Ripple (payment protocol): Difference between revisions

{{Infobox software

'''Ripple''' is a [[real-time gross settlement]] system, [[foreign exchange market|currency exchange]] and [[remittance]] network created by [[Ripple (company)|Ripple Labs Inc.]], a US-based technology company. Ripple is built upon a [[distributed computing|distributed]] [[open source software|open source]] [[internet protocol]], and supports tokens representing [[fiat currency]], [[cryptocurrency]], [[commodity|commodities]], or other units of value such as frequent flier miles or mobile minutes.<ref name="virsutalcurrentcy"/><ref name="ripple-is-http"/> Released in 2012, Ripple purports to enable "secure, instantly and nearly free global financial transactions of any size with no chargebacks."

Ripple is based around a shared public ledger,<ref name="techshowcas"/> the XRP Ledger,<ref name="XRP Ledger Dev Portal">{{cite web|url=https://developers.ripple.com/index.html|title=Home|website=XRP Ledger Dev Portal|accessdate=24 Aug 2018}}</ref> which uses a consensus process that allows for payments, exchanges and remittance in a distributed process. The network can operate without the Ripple company;<ref name="int1"/> among its validators are companies, internet service providers, and the [[Massachusetts Institute of Technology]].<ref name="int2"/><ref name="int3"/> The ledger employs the decentralized native cryptocurrency known as XRP, which {{Asof|2018|09|lc=yes|df=|since=}} was the second largest coin by [[market capitalization]].<ref>{{Cite news |url=https://www.wsj.com/articles/ripple-co-founders-token-selloff-accelerates-1537788600 |title=Ripple Co-Founder's Token Selloff Accelerates |last=Geron |first=Tomio |date=2018-09-24 |work=Wall Street Journal |access-date=2018-09-26 |language=en-US |issn=0099-9660}}</ref><ref>[https://www.nytimes.com/2018/01/04/technology/bitcoin-ripple.html Rise of Bitcoin Competitor Ripple Creates Wealth to Rival Zuckerberg]</ref>

Ripple has been adopted by banks and [[payment network]]s as settlement infrastructure technology,<ref name="nytimerush"/> with ''[[American Banker]]'' explaining that "from banks' perspective, distributed ledgers like the Ripple system have a number of advantages over cryptocurrencies like [[Bitcoin]]."<ref name="nrpnamericanbanker"/>

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==History==

===Early development (2004–12)===

The predecessor to the Ripple payment protocol, Ripplepay, was first developed in 2004 by Ryan Fugger,<ref name="buterin2013">{{cite news|last=Buterin|first=Vitalik|date=February 26, 2013|title=Introducing Ripple|work=Bitcoin Magazine|url=http://bitcoinmagazine.com/3506/introducing-ripple/|accessdate=February 6, 2014}}</ref><ref name="economciswine">{{cite book|editor1=Deng, Xiaotie |editor2=Graham, Fan Chung |title=Internet and Network Economics: Third International Workshop, WINE 2007, Proceedings|url=https://books.google.com/books?id=thhpjLxjT88C&pg=PA268|date=November 29, 2007|publisher=Springer|location=Germany|isbn=978-3-540-77104-3|page=268}}</ref> a [[web developer]] in [[Vancouver, British Columbia]].<ref name="peck2013" /> Fugger conceived of the idea after working on a [[local exchange trading system]] in Vancouver, and his intent was to create a monetary system that was decentralized and could effectively allow individuals and communities to create their own money. Fugger's first iteration of this system, RipplePay.com,<ref name="disruptor">{{cite web|last=Reutzel|first=Bailey|title=Disruptor Chris Larsen Returns with a Bitcoin-Like Payments System|url=http://www.paymentssource.com/news/disruptor-chris-larsen-returns-with-bitcoin-like-payments-system-3012580-1.html?zkPrintable=1&nopagination=1|publisher=PaymentSource|accessdate=18 March 2014}}</ref> debuted in 2005 as a financial service to provide secure payment options to members of an online community via a global network.<ref name="peck2013">{{cite web|last=Peck|first=Morgan|title=Ripple Could Help or Harm Bitcoin|work=IEEE Spectrum|url=http://spectrum.ieee.org/telecom/internet/ripple-credit-system-could-help-or-harm-bitcoin|publisher=[[Institute of Electrical and Electronics Engineers]]|date=January 14, 2013|accessdate=January 27, 2014}}</ref><ref name="ripllecouldmakebitcoin">{{cite web|last=Liu|first=Alec|title=Ripple Could Make Bitcoin Great (or Destroy It)|url=http://motherboard.vice.com/blog/the-ripple-economy-could-make-bitcoin-great|publisher=Motherboard|accessdate=January 27, 2014|deadurl=yes|archiveurl=https://web.archive.org/web/20140207195306/http://motherboard.vice.com/blog/the-ripple-economy-could-make-bitcoin-great|archivedate=February 7, 2014|df=mdy-all}}</ref>

This led to the conception of a new system by [[Jed McCaleb]] of [[eDonkey network]],<ref name="grant2013" /> which was designed and built by Arthur Britto and David Schwartz.<ref name="raplacebitcoin">

