Ripple (payment protocol)

Ripple is a centralized real-time gross settlement system (RTGS), currency exchange and remittance network created by the Ripple company. Also called the Ripple Transaction Protocol (RTXP) or Ripple protocol, [Trio] it is built upon a distributed open source internet protocol, overeenstemming ledger and native cryptocurrency abbreviated spil XRP (ripples). Released te 2012, Ripple purports to enable “secure, instantly and almost free global financial transactions of any size with no chargebacks.” It supports tokens signifying fiat currency, cryptocurrency, commodity or any other unit of value such spil frequent flier miles or mobile minutes. [Four] [Five] At its core, Ripple is based around a collective and public database or ledger, [6] which uses a overeenstemming process that permits for payments, exchanges and remittance te a distributed process.

The network can operate without the Ripple company. [7] Among its validators are companies, internet service providers, and the Massachusetts Institute of Technology. [8] [9]

Used by companies such spil UniCredit, UBS and Santander, Ripple has bot increasingly adopted by banks and payment networks spil settlement infrastructure technology, [Ten] with American Banker explaining that “from banks’ perspective, distributed ledgers like the Ripple system have a number of advantages overheen cryptocurrencies like bitcoin.” [11]

Spil of the very first week of March 2018, XRP is the third largest coin by market capitalization. [12] [13]

Contents

Early development (2004–12) Edit

The predecessor to the Ripple payment protocol, Ripplepay, wasgoed very first developed te 2004 by Ryan Fugger, [14] [15] a web developer ter Vancouver, British Columbia. [16] Fugger conceived of the idea after working on a local exchange trading system ter Vancouver, and his intent wasgoed to create a monetary system that wasgoed decentralized and could effectively permit individuals and communities to create their own money. Fugger’s very first iteration of this system, RipplePay.com, [17] debuted te 2005 spil a financial service to provide secure payment options to members of an online community via a global network. [16] [Legal]

This led to the conception of a fresh system by Jed McCaleb of eDonkey network, [Nineteen] which wasgoed designed and built by Arthur Britto and David Schwartz. [20] Ter May 2011, they began developing a digital currency system ter which transactions were verified by overeenstemming among members of the network, rather than by the mining process used by bitcoin, which relies on blockchain ledgers. [17] This fresh version of the Ripple system [16] wasgoed therefore designed to eliminate bitcoin’s reliance on centralized exchanges, use less tens unit than bitcoin, and perform transactions much more quickly than bitcoin. [16] Chris Larsen, [17] who had previously founded the lending services companies E-Loan and Prosper, joined the team te August 2012, [Nineteen] and together McCaleb and Larsen approached Ryan Fugger with their digital currency idea. After discussions with long-standing members of the Ripple community, Fugger passed overheen the reins. [17] Ter September 2012 the team co-founded the corporation OpenCoin, [17] or OpenCoin Inc. [Nineteen] [21]

OpenCoin and Ripple Labs (2012–13) Edit

OpenCoin began developing a fresh payment protocol called the Ripple Transaction Protocol (RTXP) based on Ryan Fugger’s concepts. [17] The Ripple protocol enables the instant and onmiddellijk transfer of money inbetween two parties. [22] Spil such the protocol can circumnavigate the fees and wait times of the traditional verslaggever banking system, [22] [23] and any type of currency can be exchanged including U.S. dollars, euros, renminbis, Indian rupees, yen, gold and airline miles. [24] To maintain security OpenCoin programmed Ripple to rely on a common ledger that is “managed by a network of independent validating servers that permanently compare their transaction records.” Servers could belong to anyone, including banks or market makers. [22] The company also created its own form of digital currency dubbed XRP ter a manner similar to bitcoin, using the currency to permit financial institutions to transfer money with negligible fees and wait-time. [25]

