Ripple (XRP) is an open protocol that enables a peer-to-peer server architecture to facilitate the movement of value among financial institutions.
It operates as a real-time gross settlement system (RTGS), currency exchange and remittance network – also called the Ripple Transaction Protocol (RTP).
The protocol supports any currency, but requires gateways to transfer them in and out of the network. It has been dubbed “SWIFT 2.0”, referring to the incumbent international payment system.
Ripple is based around a shared, public database (ledger), that uses the consensus process of gateways and ‘trustlines’ that allows for payments, exchanges and remittance in a distributed process.
The Ripple project is actually older than Bitcoin itself.
The predecessor to the Ripple payment protocol, Ripplepay, was first developed in 2004 by Ryan Fugger. the intent being to create a monetary system that was decentralized and could effectively empower individuals and communities to create their own money
This led to the conception of a new payment system by Jed McCaleb of eDonkey network.
In May of 2011, they began developing a digital currency system where transactions were verified by consensus among members of the network, rather than by the mining process used in Bitcoin.
In September of 2012 the eDonkey team co-founded the corporation OpenCoin Inc.
This Ripple system was designed to eliminate Bitcoin’s reliance on centralized exchanges, use less electricity than Bitcoin, and perform transactions more quickly than Bitcoin.
On September 26, 2013, OpenCoin Inc. changed its name to Ripple Labs Inc. On the same day the Ripple reference server and client became free software, released as open source under the Open-Source Software Commons.
At the time of this writing, Ripple was trading at $0.258818 each, with a total market capitalization of $9,910,500,405 billion making it the 3rd highest valued cryptocurrency on coinmarketcap.com.
It briefly was valued with the 2nd highest market capitalization ahead of Ethereum, but has since sat firmly as the 3rd highest.
So what gives it value?
Ripple’s chief cryptographer, David Schwartz on the state of payment systems :
“Payment systems today are where email was in the early ‘80s. Every provider built their own system for their customers and if people used different systems they couldn’t easily interact with each other. Ripple is designed to connect different payment systems together.”
Schwartz also anticipates the possibility of seeing “big companies lose their control over the flow of other people’s money just as they’ve lost control over the flow of information.”
Unlike Bitcoin, Ripple is not trying to convince people to switch currencies. Ripple is targeting people wanting to send fiat.
All money in Ripple is explicitly represented as debt, with transactions simply consisting of balances being shifted on a series of imaginary credit lines from the payer to the receiver.
Ripple’s built in exchange allows you to easily buy and sell Bitcoin using any other currency on the Ripple network. Cross-currency payments allow you to pay merchants with Bitcoin and have them receive the currency they desire. Outbound Bitcoin bridges in Ripple allow you to instantly pay in the currency of your choice to send bitcoins to any Bitcoin address.
Your Ripple wallet automatically converts currencies whenever your payment destination is a Bitcoin address.
Since 2013, the protocol has been adopted by an increasing number of financial institutions as an alternative remittance option.
Ripple simplifies the exchange process by creating point-to-point and transparent transfers in which banks do not have to pay corresponding bank fees. This allows for cross-boarder payments for retail customers, corporation, and other banks.
Ripple’s website describes the open source protocol as “basic infrastructure technology for interbank transactions – a neutral utility for financial institutions and systems.”
The protocol allows banks and non-bank financial services companies to incorporate the Ripple protocol into their own systems, therefore allowing their customers to use the service.
Currently, Ripple requires two parties for a transaction to occur.
1. A regulated financial institution holds funds and issues balances on behalf of customers.
2. Market makers such as hedge funds or currency exchange companies provide liquidity in the currency they want to trade in.
In addition to balances, the ledger holds information about offers to buy or currencies and assets, creating the first distributed exchange. The consenus process allows for payments, exchanges and remittance in a distributed process.
In Ripple, users make payments between each other by using cryptocurrency signed transactions denominated in either fiat currencies or Ripple’s internal currency (XRP).
Ripple is now integrated with various user verification protocols and bank services. Users have to specify which other users they trust, and how much. When non-XRP payment is made between two users that trust each other, the balance of the mutual credit line is adjusted, subject to limits set by each user.