{{cite news

| title = The Race to Replace Bitcoin

| first = Michael

| last = Craig

| url = http://www.americanbanker.com/news/bank-technology/digital-only-german-bank-to-enter-us-market-court-millennials-1072853-1.html

| newspaper = Observer

| date = February 5, 2015

| accessdate = 2015-06-13

}}</ref> In May 2011, they began developing a digital currency system in which transactions were verified by consensus among members of the network, rather than by the mining process used by [[bitcoin]], which relies on [[blockchain (database)|blockchain]] ledgers.<ref name="disruptor"/> This new version of the Ripple system<ref name="peck2013" /> was therefore designed to eliminate bitcoin's reliance on centralized exchanges, use less electricity than bitcoin, and perform transactions much more quickly than bitcoin.<ref name="peck2013" /> [[Chris Larsen]],<ref name="disruptor"/> who had previously founded the lending services companies [[E-Loan]] and [[Prosper Marketplace|Prosper]], joined the team in August 2012,<ref name="grant2013">{{cite news | last=Grant | first=Rebecca | date=April 11, 2013 | title=OpenCoin raises seed round so ‘anyone in the world can trade any amount of money in any currency’ | work=VentureBeat | url=https://venturebeat.com/2013/04/11/opencoin-raises-seed-round-so-anyone-in-the-world-can-trade-any-amount-of-money-in-any-currency/ | accessdate=February 6, 2014 }}</ref> and together McCaleb and Larsen approached Ryan Fugger with their digital currency idea. After discussions with long-standing members of the Ripple community, Fugger handed over the reins.<ref name="disruptor"/> In September 2012 the team co-founded the corporation OpenCoin,<ref name="disruptor"/> or OpenCoin Inc.<ref name="grant2013"/><ref name="bloomberg" />

===OpenCoin and Ripple Labs (2012–13)===

{{Main|Ripple (company)}}

OpenCoin began developing a new payment protocol called the Ripple Transaction Protocol (RTXP) based on Ryan Fugger's concepts.<ref name="disruptor"/> The Ripple protocol enables the instant and direct transfer of money between two parties.<ref name="clegsb"/> As such the protocol can circumnavigate the fees and wait times of the traditional correspondent banking system,<ref name="clegsb"/><ref name="clcnielsen"/> and any type of currency can be exchanged including [[U.S. dollar]]s, [[euro]]s, [[renminbi]]s, [[Indian rupee]]s, [[yen]], [[gold]] and [[airline miles]].<ref name="cldfox"/> To maintain security OpenCoin programmed Ripple to rely on a common ledger that is "managed by a network of independent validating servers that constantly compare their transaction records." Servers could belong to anyone, including banks or market makers.<ref name="clegsb"/> The company also created its own form of digital currency referred to as [[XRP]] in a manner similar to bitcoin, using the currency to allow financial institutions to transfer money with negligible fees and wait-time.<ref name="clfFortun"/>

Among OpenCoin's early investors were<ref name="angelfunding"/> [[Andreessen Horowitz]] and [[Google Ventures]].<ref name="clegsb"/> On July 1, 2013, XRP Fund II, LLC (now called simply XRP II)<ref name="fincenfines"/> was incorporated as a wholly owned subsidiary of OpenCoin, and headquartered in [[South Carolina]].<ref name="fincenfines"/> The following day, Ripple announced its linking of the bitcoin and Ripple protocols via the [[#The Bitcoin Bridge|Bitcoin Bridge]]. The bitcoin Bridge allows Ripple users to send a payment in any currency to a bitcoin address.<ref name="bitcoinbridge"/><ref name="opencoinuserscan"/> Ripple also developed early partnerships with companies such as ZipZap.<ref name="OlgaKharif"/> On September 26, 2013, OpenCoin Inc. changed its name to [[Ripple Labs|Ripple Labs Inc.]],<ref name="bloomberg"/> with [[Chris Larsen]] remaining CEO.<ref name="citizentekk"/> On the same day the Ripple [[Reference implementation|reference server and client]] became [[free software]], released as [[open source software]] under the terms of the [[ISC license]].<ref name="buterin-26-sep-2013"/> Ripple Labs continued as the primary contributors of code to the consensus verification system behind Ripple, which can "integrate with banks’ existing networks."<ref name="clhanker"/> In October 2013, Ripple partnered further with ZipZap, with the relationship called a threat to [[Western Union]] in the press.<ref name="nrpkripplechance"/>

===Focus on banking market (2014–18)===

By 2014, Ripple Labs was involved in several development projects related to the protocol, releasing for example an [[iOS]] client app for the [[iPhone]] that allows iPhone users to send and receive any currency via their phones.<ref name=RippleCourts /><ref name="rippleblogios"/><ref>{{cite web|last=Kirk|first=Jeremy|title=Apple removes Blockchain, last Bitcoin wallet app, from iOS App Store|url=http://www.pcworld.com/article/2095060/apple-removes-blockchain-last-bitcoin-wallet-app-from-mobile-store.html|publisher=PCWorld|accessdate=18 March 2014}}</ref> This Ripple Client app no longer exists.<ref>[https://download.ripple.com/ Download the Ripple Client - Official site] {{webarchive |url=https://web.archive.org/web/20150604061104/https://download.ripple.com/ |date=June 4, 2015 }}</ref> In July 2014, Ripple Labs proposed Codius, a project to develop a new [[smart contract]] system that is "programming language agnostic."<ref name="nrpeodius"/>

