple, you can transfer commodities that also include gold, as long as you have a facilitator who can carry out the transactions.
Does XRP Use Blockchain?
- Ripple started in 2012, but it began as an idea in 2004. In 2005, Ryan Fugger launched RipplePay.com as a precursor to blockchain currencies.
- RippleNet is an open-source project, and its code is different from other crypto projects. Unlike most blockchain projects, Ripple relies on institutions to operate its network. While anyone can run a node of the Ripple network, these trusted gateways (like banks and other institutions) are the ones who facilitate transactions on Ripple, providing currency exchange, fiat deposits, and other means of transfer.
- Unlike most blockchain technology that’s secured by a decentralized network of miners, Ripple is secured by a network of validating servers with an internal ledger that guarantees transactions based on consensus.
- Instead of mining rewards, all 100 billion Ripple coins are pre-mined, and Ripple Labs controls the dispersion of new coins. So far, there are 38.7 billion XRP in circulation, and Ripple Labs will release more as needed to control the money supply. Ripple brings the speed and security of blockchain to the $155 trillion cross-border payment industry.
What Is RPCA (Ripple Protocol Consensus Algorithm)?
The Ripple Protocol consensus algorithm (RPCA) uses a node election system to establish the veracity of new transactions, adding them to a continuous chain of closed transactions that are considered absolute. The goal of the RPCA is to make it possible for a globally disconnected network to agree without relying on proof-of-work infrastructure. This can prevent bad actors in a blockchain payments system from creating fake transactions.
Uses of Ripple
- Ripple offers instant and fast international transactions. The time taken for an average transaction is 4 seconds, while a Bitcoin transaction takes more than 1 hour, and for a regular banking system, it takes around a few days to complete the transaction.
- Ripple is a currency exchange where it charges a low-commission. Several currencies cannot be directly converted to other currencies, so banks use US dollars as a mediator to convert from one currency to another. This has a double-commission like converting currency A to USD, and the next step would be USD to currency B. Ripple is considered a mediator, but as per XRP news today, it is fair to say that it is very cheap compared to USD.
- Ripple aims at making instant transactions easier that are especially helpful for cross-border payments by creating an ecosystem for growth and development.
- Ripple helps banks’ customers send money to their loved ones in many emerging markets like Mexico, the Philippines, and India, to name a few.
Recent Developments
Financial institutions and banks have started using XRP for facilitating their cross-border transactions. Some of Ripple’s customers are the Commonwealth Bank of Australia, Fidor bank, Santander, and a few Japanese banks. They have reported that they have been either using or trying the Ripple network.
Final Thoughts
The Ripple platform is an open-source protocol that is designed to allow fast and cheap transactions. The Ripple payment system is increasingly being used by banks versus Bitcoin, which is used primarily by individuals and organizations as a digital currency. Moreover, Ripple’s native currency XRP can be traded over the major crypto exchanges. And as per XRP forecast, the coin might record tremendous growth over time. Ripple’s “Blockchain” is quite different from that of Bitcoin. In that, it uses a common ledger that is managed by a network of independently validating servers that constantly compare transaction records.