In order to send assists between users that have not directly established a trust relationship, the system tries to find a path between the two users so a path can be created through other trusted parties. All balances along the path are then adjusted simultaneously and atomically.
This mechnism of making payments through a network of trusted associates is named ‘rippling’.
The Ripple network doesn’t incorporate mining into it’s model like Bitcoin does. Instead, it creates and establishes trustlines through gateways in the network through a process called ‘rippling’.
A gateway is any person or organization that enables users to put money in and out of the Ripple liquidity pool. The gateway accepts currency deposits from users and issues balances into Ripple’s decentralized ledger.
Gateways are similar to bank in that they operate as the system gatekeeper, however, they do share one global ledger known as the Ripple protocol.
On the Ripple network, users must ‘extend trust’ to the Ripple gateway that holds their deposit. The creation of this ‘ trustline ‘ indicates to the network that the user is comfortable with the gateway’s counterparty risk.
There is an advanced option available to users to allow ‘ rippling ‘. When a user has allowed multiple gateways in the same currency, ‘rippling’ subjects the users balance of that currency to switch (ripple) between gateways. Although their total balance doesn’t alter during this process, users earn a small transit fee for providing inter-gateway liquidity.
The International Ripple Business Association (IRBA), provides unified procedures and disclosure standards for gateways.
Ripple relies on a common shared ledger that is distributed database storing information about all Ripple accounts. The network is managed by a network of independent validating servers that constantly compare transaction records. These servers can be anyone, including banks or private citizens.
The network creates a new ledger every few seconds. This ledger is a perfect record of all Ripple accounts as determined by the network of services.
A transaction is any proprosed change to the ledger and can be introduced by any server on the network. The servers attempt to come to consensus about a given set of transactions to apple to the ledger, creating a new ‘ last closed ledger ‘.
Transactions that are agreed upon by a ‘ supermajority ‘ of peers are the only ones considered validated. If the supermajority isn’t in consensus, this implies transaction volume was too high or network latency too great to complete the consensus process – the consensus process is again attempted by the nodes until the supermajority is reached.
In 2014, the Stellar Foundation, a Ripple competitor suffered a major network crash. David Mazieres, Steller’s chief scientist declared the Steller consensus system is unlikely to be safe with more than one validating node.
He argues that when consensus is not reached, it creates a ledger fork in the parts of the network disagreeing over accepted transactions. The Steller Foundation claimed there was an ‘innate weakness‘ in the consensus process of trustlines.
Ripple Labs has concluded there is no threat to the continued operation of the Ripple network.
Ripple allows users and businesses to conduct cross-currency transactions in between parties in 3 to 5 seconds. Payments can only be authorized by the account holder and all payments are processed automatically without any third parties or intermediaries.
The Bitcoin Bridge is a link between the Ripple and Bitcoin networks. The bridge makes it possible to pay any Bitcoin user directly from a Ripple account without ever needing to hold any bitcoin.
Any merchant accepting bitcoin has the potential to accept any currency in the world. If a Ripple user prefers to keep money in USD and not own bitcoins, a merchant however, may desire payment in bitcoin. The Bitcoin Bridge allows any Ripple user to send bitcoins without having to use a central exchange.
Transaction information on the ledger is public, payment information is not. It’s difficult for anyone to associate transaction information with any specific user or corporation.
Any Ripple user can act as a market maker by offering an arbitrage service such as providing market liquidity, intro-gateway currency conversion, rippling, etc. Market makers can be anyone including hedge funds.
According to the Ripple website, “by holding balances in multi currencies and connecting to multiple gateways, market makers facilitate payments between users where no direct trust exists, enabling exchanges across gateways.”
With a sufficient number of marker makers, the path find algorithms creates a near frictionless market and enables users to seemlessly pay each other via the network in different currencies, without assuming undesired foreign exchange risk.
Ripple Labs built the protocol to be friendly to the developer community by implementing features that include an API for its payment network, based on the popular REST API standard.
One of the earliest extensions completed by a third party developer was a Ripple extension to e-commerce platform Magento. This enables Magento to read the Ripple public ledger and create an invoice.