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|style="text-align: left;"|"...we think that the bigger opportunity is not just to create another digital currency – there are plenty of those - but rather to use that technology as a way of building a settlement system with no central operator."

|-

|style="text-align: left;"|— Ripple CEO [[Chris Larsen]] in December 2014<ref name="cldfox"/>

|}

Since 2013, the protocol has been adopted by an increasing number of financial institutions to "[offer] an alternative [[remittance]] option" to consumers.<ref name="clmenters"/> Ripple allows for cross-border payments for retail customers, corporations, and other banks, and Larsen was quoted stating that "Ripple simplifies the [exchange] process by creating point-to-point and transparent transfers in which banks do not have to pay corresponding bank fees."<ref name="cldfox"/> The first bank to use Ripple was Fidor Bank in [[Munich]], which announced the partnership in early 2014. Fidor is an online-only bank based in [[Germany]].<ref name="nrpfbtech"/> That September the New Jersey-based Cross River Bank and Kansas-based CBW Bank announced they would be using the Ripple protocol.<ref name="nrftwousbanks"/> By December Ripple Labs began working with global payments service Earthport, combining Ripple's software with Earthport's payment services system. Earthport's clients include banks such as [[Bank of America]] and [[HSBC]], and it operates in 65 countries. The partnership marked the first network usage of the Ripple protocol.<ref name="nrdwsjbit"/> In December 2014 alone, the XRP price value rose over 200%, helping Ripple surpass [[litecoin]] to become the second biggest crypto-currency, and setting Ripple's market capitalization at close to half a billion dollars.<ref name="nrpdlitecoin"/> On December 29, 2017, XRP briefly became the second largest cryptocurrency, with a market capitalization of US$73 billion.<ref>{{cite web|title=Ripple's 53% Surge Makes It the Second-Biggest Cryptocurrency|url=https://www.bloomberg.com/news/articles/2017-12-29/ripple-s-ris-is-poised-to-rain-on-ether-s-flippening-parade|website=Bloomberg}}</ref>

In February 2015, Fidor Bank announced they would be using the Ripple protocol to implement a new real-time international money transfer network,<ref name="nrecourmillen"/> and in late April 2015, it was announced that Western Union was planning to "experiment" with Ripple.<ref name="nrpkripplechance"/> In late May 2015, [[Commonwealth Bank of Australia]] announced it would be experimenting with Ripple<ref name="astacba"/> in relation to intrabank transfers.<ref name="asdfbsubsidiaries"/> Since 2012, representatives of Ripple Labs have professed support for government regulation of the crypto-currency market, claiming that regulations help businesses grow.<ref name="nrpbregulators"/> On May 5, 2015, [[FinCEN]] fined Ripple Labs and XRP II US$700,000 for violation of the [[Bank Secrecy Act]],<ref name="fincenfines"/> based on the [[Financial Crimes Enforcement Network]]'s additions to the act in 2013.<ref name="nrpl"/> Ripple Labs agreed to remedial steps to ensure future compliance, which included an agreement to only transact XRP and "Ripple Trade" activity through registered [[money services business]]es (MSB), among other agreements such as enhancing the Ripple Protocol.<ref name="fincenfines"/> The enhancement won't change the protocol itself, but will instead add AML transaction monitoring to the network and improve transaction analysis.<ref name="nrpl"/> As of 2017, the current release of the server (known as rippled) is version 0.70.1.<ref name="sourceocodgithub"/>

On June 13, 2016, Ripple obtained a [[BitLicense|virtual currency license]] from the New York State Department of Financial Services, making it the fourth company with a [[BitLicense]].<ref name="bitlicense"/> On August 19, 2016, SBI Ripple Asia announced the creation of a Japanese consortium of banks in a new network that will use Ripple's technology for payments and settlement.<ref name="jpconsortium"/> The consortium was officially launched on October 25, 2016 with 42 member banks.<ref name="jpconsortium2"/> As of July 2017, 61 Japanese banks had joined, representing over 80% of total banking assets in Japan.<ref name="jpconsortium3"/>

On September 23, 2016, Ripple announced the creation of the first interbank group for global payments based on distributed financial technology. As of April 2017, members of the network known as the Global Payments Steering Group (GPSG) are [[Bank of America Merrill Lynch]], Canadian Imperial Bank of Commerce, Mitsubishi UFJ Financial Group, Royal Bank of Canada, Santander, Standard Chartered, UniCredit and Westpac Banking Corporation. The group will "oversee the creation and maintenance of Ripple payment transaction rules, formalized standards for activity using Ripple, and other actions to support the implementation of Ripple payment capabilities."<ref name="gpsg"/><ref name="mufg"/>

In September 2018, [[PNC Financial Services]] announced it will use Ripple's xCurrent system in international payments. xCurrent is a "bi-directional messaging" system which can be integrated with [[blockchain]]s. PNC will not use XRP or Ripple's blockchain-based xRapid system.<ref>{{Cite news |url=https://uk.reuters.com/article/us-blockchain-ripple/blockchain-startup-ripple-signs-up-pnc-as-a-customer-for-its-payment-tech-idUKKCN1LZ1W9?rpc=401& |title=Blockchain startup Ripple signs up PNC as a customer for its payment tech |last=Irrera |first=Anna |date=2018-09-19 |work=Reuters U.K. |access-date=2018-09-21 |language=en-GB}}</ref>

