Ripple is an open-source payments system dedicated to breaking the monopoly of traditional financial networks. It’s successfully maintaining its position in the top 10 cryptocurrencies despite having a number of controversies around it.
Ripple’s Network is a bit different from other popular cryptocurrencies. Unlike other cryptocurrencies, Ripple’s network is made up of a Hash Tree instead of a blockchain. The native currency of Ripple is recognized as XRP.
This network is designed to eliminate the problem that is commonly found in most cryptocurrencies. The problem is that the users can only use the native currency of the blockchain they’re using for completing a transaction.
Ripple is trying to break the barrier by allowing users to process transactions using different currencies.
History of Ripple
Ripple wasn’t started as a cryptocurrency but it was launched to solve the problems people were facing with existing payment options. Ryan Fugger founded this payment solution in 2004. And it was recognized as Ripplepay at that time.
Ripplepay enabled users to securely transfer money worldwide within a few seconds. Ripple kept working on this pattern until it was sold to Jed McCaleb in 2012. Jed wanted to launch a digital currency network with the help of Arthur Britto and David Schwartz. So, he decided to go with an existing network rather than creating a new network from scratch.
These experts modified Ripple’s Network to make sure that it complies with the crypto industry’s standards. This new form of Ripplepay was called Opencoin. In 2013, the developers changed its name to Ripple Lab, Inc. They finally named it “Ripple” in 2015 because Ripple Labs, Inc was too long to pronounce.
Over the years, Ripple built a great reputation in the banking industry because it provided faster payment solutions for banks allowing them to transfer money globally faster than before. By 2018, more than 100 banks had signed agreements to use Ripple for different purposes.
During the peak of the crypto industry, XRP reached a price of $3.65 in 2018. In December 2020, The Securities and Exchange Commission filed a lawsuit against Ripple for selling XRP as part of an unregistered securities sale.
Important Things to Know About Ripple
Ripple has a goal of providing fast and secure payment solutions for businesses that want to process cross-border payments smoothly. Ripple has successfully gained the attention of more companies as compared to its rivals because its network is compatible with the traditional payment system but it’s pretty fast and secure as well.
Fast and Cheap Transactions
Ripple’s Network processes around 1500 transactions per second while Bitcoin processes 3-6 transactions on average and Ethereum processes around 12-15 transactions. So, Ripple has an edge in this category. Moreover, the users are supposed to pay around 0.00001 XRP for a standard transaction.
Currently, XRP is trading at the price of $1. So, the users have to pay only a small fraction of a penny to complete the transaction.
Ripple Uses Consensus-Based Protocol for Transactions
XRP has a maximum supply of 100 billion coins and it processes transactions using XRP Consensus Protocol. In the case of a proof-of-work protocol, the system solves the equation generated by the blockchain. Thus, they get some reward in the form of coins.
In the case of a consensus-based protocol, the independent validators make an agreement for the transaction. And they receive the reward for processing the transaction.
Ripple’s Targeted Audience is Big Institutions
Most Cryptocurrencies are following the consumer-based approach. Therefore, they’re providing solutions that can facilitate their targeted audience. On the contrary, Ripple is targeting banks and other financial institutions that want to transfer money internationally. In other words, Ripple is trying to follow a B2B approach.
So, the size of an average transaction on Ripple’s network is much bigger than other blockchains.
Ripple Has Partnered with 300+ Financial Companies
Bank of America, TransferGo, American Experience, XendPay, and hundreds of other companies have already signed up to use Ripple. Ripple is mainly competing with SWIFT that already has more than 11,000 partners. So, it still has a long way to go.
But Ripple has still made an enormous growth over a short span of time because SWIFT has been around since 1970. Ripple’s management is confident that they will beat their biggest competitor sooner than later.
Some Crypto Investors Don’t Like Ripple
Ripple had to face a lot of criticism in the beginning because it has a centralized company behind it. The investors say that it doesn’t meet the standards of true open-source. The organizers have now made certain changes to make it a decentralized platform.
Still, some investors have some serious concerns because there are only 44 billion XRP tokens in circulation. And the remaining 66 billion coins still belong to the Ripple team. It means they can control its price movement the way they want. And they still have more control over the network while it’s not the case with other cryptocurrencies.
How Does Ripple Work?
Ripple is made up of a Hash Tree. Therefore, it doesn’t use the Proof-of-work or Proof-of-stake algorithms for processing transactions. It performs transactions using a consensus protocol instead. In Ripple’s network, independent validators sign up for an agreement to complete the transaction.
The system creates a ledger once the transaction is performed. This ledger contains information about the account totals, data being tied to the previous ledger, and other essential factors. A specific number of independent validators participate in the payment processing.
The best thing about the XRP ledger is that it confirms a ledger within 3-5 seconds while a proof-of-work algorithm takes around 5-10 minutes for the same process.
Conclusion
Ripple is one of the leading cryptocurrencies that have successfully maintained their positions in this industry. However, it receives a lot of criticism from different crypto experts. And it’s also dealing with a lawsuit filed by the Securities and Exchange Commission. Still, the investors are so confident about its growth.
The unique thing about this digital currency is that it’s targeting the big institutions and it has already signed up agreements with different companies. So, it has more chances of growth compared to other cryptocurrencies because it has a business-friendly payment system.