In short, it is both a platform for currency transfers and a form in which these transfers are made. It is based on open source code that has been specifically designed to provide the fastest and cheapest transactions possible. This, as well as a number of other key features, distinguishes it from Bitcoin, which, although originally conceived for fast payments, very quickly turned into a system of accumulating values.
Ripple has its own internal currency - XRP, and can also serve as the basis for the issuance of other tokens based on the RippleNet network.
RippleNet is a network of banks, institutional investors, and payment providers using solutions developed by Ripple to make seamless international currency payments around the world.
Also, this system significantly simplifies the exchange of valuable assets, since it automatically searches for matches between requests and offers, and also helps to choose the shortest exchange chains that allow you to get the desired product or asset. Users just need to place their requests or requests - and then agree or disagree with the proposed options for action.
One of the main differences between Ripple and other similar projects is the minimum internal transaction fee of $ 0.00001. It would be possible, in principle, to do without it, but in this form it is easier to deal with spam and DDos attacks. Interestingly, this insignificant commission is not transferred to anyone's account upon withdrawal - it simply burns out.
And further. Ripple doesn't have its own blockchain. Yes, blockchain-free cryptocurrencies are also possible, although many experts don't think so. However, the protocol has a consensus algorithm that simplifies checks and regulation. Ripple protocol consensus algorithm or RPCA.
What is XRP?
As already specified, this is an internal network token that is used to transfer values through it. Basically, you change the currency you have for XRP at the official rate, transfer these tokens, paying a commission of $ 0.00001, and on the spot - exchange the tokens for the other currency you need. This allows for maximum speed and minimum transaction costs.
Who Created Ripple?
A working prototype of the protocol was developed back in 2004, but it lacked several key solutions that would make it really effective. However, with the development of the idea of cryptocurrencies and blockchains, these solutions have emerged.
And in 2013, a certain Jed McCaleb, who co-founded and created projects such as Stellar, eDonkey, Overnet and Mt. Gox, invited many large institutional and private investors to invest their money in the development of a new project - Ripple Labs. And one of the first to respond to this proposal was Chris Larsen. An "angelic" investor (investing money at the earliest stages of project development), an effective business manager actively fighting for the safety and protection of private property, and also one of the richest people in the cryptocurrency space. In a few months of 2013, the project raised $ 6 million, which was enough for further development.
- Currency exchange with a minimum commission. Due to the fact that converting currencies into XRP and vice versa is much cheaper than into dollars, many choose this particular company as an intermediary for international payments.
- High speed of work. On average, a transaction takes 4 seconds. And it doesn't matter - where and where. For comparison, in Bitcoin an account can take hours, and in traditional bank transfers - for days.
- Own payment ecosystem. Users can create their own tokens to facilitate the exchange of goods and assets. After all, it is much easier to exchange property rights, and not real things.
- Cooperation with official financial institutions and regulators. Ripple was originally designed to comply with the official regulations for the circulation of securities and money. This makes it easier for her to cooperate with traditional banks and eliminates problems with regulators. Well, in theory it does. In any case, banks such as Santander, Axis Bank, Union Credit, NBAD and UBS cooperate with the project. What is important - the more banks support the project, the greater the value of the token and the more stable it is.
- No token inflation. They have already been released in full and new ones are not planned for release.
Despite these advantages, the project also has a number of disadvantages, as well as reasons for criticism from numerous experts. They are as follows:
- High centralization. You could even say “monopoly”, as 61 percent of the tokens used to regulate the system are owned by Ripple Labs. So the further development of the project is determined exclusively by the developers, and practically nothing depends on the users.
- Availability of open source code. In theory, there may be talents who can hack it, or else discover holes that have not been found in so many years of active use.
- Partial cooperation. Yes, banks cooperate with Ripple, but they still prefer to make transfers within it in currency, not in tokens. Although it is slower, it is calmer and more familiar. So we are not talking about full integration yet.
- The ability to freeze transactions. Officially - as part of the fight against money laundering. But there may be unofficial terminations of transfers. It is known, for example, that even Jed McCaleb himself faced this when he tried to sell tokens worth over a million dollars. He was simply not allowed to do it.
The Ripple project is a pretty interesting attempt at integrating cryptocurrency features into traditional bank transfers. His example demonstrates how effective it will be for banks to use the latest advances in blockchain and cryptocurrency. Of course, there are some problems, including quite significant ones - the same regular conflicts with regulatory authorities who simply do not know how to properly treat the tokens distributed by Ripple - as securities, currencies or something else. Because of this, the company is forced to regularly sue. With an unpredictable result for yourself. So an attempt to combine the advantages of cryptocurrencies and the reliability of traditional banking systems can be considered successful only partially. However, the fact that Ripple is the third largest cryptocurrency project by capitalization, after bitcoin and ether, still speaks volumes.