==Concept==

{|class="toccolours" style="float: right; margin-left: 2em; margin-right: 0em; font-size: 85%; background:offwhite; color:black; width:28em; max-width: 40%;" cellspacing="5"

|style="text-align: left;"|"...as an open protocol, Ripple enables a peer-to-peer server architecture to facilitate the movement of value among financial institutions. This allows financial services companies to make payments directly to each other, whether across different networks, geographic borders or currencies."

|-

|style="text-align: left;"|— Consultative Group to Assist the Poor in 2015<ref name="nrpmcgap">{{cite news|title=The ‘Ripple’ Effect: Why an Open Payments Infrastructure Matters

| url=|last1=Aranda|first1=Daniel |last2=Zagone|first2=Ryan |publisher= Consultative Group to Assist the Poor|date= May 1, 2015}}</ref>

|}

Ripple's website describes the [[open-source software|open-source]] protocol as『basic infrastructure technology for interbank transactions – a neutral utility for financial institutions and systems.』The protocol allows banks and non-bank financial services companies to incorporate the Ripple protocol into their own systems, and therefore allow their customers to use the service.<ref name="nrpexecutiveummary"/> Currently, Ripple requires two parties for a transaction to occur: first, a regulated [[financial institution]] "holds funds and issues balances on behalf of customers." Second, "market makers" such as [[hedge funds]] or currency trading desks provide liquidity in the currency they want to trade in.<ref name="nrphgsma"/> At its core, Ripple is based around a shared, public database or ledger that has its contents decided on by consensus.<ref name="techshowcas"/> In addition to balances, the ledger holds information about offers to buy or sell currencies and assets, creating the first distributed exchange.<ref name="nrpexecutiveummary"/> The consensus process allows for payments, exchanges and [[remittance]] in a distributed process.<ref name=":2"/> According to the [[World Bank|CGAP]] in 2015, "Ripple does for payments what [[SMTP]] did for email, which is enable the systems of different financial institutions to communicate directly."<ref name="nrpmcgap"/>

In Ripple, users make payments between each other by using cryptographically signed transactions denominated in either fiat currencies or Ripple's internal currency (XRP). For XRP-denominated transactions Ripple can make use of its internal ledger, while for payments denominated in other assets, the Ripple ledger only records the amounts owed, with assets represented as debt obligations.<ref name="buterin2013" /> As originally Ripple only kept records in its ledger and has no real-world enforcement power, trust was required.<ref name="buterin2013" />{{clarify|date=June 2015}} However, Ripple is now integrated with various user verification protocols and bank services.<ref name="asdfcverificationprocerdures"/> Users have to specify which other users they trust and to what amount.<ref name="buterin2013" /> When a non-XRP payment is made between two users that trust each other, the balance of the mutual credit line is adjusted, subject to limits set by each user. In order to send assets between users that have not directly established a trust relationship, the system tries to find a path between the two users such that each link of the path is between two users that do have a trust relationship. All balances along the path are then adjusted simultaneously and [[Atomicity (database systems)|atomically]].<ref name="buterin2013" /> This mechanism of making payments through a network of trusted associates is named 'rippling'. It has similarities to the age-old [[hawala]] system.<ref name="hawalasystemcoi"/>

==Design features==

{{anchor|xCurrent|xRapid}}

===Gateways===

A gateway is any person or organization that enables users to put money into and take money out of Ripple's liquidity pool.<ref name="buterin-26-sep-2013" /> A gateway accepts currency deposits from users and issues balances into Ripple's distributed ledger. Furthermore, gateways redeem ledger balances against the deposits they hold when currency is withdrawn. In practice, gateways are similar to banks, yet they share one global ledger known as the Ripple protocol. Depending on the type and degree of interaction a user has with a gateway, the gateway may have [[anti-money laundering]] (AML) or [[know your customer]] (KYC) policies requiring verification of identification, address, nationality, etc. to prevent criminal activity.<ref name="ripple-is-http" /> Popular gateways as of 2017 included [[Bitstamp]], [[Kraken (bitcoin exchange)|Kraken]], Gatehub, Ripple Fox, Tokyo JPY, Mr. Ripple, RippleChina and The Rock Trading.<ref name="nrppgatewayinformation"/>

====Trustlines and rippling====

Users must ‘extend trust’ to the Ripple gateway that holds their deposit. This manual creation of a trustline indicates to the Ripple network that the user is comfortable with the gateway's [[counterparty risk]]. Furthermore, the user must put a quantitative limit on this trust and create a similar limit for each currency on deposit at that gateway. For example, if a user deposits US$50 and BTC2.00 at The Rock Trading, the user will have to grant trust of at least that much in both currencies to the gateway for the monies to be available in the Ripple network.<ref name="JohnLight">{{cite web|last=John|first=Light|title=Decentralized Exchange for Fun and Profit|url=http://letstalkbitcoin.com/the-decentralized-exchange-for-fun-profit/#.UuVJ4Hl67u0|publisher=Let's Talk Bitcoin|accessdate=January 26, 2014}}</ref> When a user has allowed multiple gateways in the same currency, there is an advanced option to allow "rippling," which subjects the user's balance of that currency to switch (or ripple) between gateways. Though their total balance doesn't alter, users earn a small transit fee for providing inter-gateway liquidity.<ref name="tonannaram">{{cite web|last=Tong|first=Anna|title=Understanding trust lines|url=https://support.ripplelabs.com/hc/en-us/articles/200916587-Understanding-trust-lines|publisher=Ripple Labs|accessdate=February 2, 2014|deadurl=yes|archiveurl=https://web.archive.org/web/20140201200627/https://support.ripplelabs.com/hc/en-us/articles/200916587-Understanding-trust-lines|archivedate=February 1, 2014|df=mdy-all}}</ref>

