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What is Ripple?

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Sending money across borders through traditional methods can take several days and can be expensive. Blockchain technology has paved the way for innovative solutions that have the potential to revolutionize cross-border payments. Ripple, one of the leading players in the crypto industry, has developed a system that aims to make international transactions faster and more efficient. In this article, we will explore the challenges of traditional international money transfers, and how Ripple’s use of blockchain technology has the potential to solve these problems and change the way we do international transactions.


  • 💡 Ripple, as a blockchain-based alternative to the SWIFT network, aims to revolutionize and speed up cross-border fund transfers. With RippleNet, cross-border fund transfer processes only take a few minutes, making it much faster than traditional methods.
  • 🔗 XRP Ledger is a decentralized ledger that facilitates transactions, and XRP is the digital currency used on the XRP Ledger.
  • 👩🏻‍💻 XRP Ledger uses a special consensus algorithm called Proof-of-Association (PoA), which requires each node to create a list of trusted nodes, called Unique Node List (UNL), that they rely on to achieve consensus.

International Money Transfer and Payment

The current international financial system is connected through SWIFT or Society for Worldwide Interbank Financial Telecommunication. There are approximately 11,000 financial institutions worldwide that are members of SWIFT, which facilitates financial messages such as fund transfer instructions. This system is also behind most international payment and fund transfer transactions.

For years, SWIFT has been considered an inefficient payment system, especially because it requires many layers of transactions before payment reaches its final destination. However, blockchain technology has emerged as a solution to this inefficiency, offering a faster and more cost-effective way to do cross-border payments and fund transfers.

Ripple, a distributed ledger technology, has the potential to revolutionize traditional financial procedures by providing a more efficient, faster, and affordable payment network.

SWIFT is overseen by central banks of the countries that are members of the G-10. These countries are Belgium, Canada, France, Germany, Italy, Japan, the Netherlands, Sweden, Switzerland, the United Kingdom, and the United States. Belgium acts as the main overseer along with other members, including the US central bank, the Federal Reserve. As of November 2022, more than 11,000 global SWIFT member institutions send an average of 44.8 million messages every day.


The emergence of Bitcoin paved the way for the development of various blockchain-based technologies, including Ripple. Ripple Labs – a technology company based in the United States – developed the Ripple blockchain infrastructure in 2012, following the innovation brought by Bitcoin.

Ripple Labs then launched RippleNet, which is specifically designed to offer faster, cheaper, and more efficient cross-border transactions for use by banks, as an alternative to SWIFT.

RippleNet functions as a currency exchange system and money transfer network, and is also responsible for the XRP (XRPL) ledger, which allows payments through its XRP assets.

RippleNet is a blockchain-based alternative to the SWIFT network, which aims to revolutionize and speed up cross-border fund transfers. Unlike SWIFT, RippleNet eliminates many of the layers required for the network to function, providing a transparent and fast transaction settlement status. With RippleNet, end-to-end transfer processes only take a few minutes, making it much faster than traditional methods.

XRP Ledger

Similar to other digital currencies, Ripple operates on a blockchain that stores permanent transaction records through its ledger called the XRP Ledger. The XRPL is also responsible for recording transaction data such as balances, accounts, and transfers and is secured cryptographically with a pair of keys (private and public keys). The holder of the private key is the only one who can approve transactions. XRP transactions can be settled within seconds, providing fast payment solutions for cross-border transactions and facilitating currency conversion for institutions.

In summary, Ripple is a technology company that provides payment solutions, while XRP Ledger is a decentralized ledger that facilitates transactions, and XRP is the digital currency used on the XRP Ledger.

Who created Ripple and XRP Ledger?

XRP Ledger is a blockchain-based payment system created by Ryan Fugger in 2004. However, XRPL did not become an actual blockchain ledger until after Bitcoin was released. In 2011, Jed McCaleb took over the project and co-founded Ripple with Chris Larsen and Arthur Britto in 2012. They launched XRPL in June of that year and introduced the XRP token in December.

XRP Ledger developers opposed the energy waste associated with Bitcoin’s Proof-of-Work (PoW) consensus mechanism. They believe that the real value of Bitcoin is transaction publicity and the state, not the PoW consensus mechanism.

How XRP Ledger works

Unlike popular blockchains that typically use Proof-of-Work (PoW) or Proof-of-Stake (PoS) consensus algorithms, XRPL uses a special consensus algorithm called Proof-of-Association (PoA). This consensus algorithm requires each node to create a list of trusted nodes, called the Unique Node List (UNL), which they rely on to achieve consensus.

Validators, which are nodes involved in voting on improvement proposals, must gain trust from other nodes before being given access to the consensus process. Most nodes use one of the default UNLs, which are recommended by XRPL Foundation, Ripple, and Coil. However, they can create their own if desired.

All nodes in XRPL run the same open-source software called Rippled. Validators do not receive rewards in PoA; their main incentive is to support network decentralization. Stock nodes process transactions and allow developers to reference and broadcast to the network, but they do not participate in voting.

Nodes rely on their UNLs to confirm the state of the network. Every 3-5 seconds, a new block, known as a ledger, is created through a two-phase consensus and validation process as shown below.

What is Ripple

Advantages of PoA compared to PoW and Proof-of-Stake (PoS) include:

  • Lower hardware requirements that reduce electricity costs and overhead, making validator costs more affordable than PoW miners.
  • Block production is not directly dependent on who has the most capital, as in PoS.
  • No reorg (changing blocks after validation).

However, PoA also has some disadvantages, including:

  • PoA’s freedom from high external costs and locked-up capital means it will not have the same financial ability to punish bad actors.
  • Validator connections can be severed, and nodes can be removed from the UNL as retaliation, but there will be no financial impact from such attacks.
  • The implementation of PoA in XRPL is not decentralized (in terms of block-producing nodes) like the most popular PoW/PoS chains, which may be due to a lack of financial incentive to participate.

Final Thoughts

Ripple, a prominent player in the cryptocurrency field, has the potential to revolutionize cross-border payments and remittances, leading to significant changes in the financial and banking industry. It could replace the existing SWIFT network and provide fast, cost-effective transactions. Ripple aims to impact enterprises and financial institutions, rather than retail customers, by offering a Liquidity Hub for crypto trading and digital asset management. The company is also developing projects for NFT issuance, smart contract implementation, and the creation of federated sidechains to facilitate integration with other platforms. Ripple has positioned itself as an experienced developer of CBDC applications, offering a platform for minting, managing, transacting, and destroying CBDCs based on advanced ledger technology. However, Ripple’s adoption and success depend on the outcome of the SEC’s verdict, which is currently unresolved.


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