Photo by Tech Daily on Unsplash
Just what is Ripple, anyway?
Ripple is a distributed ledger protocol and a digital payment network that uses its own cryptocurrency, XRP, to facilitate transactions. The cryptocurrency’s token, XRP, was pre-mined and is traded under that symbol. XRP is designed to function as a stopgap measure of exchange between two different networks or monetary systems. Ripple was created by Chris Larsen and Jed Mc Caleb and launched to the public in 2012.
Ripple replaces blockchain mining with a consensus mechanism that uses a network of servers owned by participating banks to verify transactions. Compared to bitcoin, ripple transactions consume less energy When looking at market capitalization, Ripple (XRP) is near the top of the list for most valuable blockchain tokens. Although banks are the primary users of the Ripple payment system, individual investors can speculate on the value of XRP
Learning about the Ripple Effect
Ripple is a decentralized, open-source platform that facilitates instant, borderless remittance of fiat and cryptocurrency alike. Its products incorporate XRP to speed up international currency exchanges. Consider a money transfer structure in which the sender and receiver each use their preferred middlemen to receive the funds. This will help you grasp how the system operates.
Ripple can be thought of as a form of digital hawala service.
Hawala is a non-formal way of sending money, typically across international borders, without actually moving any cash. In order to establish trust between two parties conducting a transaction, Ripple employs a third party, or “gateway.” The gateway is the middleman between public addresses on the Ripple network and the currency being sent or received.
Registering and opening a gateway makes the registrant eligible to act as the network’s middleman for currency conversions, liquidity management, and payment transfers. The XRP digital currency issued by Ripple is used as a “bridge currency.” To facilitate the easy exchange of one currency for another, it makes no distinction between fiat and cryptocurrency.
Ripple And Gateways
Gateways exist for all the different currencies in the ecosystem, such as CAD luzelle, BTC bitstamp, and USD snapswap. It is not required that Mr A have any bitcoins in his possession for MR B to demand bitcoins as payment for services rendered. MR A will receive bitcoins from his gateway, which he can fund with Canadian dollars. It is possible to use more than one gateway in a transaction, creating a trust wave that extends throughout the network of users.
How do users store funds at the gateway
The value of the user’s funds stored at the gateway is at risk if the gateway does not fulfill its liability. Users who have reservations about a particular gateway can still use it to complete transactions by going through another, more reliable gateway. In this way, the IOU will be processed through a reliable, credit-verified system. Bitcoin (and most altcoins) do not have the counterparty risk that traditional currencies do because one user’s bitcoin is not another user’s IOU or liability.
How The Security And Exchange Sued Ripple
You may have heard that the Securities and Exchange Commission (SEC) has been suing Ripple since December 2020. The company and two of its top executives are being sued by the agency over allegations that they sold XRP tokens worth $1.3 billion without the proper licensing. According to the SEC, XRP is a security that falls under the agency’s purview of regulation. Ripple disputes this, arguing that XRP is a true medium of exchange that can be used for both domestic and international trade.
This Is How Ripple Functions
Unlike Bitcoin and Nxt, Ripple’s network is not powered by a PoW or PoS consensus algorithm. Rather, a consensus protocol is used to verify user balances and transaction histories. By discouraging wasteful spending and ensuring only necessary transactions occur, the consensus helps maintain the system’s credibility. if a user on Ripple attempts to send $100 to multiple different gateways, all but the first transaction will be discarded. Each node in a distributed system reaches a mutual agreement as to which transaction occurred