====Creditworthiness====

Similar to reasons during the [[Free Banking Era]] in the United States, the value of a currency can vary significantly depending on a gateway's creditworthiness. A non-profit [[trade organization|trade association]], the International Ripple Business Association (IRBA), provides unified procedures and disclosure standards for gateways.<ref name="ripplegateways"/><ref name="publicdiscolsoure"/><ref name="ripplebass"/> {{As of|2015|06}}, fifteen businesses had met or exceeded the IRBA standards.<ref name="ripplegateways"/><ref name="publicdiscolsoure"/>

===Consensus ledger===

Ripple relies on a common shared ledger, which is a distributed database storing information about all Ripple accounts. The network is "managed by a network of independent validating servers that constantly compare their transaction records." Servers could belong to anyone, including banks or market makers.<ref name="clegsb"/> Though the Ripple protocol is freeware,<ref name="buterin-26-sep-2013"/> Ripple Labs continues to develop and promote the Ripple protocol, which confirms financial transactions via a network of distributed servers. Ripple Labs is currently assisting banks in integrating with the Ripple network.<ref name="clhanker"/> A new ledger is created every few seconds,<ref name="britooconsensus"/> and the last closed ledger is a perfect record of all Ripple accounts as determined by the network of servers. A transaction is any proposed change to the ledger and can be introduced by any server to the network. The servers attempt to come to consensus about a set of transactions to apply to the ledger, creating a new ‘last closed ledger’.<ref name="britooconsensus"/>

The consensus process is distributed,<ref name="bicoinsciencetrust"/> and the goal of consensus is for each server to apply the same set of transactions to the current ledger.<ref name="britooconsensus"/> Servers continually receive transactions from other servers on the network,<ref name="britooconsensus"/> and the server determines which transactions to apply based on if a transaction came from a specified node in the ‘unique node list’ (UNL).{{failed verification|date=June 2015}}<ref name=":2"/> Transactions that are agreed upon by a "supermajority" of peers are considered validated.<ref name="britooconsensus"/> If the supermajority isn't in consensus, "this implies that transaction volume was too high or network latency too great for the consensus process to produce consistent proposals," then the consensus process is again attempted by the nodes. Each round of consensus reduces disagreement, until the supermajority is reached.<ref name="britooconsensus"/> The intended outcome of this process is that disputed transactions are discarded from proposals while widely accepted transactions are included.While users may assemble their own UNL nodes and have full control over which nodes they trust, Ripple Labs acknowledges that most people will use the default UNL supplied by their client.

====Ledger security====

In early 2014,<ref name="nrpowhitewhitepaper"/> a rival company called the [[Stellar (payment network)|Stellar Foundation]]<ref name="nrrpando"/> experienced a network crash.<ref name=":1"/> The company brought in David Mazieres, Stellar's chief scientist and head of [[Stanford University]]'s secure computing group, to conduct a review of the Stellar consensus system, which was similar to Ripple's. Mazieres declared the Stellar system unlikely to be safe when operating with "more than one validating node,"<ref name=":1"/> arguing that when consensus is not reached, a ledger fork occurs with parts of the network disagreeing over accepted transactions.<ref name=":0"/> The Stellar Foundation afterwards claimed that there was an "innate weaknesses" in the consensus process,<ref name=":1" /> a claim which according to ''Finance Magnates,'' "Ripple vehemently denied."<ref name="nrpowhitewhitepaper"/> Ripple Labs chief cryptographer David Schwartz disputed Mazieres' findings and declared that Stellar had incorrectly implemented the consensus system, as "the protocol provides safety and fault tolerance assuming the validators are configured correctly."<ref name=":0"/> The company further wrote that after examining Stellar's information, they had concluded "that there is no threat to the continued operation of the Ripple network."<ref name="asdfadavids">

