Ripple (XRP)
The term Ripple (XRP) refers to both the native cryptocurrency, XRP, and the technological business, Ripple Labs, Inc. The company’s founders, David Schwartz, Arthur Britto, and Jed McCaleb, were first made public in 2012. Co-founders Chris Larsen and Jed McCaleb established OpenCoin in September 2012; on September 26, 2013, the company formally changed its name to Ripple Labs, Inc. The company was renamed Ripple Labs to Ripple in October 2015.
Definition for Ripple
- Ripple Labs, Inc. provides enterprise blockchain solutions on the XRP Ledger and other networks. The XRP Ledger’s main code supports Ripple and its currency, XRP.
- Ripple’s native coin is XRP. It can be used as ledger money between transactions. Most cryptocurrencies are decentralized, but Ripple controls XRP.
- Ripple targets banks and non-banks to make rapid, safe, and cheap international payments. The multi-step correspondent banking system for interbank and overseas payments will be streamlined and partially replaced.
- Ripple positions itself as an enhanced SWIFT rather than directly competing with Bitcoin or Ethereum.
Technical Foundations
XRP Ledger (XRPL): In 2012, Ripple Labs launched the XRP Ledger. Technology experts Arthur Britto, Jed McCaleb, and David Schwartz founded XRP in 2011. Once called “Ripple,” the open-source project’s consensus ledger was Ripple.
Permissioned and Consortium Blockchain: As a permissioned blockchain at its core, Ripple allows only specific participants typically a group of organizations to validate transactions and provide access. The access control layer is under the authority of ledger administrators, and not every user has full control.
Consensus Mechanism: Ripple does not employ a Proof-of-Work (PoW) methodology, in contrast to Bitcoin. Rather, the XRP Consensus Protocol, a consensus method based on Byzantine fault-tolerant agreement, is used. Assuming a certain degree of confidence between the parties involved in the transaction, this protocol relies on nodes working together to validate transactions. A semi-decentralized consensus process is another name for it. A consensus method known as HashTree is used by Ripple’s validating servers.
Unique Node List (UNL): Using a Unique Node List (UNL), Ripple validates transactions. In order to validate a transaction, 80% or more of the nodes on a particular UNL must concur. A minimum of one fifth of the nodes must be malicious for this system to remain proper, even if a certain percentage of them are malicious.
Transaction Speed and Energy Efficiency: Validating servers that continuously check data with a shared ledger process transactions on the Ripple network. Faster transaction speeds are made possible by this, and Ripple uses less energy and processing power than Proof-of-Work blockchains. The XRP Ledger consumes roughly the same amount of electricity as an email server, which is significantly less than Bitcoin.
Data Storage: Unlike some other blockchains, records in Ripple are kept consecutively rather than in groups called blocks.
XRP Cryptocurrency Details
Pre-mined Supply: XRP, in contrast to many other cryptocurrencies, was pre-mined, with 100 billion tokens produced at launch. Ripple Labs was given 80 billion XRP by the founders of XRPL. The goal of Ripple Labs is to keep the market stable by holding a percentage of XRP and periodically releasing tokens into circulation through sales.
Counterparty Risk: The only coin on the Ripple ledger that is free from counterparty risk is XRP. The gateways that “issue” the other currencies on the Ripple ledger must be trusted in order to pay off debts that are not on the distributed ledger. These gateways change trust relationships because a USD issued on the Ripple ledger is not a “real” US dollar backed by a central bank.
Operational Aspects and Benefits
Atomic Payments: Payments are atomic, which means that all intermediate payments in a multi-hop transaction are either complete or not. This is a major benefit. In contrast, a failure in an intermediate payment may necessitate manual reversal in traditional systems.
Cost Efficiency: In order to lower transaction costs, Ripple offers a blockchain-based unit of account and does away with conventional banking techniques.
Suitability for Finance: The financial industry is often risk conservative and prefers not to rely on strong trust assumptions, which makes blockchain technology including Ripple ideally suited for financial applications.
Partnerships and Industry Adoption
- Hundreds of relationships have been formed between Ripple and different businesses in the banking and payments industries.
- SBI Ripple Asia’s March 2018 introduction of “MoneyTap” in Japan with 61 banks is one example.
- The smartphone application One Pay FX, which uses Ripple’s xCurrent technology to facilitate foreign payments, was introduced by the Spanish banking firm Santander.
- In 2018, Kotak Mahindra Bank, Axis Bank, and IndusInd joined Ripple.
- MoneyGram uses Ripple’s On-Demand Liquidity to speed up and decrease international payments. Ripple’s viability depended on XRP sales, and MoneyGram received a $50 million investment and XRP subsidies in February 2020.
- Ripple increased its global footprint in May 2023 when it paid $250 million to purchase the Swiss cryptocurrency custody company Metaco.
- In June 2023, the Singaporean central bank granted Ripple a licence to provide regulated digital payment token services and products.
Regulatory and Legal Matters
FinCEN Civil Penalty: FinCEN fined Ripple US$700,000 on May 5, 2015, for “wilful violation of the Bank Secrecy Act by acting as a money services business without registering with FinCEN.” For future compliance, the business committed to corrective actions.
BitLicense: The fourth business to earn a BitLicense was Ripple, which received its virtual currency licence from the New York State Department of Financial Services on June 13, 2016.
SEC Lawsuit: The SEC charged Ripple CEO Bradley Garlinghouse and co-founder Christian Larsen with violating investor protection laws by raising approximately $1.3 billion through an unregistered securities offering on December 22, 2020. The SEC claims Ripple failed to inform clients about XRP and its actions.
Court Ruling: In July 2023, the district court ruled that Ripple Labs’ XRP cryptocurrency was not a security, dismissing the SEC action. That being said, it decided that such activities might be categorized as securities if they were marketed in institutional sales or utilized as a fundraiser. Exchanges’ subsequent sales of XRP are not securities since programmatic sales of the cryptocurrency on open cryptocurrency exchanges do not satisfy the third prong of the Howey Test. The SEC said in October 2023 that it will no longer pursue its case against Chris Larsen and Brad Garlinghouse. The company has spent more over $100 million fighting itself in the SEC lawsuit, according to Ripple’s legal chief as of June 2024.
Political Activities and Controversies
Super PACs: In December 2023, Ripple gave $25 million to create Fairshake, a super PAC, and two companion super PACs, raising a total of $78 million from the cryptocurrency space. Ripple’s CEO promised to provide an additional $25 million every year as long as there are “crypto naysayers” in May 2024. In 33 of the 35 House and Senate primary contests it joined as of June 2024, Fairshake has supported victorious candidates.
Board Member Controversy: After being accused of cybercrimes by the Southern District of New York US Attorney, Ken Kurson, a member of the Ripple board, resigned in October 2020.
Investment Aspects
- The price of XRP is prone to swing in reaction to market developments, making it a highly volatile asset. The highest value ever recorded was €3.18 in January 2018.
- Fiat currencies like US dollars or euros can be used to purchase XRP on cryptocurrency exchanges. Either a digital wallet or an exchange can be used to hold it.
- Another ecosystem initiative from Ripple is called Ripple Xpring, which invests in, develops, buys, and grants businesses and projects that can help XRP achieve use cases outside international transactions, like cryptocurrency-based debt and derivatives solutions.