Ripple vs Bitcoin. It’s time to compare Ripple, the new up-and-comer in the banking world, to Bitcoin.
As with all altcoins, Ripple still resides under the shadow of Bitcoin in terms of daily trading volume. That’s because Bitcoin is the most exchanged and offered cryptocurrency in the world. Where Bitcoin is offered on local exchanges, in persons and in ATMs, Ripple exchanges are limited to the following reputable sources: Poloniex, Bittrex, Kraken, Jubi, Bter, Anxpro and some other lesser know exchanges.
It is worth noting, however, that Ripple in itself acts as a decentralized currency exchange. Nevertheless, Ripple’s accessibility does not compared to the vast usage of Bitcoin that we now find throughout the world.
Read this guide to learn where to buy Ripple.
Bitcoin, with it’s current +2000$ USD price, has a massive lead over Ripple, which still trades well under the 1$ mark. So the winner here really is a no-brainer.
However, it can serve to bring the price into perspective by inspecting the total supply of both currencies. Where Bitcoin will only ever have 21 million coins, Ripple was originally designed to have 100 billion coins. Hopefully that can bring the price disparity into perspective. Either way, Bitcoin’s whopping price makes it win in this category.
Ripple uses an iterative consensus process instead of Bitcoin’s traditional Proof of Work (PoW). As a result, Ripple transactions are finalized within seconds, whereas Bitcoin transactions take minutes to hours to complete.
Considering that Ripple doesn’t take any special measures to enforce private transactions, we’ll have to focus on the traditional sense of security to discern the winner of this category.
And in that sense, Bitcoin should win without much of a debate. Considering that Ripple is largely governed by a central body, it is hard to argue that it is more secure than the most mined cryptocurrency in the world. A such, Ripple is more secure in that there is somewhat of an accountable body (Ripple company). But in cryptographic terms, its centralized nature makes transaction reversals far more likely than in the case of Bitcoin.
Of course, Bitcoin takes the cake in this category because of its dominant position in the market. However, Ripple has the interesting feature of being able to play well with other currencies. It is a decentralized transaction network that contains a cryptocurrency called Ripples (XRP). And rather than being just a decentralized currency, it’s a decentralized exchange protocol.
Either way, you won’t find any online markets accepting Ripple in the same way that we can buy computer hardware with Bitcoin. Also, we find that cryptocurrency debit cards don’t accept Ripple as readily as Bitcoin. All in all, Ripple is great for banking infrastructures to connect worldwide, whereas Bitcoin is suitable for all sorts of different use cases.
As mentioned, Ripple has centralized elements in that it is supported by the Ripple company. This means that developer contributions also take a more centralized approach that what you would find in most other cryptocurrency projects. However, there is a Ripplegithub repository, and a page on ripple.com that guides you through different aspects of Ripple development.
Either way, the most prolific cryptocurrency developers tend to gravitate towards Bitcoin due to its prestige and engineering prowess, so it’s safe to say that Bitcoin boasts more experience developers than you will find in the Ripple project.
Bitcoin has an unparalleled amount of different wallet options. From hardware wallets, to online wallets, exchanges and the core wallet, it’s to be expected that the oldest cryptocurrency offers the most storage options.
However, you’ll find that Ripple has a few different wallet types to use as well. Rippex, for example, is a well respected desktop wallet. For the go-to online ripple wallet solution you can be confident in that Gatehub will provide you with what you need. Furthermore, you’ll find that most major exchanges will let you store and trade Ripple on their online wallets as well. Although keep in mind that it’s not safe to store you cryptos on exchange wallets for a long time due unexpected closures, DDOSes, and all sorts of other hacking and legal problems.
As Bitcoin is unmatched in terms of liquidity in the cryptocurrency world, we also have a clear winner here. However, Ripple does have the advantage over several other altcoins in that it is listed in more than six exchanges. Also, XRP are backed by the Ripple company, which means that there is a kind of centralized governance system to advocate for its value and lobby for an increase in its use and adoption.
Either way, Bitcoin, given its 24h trading volume of over 1 billion dollars, is the most liquid cryptocurrency to date.