{{cite news

| title =Why the Stellar Forking Issue Does Not Affect Ripple

| first =Stefan

| last =Thomas

| url = https://ripple.com/dev-blog/why-the-stellar-forking-issue-does-not-affect-ripple/

| newspaper =

| publisher =ripple.com

| date =December 7, 2014

| accessdate = 2015-06-05

}}</ref>

===Use as a payment/forex system===

Ripple allows users or businesses to conduct [[Foreign exchange market|cross-currency]] transactions<ref name="Payment Network"/> in 3 to 5 seconds.<ref name="nrpexecutiveummary"/> All accounts and transactions are cryptographically secure and algorithmically verified. Payments can only be authorized by the account holder and all payments are processed automatically without any third parties or intermediaries.<ref name="Payment Network" /> Ripple validates accounts and balances instantly for payment transmission and delivers payment notification with very little latency (within a few seconds).<ref name="nortificationlatency"/> Payments are irreversible, and there are no chargebacks.<ref name="norchargebacksfaxtcoexist"/> XRP cannot be frozen or seized.<ref name="mcgarvey"/> While as of 2014 anyone could open an account on Ripple,<ref name="mcgarvey"/> by 2015 [[Identity verification service|identity verification procedures]] had been implemented.<ref name="asdfcverificationprocerdures"/> Ripple's Path-finding Algorithm searches for the fastest, cheapest path between two currencies.<ref name="bradburydannyhttp"/> In the case of a user who wants to send a payment from USD to EUR, this could be a "one-hop" path directly from USD to EUR, or it could be a multi-hop path, perhaps from USD to CAD to XRP to EUR.<ref name="nrpibridgecurrency"/> Path finding is designed to seek out the cheapest conversion cost for the user. {{As of|2014|05|14|df=US}}, Ripple's gateways allow deposits in a limited number of fiat currencies (USD, EUR, MXN, NZD, GBP, NOK, JPY, CAD, CHF, CNY, AUD), a handful of crypto currencies (BTC, XRP, LTC, NMC, NXT, PPC, XVN, SLL) and a few commodities (gold, silver, platinum).<ref name="riipllecharts"/><ref name="companysummary"/><ref name="bullionexchange"/>

====The Bitcoin Bridge====

The bitcoin bridge is a link between the Ripple and bitcoin ecosystems. The bridge makes it possible to pay any bitcoin user straight from a Ripple account without ever needing to hold any of the digital currency. Additionally, any merchant accepting bitcoins has the potential to accept any currency in the world. For example, a Ripple user may prefer to keep money in USD and not own bitcoins. A merchant, however, may desire payment in bitcoin. The bitcoin bridge allows any Ripple user to send bitcoins without having to use a central exchange such as [[BTC-e]] to acquire them.<ref name="opencoinuserscan"/><ref name="bailyreuts"/> [[Bitstamp]] acts as a gateway for the Ripple payment protocol, among other exchanges.

===Privacy===

While transaction information on the ledger is public, payment information is not. It's thus difficult for anyone to associate transaction information with any specific user or corporation.<ref name="howdoesripple">{{cite web|title=What an Open Network Means for Banks, Market Makers and Regulators|url=https://ripple.com/insights/what-an-open-network-means-for-banks-market-makers-and-regulators/|website=ripple.com|accessdate=May 17, 2016}}</ref>

===Market makers===

Any user on Ripple can act as a [[market maker]] by offering an [[arbitrage]] service such as providing [[market liquidity]], intra-gateway [[currency conversion]], rippling, etc. Market makers can also be hedge funds or currency trading desks. According to the Ripple website, "by holding balances in multiple currencies and connecting to multiple gateways, market makers facilitate payments between users where no direct trust exists, enabling exchanges across gateways."<ref name="marketmakers"/> With a sufficient number of market makers, the path finding algorithm creates a near [[frictionless market]] and enables users to seamlessly pay each other via the network in different currencies, without assuming any undesired foreign exchange risk.<ref name="SpavenOnline" />

Ripple can be used to trade or convert currencies, to send money in one currency and the recipient to receive it in another currency.<ref name="SpavenOnline"/> For example, a user can pay with USD and the recipient can choose to receive the money in another currency, including bitcoins and XRP.<ref name="SpavenOnline"/>

===Open API===

Ripple Labs built the protocol to be friendly to the developer community, and resulting features include an [[API]] for its payment network, based on the popular [[REST API]] standard. One of the earliest extensions by third-party developers was a Ripple extension to e-commerce platform [[Magento]], which enables Magento to read the Ripple public ledger and create an invoice. There has been a Ripple Wallet payment option developed for retail situations as well.<ref name=RippleCourts>{{cite web|last=Bradbury|first=Danny|title=Ripple Courts Developers, Entrepreneurs With New Initiatives|url=http://www.coindesk.com/ripple-courts-developers-entrepreneurs-new-initiatives/|publisher=CoinDesk|accessdate=18 March 2014}}</ref>

==XRP==

{{primary sources|section|date=December 2018}}

{{Infobox cryptocurrency

| currency_name = XRP

| image_1 =

| image_2 =

| image_title_1 =

| symbol =

| ticker_symbol = XRP

| coin_definition =

| white_paper = https://ripple.com/files/ripple_consensus_whitepaper.pdf

| implementations =

| initial_release_version =

| initial_release_date =

| code_repository = https://github.com/ripple/rippled

| status =

| latest_release_version =

| latest_release_date =

| forked_from =

| programming_languages =

| operating_system =

| author =

| developer =

| source_model = Open Source

| license =

| website = https://ripple.com/xrp/

| block_explorer = https://xrpscan.com/

| ledger_genesis = Jan 01, 2013, 2:21:10 AM UTC

| hash_function =

| issuance =

| timestamping =

| block_time =

| block_reward =

| circulating_supply =

| supply_limit = 100,000,000,000 XRP

| total_supply =

| exchange_rate =

| market_cap =

| footnotes = {{notelist|group=infobox}}

}}

{{rquote|1=right|2=XRP exists natively within the Ripple protocol as a counterparty-free currency, as Bitcoin does on the Blockchain. Because XRP is an asset, as opposed to a redeemable balance, it does not require that users trust any specific financial institution to trade or exchange it. All other currencies on Ripple do require some amount of trust, as they each have an issuer, from whom that currency can be redeemed (this includes BTC on the Ripple network).|3=Ripple protocol<ref name="nrpjmathbased"/>}}

