Ripple, created by Chris Larsen and Jed McCaleb, is a financial settlement protocol designed to enable near-instant monetary transfers between parties. It is the product of Ripple Labs, a San Francisco-based fintech company, aiming to connect banks, payment providers, and cryptocurrency exchanges for efficient global money transfers. The protocol’s native crypto asset, XRP, powers all transaction activity on the Ripple Network or RippleNet. The XRP ledger, a shared public database, records all XRP transactions, with independent validating servers ensuring transparency by comparing records. Ripple’s patented Ripple Protocol Consensus Algorithm (RPCA) helps achieve consensus, but it is not based on blockchain technology and does not involve practices like mining or staking.
Ripple facilitates peer-to-peer transactions, although its primary focus is on facilitating large-scale financial transactions between major banks globally. Currently, a currency needing exchange is used to purchase an equivalent amount of XRP, which is then converted into the final output currency upon transfer. However, there is a possibility in the future where digital assets powered by banks could potentially replace XRP for value transfer.
Regarding XRP supply, Ripple Labs claims that no more than 100 billion XRP coins will be issued. In 2017, the company locked 55 percent of the total XRP supply (55 billion XRPs) into a smart contract-based escrow account, releasing 1 billion tokens per month for sale to investors over 55 months. At the end of each selling period, unsold tokens were planned to return to the escrow for distribution beyond the 55 months. Ripple has not sold more than 300 million XRP per month from 2016 to 2018. Additionally, Larsen, McCaleb, and another contributor retained 20 billion XRP collectively to start the company.
XRP transactions are swift, taking a maximum of 5 seconds, with the system capable of handling over 1500 transactions per second. The minimum transaction fee is 0.00001 XRP, which is destroyed to prevent spamming on RippleNet.
Ripple offers several advantages, including being almost forgery-proof, enabling fast transactions, acting as a universal translator of currencies, facilitating quick lending and borrowing, and allowing loans by IOU. However, Ripple has faced criticisms for certain business practices, such as holding onto a significant portion of existing XRP in circulation and not passing on large amounts of XRP to network users as promised.
In conclusion, Ripple’s innovative financial settlement protocol and XRP cryptocurrency have the potential to revolutionize global money transfers and banking operations. Despite facing challenges and criticisms, Ripple continues to play a significant role in the financial technology sector, offering unique solutions for efficient and cost-effective transactions.
