What is Ripple?

Ripple is a technology that works as a cryptocurrency and a digital payment network for financial transactions. It was first published in 2012; It was co-founded by Chris Larsen and Jed McCaleb. Ripple's core process is a payment processing remittance and asset exchange system, similar to the SWIFT system for international money and securities transfers used by banks and financial intermediaries that trade between currencies. The token used for the cryptocurrency is pre-made and uses the stock symbol XRP  foreign exchange market today. Ripple is the name of the company and the network, and XRP is the cryptocurrency token. The purpose of XRP is to serve as an intermediary mechanism for trading between two currencies or networks, as a kind of denomination of the temporary settlement layer.



Understanding Ripple

Ripple operates on a decentralized open-source peer-to-peer platform that allows transparent money transfer in any form, whether in dollars, yen, euros, or cryptocurrencies like Litecoin. Or Bitcoin. Ripple is a global payments network and its clients include major banks and financial service providers. XRP is used in their products to allow fast conversion between different currencies.

Ripple as a Hawala Digital Network

To understand how the system works, imagine a money transfer structure in which both parties at each end of the transaction use their preferred intermediaries to receive the money. In fact, Ripple acts as a digital hawala service. Hawala is an informal method of transferring money, usually across borders, without actually moving physical money. Tell Lawrence to send $ 100 to David, who lives in another city. Lawrence provides his local agent, Kate, with the funds to send David over forex trading platforms in India. Lawrence also provides the funds with a secret password that David must answer correctly in order to receive the funds in town from him. Kate informs David's agent Rose of the details of the transaction: recipient, funds to be refunded, and password. If David gives Rose the correct password, Rose will give him $ 100.

Ripple XRP Digital Currency

XRP digital currency acts as a bridge currency with other currencies. It does not distinguish between fiat/cryptocurrencies, which makes it easy to exchange each currency for another. Each currency in the ecosystem has its own gateway, for example, CADBluzelle, BTCbitstamp, and USDsnapswap. If David wanted bitcoins as payment for services rendered to Lawrence, Lawrence did not necessarily have to be in possession of bitcoins. He can send the Canadian dollar (CAD) payment to his gateway and David can receive bitcoins from his gateway. A gateway is not required to initiate a complete transaction; Multiple gateways can be used, creating a chain of trust that spans between users. Holding funds with a gateway exposes the user to counterparty risk, a risk also presents in the traditional banking system. If the gateway does not meet its responsibility, the user could lose the value of their money held at that gateway. Therefore, users who do not trust a gateway can transact with a trusted gateway, which in turn bypasses the "untrusted" gateway. In this way, the promissory note is handled through the certified or solvent trusted gateway. Counterparty risk does not apply to bitcoins (and most altcoins) because one user's bitcoins are not another user's debt or responsibility.



This is How Ripple Works

The Ripple network does not run on a proof-of-work (PoW) system like Bitcoin or a proof-of-stake (PoS) system like Nxt. Instead, transactions are based on a consensus record to validate account balances and transactions in the system. Consensus strives to improve the integrity of the system by avoiding double-spending. A Ripple user who initiates a transaction with multiple gateways but tries to send the same $ 100 to the gateway systems will delete all transactions except the first one best broker in India for forex.. The individual distributed nodes decide by consensus which transaction was performed first. Confirmations are immediate and take about five seconds. Since there is no central authority deciding who can set up a node and confirm transactions, the Ripple platform is said to be decentralized. Ripple keeps track of all promissory notes in a specific currency for each user or gateway. IOU credits and transaction flows that occur between Ripple's wallets are publicly available in the Ripple Consensus Book. But although the history of financial transactions is publicly recorded and made available on a blockchain, the data is not linked to the identification or account of a person or company. However, the public record of all transactions (i.e. blockchain) makes the information vulnerable to anonymization measures.

Special Considerations

Ripple improves on some of the drawbacks attributed to traditional banks. Transactions are processed through the Ripple network in seconds (although the platform often processes millions of transactions). This is in contrast to banks where it can take days or weeks to complete a transfer. The fees for transacting on Ripple are also minimal, with the minimum transaction cost set at 0.00001 XRP for a standard transaction, compared to the high fees charged by banks for making cross-border payments. In May 2021, one XRP was worth around $ 1.60, and Ripple was the fifth-largest cryptocurrency with a market capitalization of around $ 60 billion.

Contact us