XRP is the native currency of the Ripple network. XRP are currently divisible to 6 decimal places, and the smallest unit is called a drop with 1 million drops equaling 1 XRP.<ref name="htighubripple"/> There were 100 billion XRP created at Ripple's inception, with no more allowed to be created according to the protocol's rules.<ref name="ripplexrp"/> As such, the system was designed so XRP is an asset with decreasing available supply.<ref name="ripplexrp"/> Not dependent on any third party for redemption, XRP is the only currency in the Ripple network that does not entail [[counterparty risk]], and it is the only native digital asset. The other currencies in the Ripple network are debt instruments (i.e. liabilities), and exist in the form of balances.<ref name="buterin-26-sep-2013" /> Users of the Ripple network 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<ref name="proposed-reserve"/> (US$6.65 as of August 21, 2018).<ref name="coincapmarket">{{cite web|title=Crypto-Currency Market Capitalizations|url=https://coinmarketcap.com/currencies/ripple/|publisher=coinmarketcap.com|access-date=October 3, 2016}}</ref> The purpose for this requirement is discussed in the [[Ripple (payment protocol)#XRP as an anti-spam measure|anti-spam section]].

===Distribution===

[[File:Market capitalizations of cryptocurrencies.svg|thumb|240px|Cryptocurrency [[market capitalization]]s {{as of |lc=y|2018|01|27}}, in billions of [[United States dollar|US dollars]], with Ripple at top right.<ref>{{cite web|url=https://coinmarketcap.com/|title=Cryptocurrency Market Capitalizations|website=CoinMarketCap|accessdate=2018-01-27}}, including all (1132) cryptocurrencies with known market capitalization.</ref>]]

Of the 100 billion created, 20 billion XRP were retained by the creators, who were also the founders of Ripple Labs. The creators gave the remaining 80% of the total to Ripple Labs, with the XRP intended "to incentivize market maker activity to increase XRP liquidity and strengthen the overall health of XRP markets."<ref name="ripplexrp"/><ref name="escrow"/> Ripple Labs also had a short-lived 2013 giveaway of under 200 million XRP (0.2% of all XRP) with some of the amount given to charities such as the Computing for Good initiative, which began offering XRP in exchange for time volunteered on research projects.<ref name="rippleforumoffical"/> As of March 2015, 67% of Ripple Labs's original 80% was still retained by the company,<ref name="ripplexrp"/> with Ripple Labs stating that "we will engage in distribution strategies that we expect will result in a stable or strengthening XRP exchange rate against other currencies."<ref name="ripple-xrp-distribution"/> In May 2017, to alleviate concerns surrounding XRP supply, Ripple committed to place 55 billion XRP (88% of its XRP holdings) into a cryptographically-secured escrow. The escrow will allow them to use up to 1 billion monthly and return whatever is unused at the end of each month to the back of the escrow queue in the form of an additional month-long contract, starting the process all over.<ref>{{Cite web|url=http://themarketmogul.com/ripple-investments/?hvid=35PIpE|title=Investing in Ripple: The Next Big Thing?|last=Pilkington|first=Nicholas|date=June 25, 2017|website=themarketmogul.com|access-date=}}</ref><ref name="escrow"/> The amount of XRP distributed and their movement can be tracked through the Ripple Charts website.<ref name="ripplegraphsite">{{cite web|title=Network Feed|url=https://ripple.com/graph/#r8TR1AeB1RDQFabM6i8UoFsRF5basqoHJ|publisher=Ripple Labs|accessdate=January 28, 2014}}</ref>

===As a bridge currency===

One of the specific functions of XRP is as a bridge currency,<ref name="nrpibridgecurrency"/> which can be necessary if no direct exchange is available between two currencies at a specific time,<ref name="kingstevebitcoin"/> for example when transacting between two rarely traded currency pairs.<ref name="nrpjmathbased"/> Within the network's currency exchange, XRP are traded freely against other currencies, and its market price fluctuates against dollars, euros, yen, bitcoin, etc. Ripple's design focus is as a [[Foreign exchange market|currency exchange]] and a distributed [[real-time gross settlement]] system, as opposed to emphasizing XRP as an [[alternative currency]].<ref name="nrpjmathbased"/> In April 2015, Ripple Labs announced that a new feature called autobridging had been added to Ripple, with the intent of making it easier for market makers to transact between rarely traded currency pairs. The feature is also intended to expose more of the network to liquidity and better FX rates.<ref name="rippledblog">

