What is Ripple?
Ripple is an Internet protocol for making financial transactions.
What is an Internet protocol?
An Internet protocol is a set of rules followed by the computers on the Internet to help them communicate with each other.
Examples of Internet Protocols
Examples of Internet Protocols
|The protocol HTTP (Hypertext Transfer Protocol) is a set of rules for building and sharing websites. The invention of HTTP led to the World Wide Web.|
|The protocol SMTP (Simple Mail Transfer Protocol) is a set of rules for sending messages on the Internet. The invention of SMTP made it possible to send emails.|
|The protocol RTXP (Ripple Transaction Protocol) is a set of rules for making transactions on the Internet. The invention of RTXP makes it easier to do business on the Internet.|
Who owns Internet protocols?
No one owns a protocol. It is invented to be a useful standard. Anyone can choose to use a protocol in their software or business.
What is a financial transaction?
|Physical vs. Virtual Transactions|
|Physical Transaction||Virtual Transaction|
|A physical transaction involves the movement of an object like a piece of gold or a dollar bill.||A virtual transaction involves the changing of account balances on a ledger.|
What makes Ripple transactions different?
Most virtual transactions are controlled by an organization. Ripple transactions are controlled by the Ripple protocol. It’s an automated system that “just works.”
|Organization:||Bank||Payment Provider||Video Game||Airline||Mobile Carrier|
|Transaction:||Financial accounts||Payments||Virtual currencies||Frequent flier miles||Mobile minutes|
|Ripple Transaction Protocol (RTXP)|
|Any type of transaction|
Who runs the Ripple protocol?
The Ripple protocol runs on a network of computer servers around the world. The Ripple network uses Ripple’s mathematical algorithm to verify the accuracy of financial transactions.
|The Ledger is a shared, constantly updated database of Ripple accounts and transactions. At any time, anyone can view the Ledger and see a perfect record of all activity on the Ripple network.|
Ripple’s three primary parts
|Payment Network||A network of financial accounts that makes transactions easy for users or businesses.
|Distributed Exchange||An automated system for currency trades, that makes cross-currency payments possible.|
|Currency (XRP)||A currency built into Ripple, that holds value and also plays an important role in the security of the network.|
Who Invented Ripple
Ripple was invented and developed by a group of programmers at Ripple Labs, Inc. A beta version was released in 2013 and made open source.
What is Open Source?
Open Source software is created to be freely available to everyone to use, modify, implement, and develop. Because it is not owned by anyone, no one profits directly from its use. You can read more at the Open Source Initiative (opensource.org).
What are the advantages of using Ripple for financial transactions?
An open, shared Internet protocol for financial transactions offers many advantages.
- Payments are cheaper. Because Ripple is not owned by anyone, the cost of making payments decreases. Merchants that receive payments via Ripple can save billions of dollars in fees.
- Payments are faster.Because Ripple transactions are automatic, payments can be processed much faster. By making money available sooner, Ripple can accelerate the economy.
- Currency exchange is easy. Ripple makes it possible to exchange currencies at no extra charge. This makes international commerce easier and more profitable.
- Finance is accessible. Because Ripple only requires an Internet connection, it can provide financial services to billions of people in underbanked areas of the world.
- Finance is interconnected. By creating a shared protocol for money, Ripple makes transactions between independent businesses easy. This reduces friction and inefficiency in the financial system.
Ripple is like Email
|Ripple is like email|
All email providers uses the same protocol, SMTP. As a result, you can send email to anyone, even if they use a different email provider. Someone at Gmail can send email to Yahoo or AOL.
In the same way, people who use the Ripple protocol, RTXP, can send money to each other, no matter what financial service company they use. Customers of a bank that uses Ripple could send money to any other bank or business that uses Ripple.
Currently, the financial system is made up of many disconnected systems. Ripple creates a way for these systems to become as interconnected and easy as email.
Future of Ripple
|Future of Ripple|
Internet protocols are open-ended tools that can be used in diverse ways. When HTTP was invented, no one could have predicted the invention of Google or YouTube, but those companies could not have existed without HTTP.
In the same way, it is impossible to predict the full potential of Ripple. Many of its advantages are immediate and obvious. However, many of its advantages await to be discovered and unleashed by innovative programmers and entrepreneurs.