Among OpenCoin’s early investors were [26] Andreessen Horowitz and Google Ventures. [22] On July 1, 2013, XRP Fund II, LLC (now called simply XRP II) [27] wasgoed incorporated spil a wholly possessed subsidiary of OpenCoin, and headquartered ter South Carolina. [27] The following day, Ripple announced its linking of the bitcoin and Ripple protocols via the Bitcoin Bridge. The bitcoin Bridge permits Ripple users to send a payment ter any currency to a bitcoin address. [28] [29] Ripple also developed early partnerships with companies such spil ZipZap. [30] On September 26, 2013, OpenCoin Inc. switched its name to Ripple Labs Inc., [21] with Chris Larsen remaining CEO. [31] On the same day the Ripple reference server and client became free software, released spil open source under the terms of the ISC license. [Two] Ripple Labs continued spil the primary contributors of code to the overeenstemming verification system behind Ripple, which can “integrate with banks’ existing networks.” [32] Ter October 2013, Ripple partnered further with ZipZap, with the relationship called a threat to Western Union te the press. [33]

Concentrate on banking market (2014–17) Edit

By 2014, Ripple Labs wasgoed involved ter several development projects related to the protocol, releasing for example an iOS client app for the iPhone that permits iPhone users to send and receive any currency via their phones. [34] [35] [36] This Ripple Client app no longer exists. [37] Ter July 2014, Ripple Labs proposed Codius, a project to develop a fresh clever contract system that is “programming language agnostic.” [38]

Since 2013, the protocol has bot adopted by an enhancing number of financial institutions to “[suggest] an alternative remittance option” to consumers. [39] Ripple permits for cross-border payments for retail customers, corporations, and other banks, and Larsen wasgoed quoted stating that “Ripple simplifies the [exchange] process by creating point-to-point and semitransparent transfers te which banks do not have to pay corresponding bankgebouw fees.” [24] The very first bankgebouw to use Ripple wasgoed Fidor Bankgebouw te Munich, which announced the partnership te early 2014. Fidor is an online-only canap based ter Germany. [40] That September the Fresh Jersey-based Cross Sea Canap and Kansas-based CBW Canap announced they would be using the Ripple protocol. [Trio] 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 spil Canap of America and HSBC, and it operates ter 65 countries. The partnership marked the very first network usage of the Ripple protocol. [41] Te December 2014 alone, the XRP price value rose overheen 200%, helping Ripple surpass litecoin to become the 2nd thickest crypto-currency, and setting Ripple’s market capitalization at close to half a billion dollars. [42] On December 29, 2018, XRP shortly became the 2nd largest cryptocurrency, with a market capitalization of 73 billion USD. [43]

Te February 2015, Fidor Handelsbank announced they would be using the Ripple protocol to implement a fresh real-time international money transfer network, [44] and te late April 2015, it wasgoed announced that Western Union wasgoed programma to “proefneming” with Ripple. [33] Ter late May 2015, Commonwealth Bankgebouw of Australia announced it would be experimenting with Ripple [45] te relation to intrabank transfers. [46] Since 2012, representatives of Ripple Labs have professed support for government regulation of the crypto-currency market, claiming that regulations help businesses grow. [47] On May Five, 2015, FinCEN fined Ripple Labs and XRP II US$700,000 for disturbance of the Bankgebouw Secrecy Act, [27] based on the Financial Crimes Enforcement Network’s additions to the act ter 2013. [48] 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 businesses (MSB), among other agreements such spil enhancing the Ripple Protocol. [27] The enhancement won’t switch the protocol itself, but will instead add AML transaction monitoring to the network and improve transaction analysis. [48] Spil of 2018, the current release of the server (known spil rippled) is version 0.70.1. [1]

The year 2015 and 2016 marked the expansion of Ripple (company) with the opening of an office ter Sydney, Australia ter April 2015 [49] and the opening of European offices ter London, United Kingdom te March 2016 [50] then te Luxembourg ter June 2016. [51] Many companies have subsequently announced experimenting and integrations with Ripple. [52]

On June 13, 2016, Ripple obtained a virtual currency license from the Fresh York State Department of Financial Services, making it the fourth company with a BitLicense. [73]

On August Nineteen, 2016, SBI Ripple Asia announced the creation of a Japanese consortium of banks te a fresh network that will use Ripple’s technology for payments and settlement. [74] The consortium wasgoed officially launched on October 25, 2016 with 42 member banks. [75] Spil of July 2018, 61 Japanese banks had joined, signifying overheen 80% of total banking assets ter Japan. [76]