{{cite news

| title = rippled Feature Update: NuDB and Autobridging

| first = Alec

| last = Liu

| url = https://ripple.com/blog/rippled-feature-update-nudb-and-autobridging/

| newspaper = Ripple blog

| date = April 27, 2015

| accessdate = 2015-06-16

}}</ref>

===As an anti-spam measure===

When a user conducts a financial transaction in a non-native currency, Ripple charges a transaction fee. The purpose of the fees is to protect against [[Denial-of-service attack|network flooding]] by making the attacks too expensive for hackers. If Ripple were completely free to access, adversaries could broadcast large amounts of "ledger spam" (i.e. fake accounts) and "transaction spam" (i.e. fake transactions) in an attempt to overload the network. This could cause the size of the ledger to become unmanageable and interfere with the network's ability to quickly settle legitimate transactions. Thus, to engage in trade, each Ripple account is required to have a small reserve of 20 XRP,<ref name="proposed-reserve" /> (US$4.96 as of December 5, 2017<ref name="coincapmarket" />), and a transaction fee starting at .00001 XRP (US$0.000002 as of December 5, 2017<ref name="coincapmarket" />) must be spent for each trade. This transaction fee is not collected by anyone; the XRP is destroyed and ceases to exist.<ref name="Teague"/> The transaction fee rises if the user posts trades at an enormous rate (many thousands per minute), and resettles after a period of inactivity.<ref name="JohnLight" />

==Reception==

Since its debut the Ripple protocol has received a fair amount of attention in both the financial and mainstream press. In April 2015, ''[[American Banker]]'' asserted that "from banks' perspective, distributed ledgers like the Ripple system have a number of advantages over cryptocurrencies like Bitcoin."<ref name="nrpnamericanbanker"/> Wrote the [[Federal Reserve Bank of Boston]], "the adoption of distributed networks, such as Ripple, may help the [banking] industry realize faster processing, as well as greater efficiencies for global payments and correspondent banking."<ref name="nraindustryperspectives"/> Writing for ''[[Esquire (magazine)|Esquire]]'' about Ripple as a payment network in 2013, [[Ken Kurson]] said that "the big financial-service brands ought to feel about Ripple the way the record labels felt about [[Napster]]."<ref name="kurson2013"/> ''[[The New York Times]]'' website [[The New York Times|Dealbook]] points out in 2014 that “[Ripple] is winning something that has proved elusive for virtual currencies: involvement from more mainstream players in the financial system.”<ref name="nytimerush"/> In August 2015, Ripple has been awarded as Technology Pioneer by [[World Economic Forum]].<ref name="wef"/> For its creation and development of the Ripple protocol (RTXP) and the Ripple payment/exchange network, the [[Massachusetts Institute of Technology]] (MIT) recognized Ripple Labs as one of 2014's 50 Smartest Companies in the February 2014 edition of ''[[MIT Technology Review]]''.<ref name="bergstensmartestmiet" />

=== Reactions to XRP ===

The reaction to XRP is polarized in the crypto-currency community.<ref name=":2"/> Proponents of [[bitcoin]] have criticized XRP for being "pre-mined," as XRP is built directly into the Ripple protocol and requires no mining. Also, Ripple Labs' distribution of the original limited amount of XRP currency has met with a fair amount of controversy,<ref name="nrpowhitewhitepaper"/> and in particular the founders' retainment of 20% is seen as a high percentage.{{Citation needed|date=December 2018}} However, ''[[Esquire (magazine)|Esquire]]'' countered in 2013 that "if that is devious, then so is every company that's ever gone public while retaining the great bulk of its shares."<ref name="kurson2013" /> Much of the controversy was settled after the announcement that the founders<ref name="nrrpando"/> Jed McCaleb<ref name="nrqviewptiiocp"/> and Arthur Britto<ref name="nrrpando"/> would be selling their XRP at a mediated rate over several years.<ref name="nrrpando"/> However, recently Jed McCaleb has begun accelerating selling his XRP.<ref>{{cite web|url=https://www.wsj.com/articles/ripple-co-founders-token-selloff-accelerates-1537788600|title=Ripple Co-Founder’s Token Selloff Accelerates|work=Wall Street Journal|date=September 24, 2018}}</ref> CEO [[Chris Larsen]] in turn donated 7 billion XRP to the Ripple Foundation for Financial Innovation, with the XRP to be "locked up" and donated over time.<ref name="rippleworks"/> In 2016, of the 20% allocated initially to the founders, nearly half had been donated to non-profits and charities.<ref name="nrqviewptiiocp"/><ref name="rippleworks"/><ref name="miri"/>

Ripple has also been criticized for not being truly decentralized, or for using only a few core validation nodes for transaction consensus, compared to Bitcoin and [[Ethereum]].<ref>{{cite web|url=https://www.coindesk.com/100-billion-controversy-xrps-surge-raises-hard-questions-ripple|title=$100 Billion Controversy: XRP's Surge Raises Hard Questions for Ripple|work=CoinDesk|date=January 4, 2018}}</ref>

A scientific study made by two researchers from Stanford and Stockholm University that studied the money production from an energy consumption point of view and a macroeconomic level stated that running a server on Ripple was comparable to the energy needs of running an email server.<ref>{{cite web|url=http://papers.netrogenic.com/sid/eco-friendly-money.pdf|title=How Eco friendly is our money and is there an alternative?|last1=Leopold|first1=Sid John|last2=Englesson|first2=Niclas|date=November 27, 2017|access-date=August 27, 2018}}</ref>