Ripple: How XRP is Changing the World of Currency Exchange!

Ripple’s XRP has been with us for quite a long time. In fact, the foundations of what would become Ripple as we know it today are older than Bitcoin itself.

At its core, Ripple is a global payment network and currency exchange. It aimed to become the potential replacement for SWIFT, one of the leading global payment processing platforms, and to help with the integration of big business to the blockchain.

To this end, Ripple acts as the intermediary in a transaction. When two strangers want to trade, Ripple and its XRP token aim to be the trusted entity in the middle to ensure an honest trade.

As I alluded to, the foundations of Ripple exceed that of Bitcoin.
The origin of what would become Ripple dates back to 2004, when Ripple was conceived as a decentralized payment network by Ryan Fugger.
No blockchain yet, though.

Later in 2011, Jed McCaleb began working on a digital currency where transactions were verified by the network’s users.
The following year, McCaleb would take over Ripple from Fugger.
With the addition of Arthur Britto and David Schwartz, the cryptocurrency we know as XRP was born in 2013.

But now we get to the question of how it works, as unlike other cryptocurrencies, you’ll sometimes hear people say, “XRP isn’t a cryptocurrency.”

Though, by the definition of a digital token built upon a decentralized ledger that allows users to transfer funds across the internet, XRP is a cryptocurrency.

However, we must remember that Ripple is older than Bitcoin. In the beginning, there was no blockchain and Ripple wasn’t trying to create one. Ripple is a company that has adapted to the blockchain rather than one that was created for it.

Therefore there is no mining like you get with Bitcoin, and there is no staking like you get with Ethereum.
Instead, to verify XRP transactions, Ripple uses the XRP Ledger, or XRPL, and the Ripple Consensus Protocol Algorithm, or RCPA.

XRPL is the open-source distributed ledger created by Ripple, which stores and updates a list of all its transactions.
The XRPL uses a network of trusted validators to confirm their transactions, with at least 80% of the validators agreeing before a consensus is confirmed.

Anyone can become a validator, though Ripple ultimately decides who can become a trusted validator with these validators added to what is known as the Unique Node List, or UNL.

Alternatively, the Ripple Consensus Protocol Algorithm, or RCPA, defines how the XRPL is managed by this network of independent validators.
The RCPA’s main aim is to ensure honesty.

To do this, it has two rules that help ensure honesty even with a small percentage of dishonest actors.
Each UNL must achieve 80% consensus within its active set of 36 validators, remembering that six validators are operated directly by Ripple.
Practically speaking, this means 29 of the remaining actors must be acting dishonestly to falsify consensus.

However, as a second precaution, an additional percentage of the validator nodes will be crossover from an additional UNL. This means to corrupt the network you need to compromise two separate UNLs to forge transactions.

All Ripple transactions are visible on its publicly viewable consensus ledger, with each successive data block including the previous block’s hash to confirm its authenticity.

This process typically finalizes in seconds, making it an attractive proposition for those looking to send money around the globe quickly.

The RCPA, like all consensus mechanisms, is to ensure the double-spend problem does not occur. The double-spend problem is where someone successfully spends the same digital money twice.

Institutional investors currently make up a large proportion of trusted validators, which Ripple views as necessary if it wants to become the intermediary of choice for all currency conversion on the blockchain.
Due to these two fail-safes, the network has run without incident since 2013.

Why Ripple doesn’t reward its validators?

Uniquely, there is no reward for hosting a record of their transactions. Ripple believes this incentivizes participating for the wrong reasons. Ultimately, they believe users should host a record of the transactions as it ensures the security of the network and your investment.

By rewarding people to host the network you risk attracting people who will disappear as soon as better rewards are available for hosting another network.
Therefore, by offering no reward Ripple guarantees those who are hosting the network are likely those committed to its long-term success.

While XRP is definitely a cryptocurrency, it is fair to say Ripple isn’t a very crypto-focused company.

That said, why should they be? Not only is XRP popular among retail investors it is also proving highly popular among institutional investors, which was ultimately their aim all along.

This is especially impressive when you remember that XRP is still going against the Securities and Exchange Commission, or SEC, in a lawsuit regarding its status as a security.

Normally, this would encourage fleeing from the platform, but not with XRP, which is especially strange given the high number of institutional investors, such as Santander and Bank of America.

There will only ever be 100 billion XRP, and all 100 billion had been “pre-mined” before launch – meaning all tokens were created at once, no mining involved.

RippleLabs received 80% of this newly created XRP, which operates and manages Ripple and who sells part of its share of XRP periodically.

The remaining 20% went to the following founders: Jed McCaleb, Arthur Britto, and David Schwartz.

However, where XRP shines is as a currency-converting platform. Its unique setup of selected nodes allows XRP transactions to finalize in seconds and process up to 1500 transactions at once.

Its incredibly cheap to use at only 0.00001 XRP per transaction and environmentally friendly compared to its peers, thus offering a quicker and greener way to send currency across the internet.

Again, this encourages the demographic Ripple hopes to lure, big business.

To summarize, Ripple is a currency conversion platform that hopes to bring big business to blockchain technology.

Its XRP token is used as an intermediary in transactions when sending between two strangers.

No matter the currency, be it Dollars or Euros, Ripple’s XRP can be used as a medium of exchange.

The XRP token ensures a fair currency conversion exchange of less than a cent. The transaction will finalize in seconds and don’t require the amount of power platforms like Bitcoin do.