Ripple
is a real-time gross 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 frequent flier miles or mobile minutes. Ripple purports to
enable "secure, instantly and nearly free global financial transactions of
any size with no chargebacks." The ledger employs the native
cryptocurrency known as XRP.
In
December 2020, Ripple Labs and two of its executives were sued by the U.S.
Securities and Exchange Commission (SEC) for selling XRP tokens, which the SEC
classified as unregistered securities.
Ripple was conceived by Jed McCaleb and
built by Arthur Britto and David Schwartz who then approached Ryan Fugger who
had debuted in 2005 as a financial service to provide secure payment options to
members of an online community via a global network. Fugger had developed a
system called OpenCoin which would transform into Ripple. The company also
created its own form of digital currency referred to as XRP to allow financial
institutions to transfer money with negligible fees and wait-time. In 2013, the
company reported interest from banks for using its payment system.
By 2018, over 100 banks had signed up, but
most of them were only using Ripple's XCurrent messaging technology, while
avoiding the XRP cryptocurrency due to its volatility problems.[10]
Representatives of the Society for Worldwide Interbank Financial
Telecommunication (SWIFT), whose market dominance is being challenged by
Ripple, have argued that the scalability issues of Ripple and other blockchain
solutions remain unsolved, confining them to bilateral and intra-bank
applications. A Ripple executive acknowledged in 2018 that "We started out
with your classic blockchain, which we love. But the feedback from the banks is
you can’t put the whole world on a blockchain."
Ripple relies on a common shared ledger,
which is a distributed database storing information about all Ripple accounts.
Chris Larsen told the Stanford Graduate School of Business that the network was
managed by a network of independent servers which compare their transaction
records, and that servers could in theory belong to anyone, including banks or
market makers. Ripple validates accounts and balances instantly for payment
transmission and delivers payment notification within a few seconds. Payments
are irreversible, and there are no chargebacks.
Ripple Labs continued as the primary
contributors of code to the consensus verification system behind Ripple, which
can "integrate with banks’ existing networks." Since 2013, the
protocol has been adopted by an increasing number of financial institutions to
"offer an alternative remittance option" to consumers. By December
2014 Ripple Labs began working with global payments service Earthport,
combining Ripple's software with Earthport's payment services system. The
partnership marked the first network usage of the Ripple protocol. On December
29, 2017, XRP briefly became the second largest cryptocurrency, with a market
capitalization of US$73 billion.