On September 23, 2016, Ripple announced the creation of the very first interbank group for global payments based on distributed financial technology. Spil of April 2018, members of the network known spil the Global Payments Steering Group (GPSG) are Bankgebouw of America Merrill Lynch, Canadian Imperial Canap of Commerce, Mitsubishi UFJ Financial Group, Royal Bankgebouw 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 deeds to support the implementation of Ripple payment capabilities.” [77] [78]

Ripple’s webstek describes the open-source protocol spil “basic infrastructure technology for interbank transactions – a neutral utility for financial institutions and systems.” The protocol permits banks and non-bank financial services companies to incorporate the Ripple protocol into their own systems, and therefore permit their customers to use the service. [80] Presently, Ripple requires two parties for a transaction to occur: very first, a regulated financial institution “holds funds and issues balances on behalf of customers.” 2nd, “market makers” such spil hedge funds or currency trading desks provide liquidity ter the currency they want to trade te. [81] At its core, Ripple is based around a collective, public database or ledger that has its contents determined on by overeenstemming. [6] Ter addition to balances, the ledger holds information about offers to buy or sell currencies and assets, creating the very first distributed exchange. [80] The overeenstemming process permits for payments, exchanges and remittance ter a distributed process. [82] According to the CGAP ter 2015, “Ripple does for payments what SMTP did for email, which is enable the systems of different financial institutions to communicate directly.” [79]

Ter Ripple, users make payments inbetween each other by using cryptographically signed transactions denominated te 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 ter other assets, the Ripple ledger only records the amounts owed, with assets represented spil debt obligations. [14] Spil originally Ripple only kept records ter its ledger and has no real-world enforcement power, trust wasgoed required. [14] [ clarification needed ] However, Ripple is now integrated with various user verification protocols and canap services. [83] Users have to specify which other users they trust and to what amount. [14] When a non-XRP payment is made inbetween two users that trust each other, the balance of the mutual credit line is adjusted, subject to thresholds set by each user. Ter order to send assets inbetween users that have not directly established a trust relationship, the system attempts to find a path inbetween the two users such that each listig of the path is inbetween two users that do have a trust relationship. All balances along the path are then adjusted at the same time and atomically. [14] This mechanism of making payments through a network of trusted associates is named ‘rippling’. It has similarities to the age-old hawala system. [84]

Gateways Edit

A gateway is any person or organization that enables users to waterput money into and take money out of Ripple’s liquidity pool. [Two] 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. Te practice, gateways are similar to banks, yet they share one global ledger known spil 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. [Five] Popular gateways spil of 2018 included Bitstamp, Gatehub, Ripple Fox, Tokyo JPY, Mr. Ripple, RippleChina and The Rock Trading. [85]

Trustlines and rippling Edit

Users voorwaarde ‘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 convenient with the gateway’s counterparty risk. Furthermore, the user vereiste waterput 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 ter both currencies to the gateway for the monies to be available ter the Ripple network. [86] When a user has permitted numerous gateways te the same currency, there is an advanced option to permit “rippling,” which subjects the user’s balance of that currency to switch (or ripple) inbetween gateways. Tho’ their total balance doesn’t alter, users earn a puny transit toverfee for providing inter-gateway liquidity. [87]

Creditworthiness Edit

Similar to reasons during the Free Banking Era ter the United States, the value of a currency can vary significantly depending on a gateway’s creditworthiness. A non-profit trade association, the International Ripple Business Association (IRBA), provides unified procedures and disclosure standards for gateways. [88] [89] [90] Spil of June 2015 [update] , fifteen businesses had met or exceeded the IRBA standards. [88] [89]

Overeenstemming ledger Edit

Ripple relies on a common collective ledger, which is a distributed database storing information about all Ripple accounts. The network is “managed by a network of independent validating servers that permanently compare their transaction records.” Servers could belong to anyone, including banks or market makers. [22] However the Ripple protocol is freeware, [Two] Ripple Labs resumes to develop and promote the Ripple protocol, which confirms financial transactions via a network of distributed servers. Ripple Labs is presently assisting banks te integrating with the Ripple network. [32] A fresh ledger is created every few seconds, [91] and the last closed ledger is a volmaakt record of all Ripple accounts spil determined by the network of servers. A transaction is any proposed switch to the ledger and can be introduced by any server to the network. The servers attempt to come to overeenstemming about a set of transactions to apply to the ledger, creating a fresh ‘last closed ledger’. [91]

