Ripple by Ripple Labs
The future of online payments and moreRipple is a real-time settlement system, currency exchange, and remittance network created by Ripple Labs Inc., a US-based technology company. Released in 2012, Ripple is built upon a distributed open-source protocol and supports tokens representing fiat currency, cryptocurrency, commodities, or other units of value such as mobile minutes or data or frequent flier miles.
Ripple aims to connect financial institutions, banks, and payment providers to provide a frictionless experience for sending and receiving value and money globally. It was originally designed as a day-to-day payment system, to speed up and reduce costs for transactions, and provide a "middle-man" currency for exchanges and conversions with minimum commission.
XRP enhances Ripple’s software by acting as a bridge or “middle-man” between traditional fiat (USD, EUR, etc.) currencies, providing liquidity, and speeding up cross-border transactions; however, it is not essential to the network and doesn’t have to be used.
Ripple Key Takeaways
There is a difference between Ripple and XRP
- XRP is the cryptocurrency that runs on a digital payment platform called RippleNet, which is on top of a distributed ledger database called XRP Ledger.
- Ripple is a technology company that provides efficient solutions to send value and money globally using the power of blockchain technology.
What is RippleNet?
- RippleNet is Ripple’s global payments network, it includes over 300 financial institutions across 40 countries and six continents. Through the use of blockchain and advanced APIs, Ripple enables financial institutions who are part of the network—RippleNet—to send money and value world-wide, instantly, reliably, and for fractions of a penny.
What is On-Demand Liquidity?
- On-Demand Liquidity allows RippleNet users to leverage the digital asset XRP to bridge two currencies in three seconds or less, ensuring payments are swiftly sent and received in local currency on either side of the transaction. XRP is ideally suited for global payments and transfer of value because it is quicker, less costly, and more scalable than any other digital asset.
What is the difference between Ripple and XRP?
It’s important to understand the difference between XRP, Ripple, and RippleNet.
- XRP is the currency that runs on a digital payment platform called RippleNet, which is on top of a distributed ledger database called XRP Ledger.
- RippleNet is run by a company called Ripple, the XRP Ledger is open-source and is not based on blockchain, but rather the previously mentioned distributed ledger database.
- Ripple is a technology company that provides solutions for sending money globally through a robust, global payments network, RippleNet.
How does the Ripple platform work?
The Ripple platform is similar to Ethereum in that it has its native currency (XRP) but is also open-source, allowing users and developers to build their own assets and products on top of the existing platform.
Ripple uses its proprietary patented technology, the ‘Ripple Protocol Consensus Algorithm’ (RPCA), to verify transactions. It is argued that XRP is not technically a “real” cryptocurrency because it is controlled by one company and transactions are processed by its network of approved validators.
SEC’s action against Ripple Labs, Inc
The U.S. Securities and Exchange Commission (SEC) initiated legal proceedings against Ripple Labs, CEO Brad Garlinghouse, and co-founder Chris Larsen on December 21, 2020, for allegedly selling unregistered securities.
In the lawsuit, the SEC claimed that XRP was a “security” (fungible and tradable financial instruments used to raise capital in public and private markets) instead of a commodity (basic good used in commerce that is interchangeable with other goods of the same type) because it was generated and distributed by Ripple Labs in a centralized fashion and was not being adopted by financial institutions for its advertised use cases.
The SEC stated that Ripple executives sold 14.6 billion units of XRP for more than $1.38 billion to fund the company’s operations and enrich themselves.
In response, Garlinghouse criticized the SEC and indicated that Ripple Labs would defend itself in court. Coinbase delisted XRP on December 28; an investor filed a class action on December 30 alleging that Coinbase sold XRP tokens with the understanding that they were unregistered securities.
History of Ripple
Software developer Ryan Fugger founded the original Ripple project already in 2004. The core idea behind the project and new protocol was a peer-to-peer network of financial relations that would replace banks.
Based on the assumption that money is simply a bank’s promise of value, he aimed to design a monetary system where the promise of an individual held just as much weight. Ryans concept was launched in 2005 as RipplePay, a financial service allowing users to extend credit lines to family and friends and make secure payments in both traditional and online currencies.
In 2012, Jed McCaleb, an American programmer and entrepreneur, and Chris Larsen, an angel investor, and startup executive approached Ryan with an idea of a new digital currency. Jed had been working on a digital currency system in which transactions were verified by consensus among members of the network.
After discussions and negotiations, Ryan handed over the reins to Jed and Chris, who co-founded the corporation OpenCoin, to develop the Ripple protocol (RTXP) and the Ripple payment and exchange network. The company later changed its name to Ripple Labs.
Future for Ripple
For its invention and development of the Ripple protocol (RTXP) and the Ripple payment and exchange network Ripple Labs was named as one of 2014’s 50 Smartest Companies in the February 2014 edition of MIT Technology Review.
Ripple has the potential to disrupt many industries and is backed by a team of experts at Ripple Labs and other investors who are working hard to push the adoption of the digital asset. However, it now faces the challenges of being opposed by chief US regulators.
Ripple had a strong breakout in 2020 but had a hard stop in the form of negative XRP news in the form of a lawsuit from the SEC. The chief US regulator claims that XRP tokens are “unregistered securities”, and Ripple the parent company has broken laws by offering these to investors in the United States.
XRP has been delisted from many cryptocurrency exchanges which could cause the asset and therefore the company to struggle in the long term. With that said, Ripple has a unique position on the market that is more than just XRP.
March 25, 2021
March 24, 2021