The overeenstemming process is distributed, [92] and the aim of overeenstemming is for each server to apply the same set of transactions to the current ledger. [91] Servers continually receive transactions from other servers on the network, [91] and the server determines which transactions to apply based on if a transaction came from a specified knot ter the ‘unique knot list’ (UNL). [ not te citation given ] [82] Transactions that are agreed upon by a “supermajority” of peers are considered validated. [91] If the supermajority isn’t ter overeenstemming, “this implies that transaction volume wasgoed too high or network latency too excellent for the overeenstemming process to produce consistent proposals,” then the overeenstemming process is again attempted by the knots. Each round of overeenstemming reduces disagreement, until the supermajority is reached. [91] 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 knots and have total control overheen which knots they trust, Ripple Labs acknowledges that most people will use the default UNL supplied by their client.

Ledger security Edit

Te early 2014, [93] a rival company called the Stellar Foundation [94] experienced a network crash. [95] The company brought te David Mazieres, Stellar’s chief scientist and head of Stanford University’s secure computing group, to conduct a review of the Stellar overeenstemming system, which wasgoed similar to Ripple’s. Mazieres proclaimed the Stellar system unlikely to be safe when operating with “more than one validating knot,” [95] arguing that when overeenstemming is not reached, a ledger fork occurs with parts of the network disagreeing overheen accepted transactions. [96] The Stellar Foundation afterwards claimed that there wasgoed an “all-natural weaknesses” te the overeenstemming process, [95] a optie which according to Finance Magnates, “Ripple vehemently denied.” [93] Ripple Labs chief cryptographer David Schwartz disputed Mazieres’ findings and announced that Stellar had incorrectly implemented the overeenstemming system, spil “the protocol provides safety and fault tolerance assuming the validators are configured correctly.” [96] 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.” [97]

Use spil a payment/forex system Edit

Ripple permits users or businesses to conduct cross-currency transactions [98] ter Trio to Five seconds. [80] 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. [98] Ripple validates accounts and balances instantly for payment transmission and produces payment notification with very little latency (within a few seconds). [99] Payments are irreversible, and there are no chargebacks. [100] XRP cannot be frozen or seized. [101] While spil of 2014 anyone could open an account on Ripple, [101] by 2015 identity verification procedures had bot implemented. [83] Ripple’s Path-finding Algorithm searches for the fastest, cheapest path inbetween two currencies. [102] Te 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. [103] Path finding is designed to seek out the cheapest conversion cost for the user. Spil of May 14, 2014 [update] , Ripple’s gateways permit deposits te 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). [104] [105] [106]

The Bitcoin Bridge Edit

The bitcoin bridge is a listig inbetween the Ripple and bitcoin ecosystems. The bridge makes it possible to pay any bitcoin user straight from a Ripple account without everzwijn needing to hold any of the digital currency. Additionally, any merchant accepting bitcoins has the potential to accept any currency te the world. For example, a Ripple user may choose to keep money te USD and not own bitcoins. A merchant, however, may desire payment ter bitcoin. The bitcoin bridge permits any Ripple user to send bitcoins without having to use a central exchange such spil BTC-e to acquire them. [29] [107] Bitstamp acts spil a gateway for the Ripple payment protocol, among other exchanges.

Privacy Edit

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. [108]

Market makers Edit

Any user on Ripple can act spil a market maker by suggesting an arbitrage service such spil providing market liquidity, intra-gateway currency conversion, rippling, etc. Market makers can also be hedge funds or currency trading desks. According to the Ripple webstek, “by holding balances ter numerous currencies and connecting to numerous gateways, market makers facilitate payments inbetween users where no meteen trust exists, enabling exchanges across gateways.” [109] 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 ter different currencies, without assuming any undesired foreign exchange risk. [110]

Ripple can be used to trade or convert currencies, to send money te one currency and the recipient to receive it te another currency. [110] For example, a user can pay with USD and the recipient can choose to receive the money te another currency, including bitcoins and XRP. [110]

Open API Edit

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 Surplus API standard. One of the earliest extensions by third-party developers wasgoed a Ripple extension to e-commerce podium Magento, which enables Magento to read the Ripple public ledger and create an invoice. There has bot a Ripple Wallet payment option developed for retail situations spil well [34] .

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