What is Ripple?

Today I’ll introduce you to Ripple.

It’s a dynamic platform with one of the most popularly traded digital assets in crypto today.

It was designed as a system for banks and payment services to easily create fast and cheap international money transfers. 

Current transfer systems like Western Union or the SWIFT protocol are some of the most common ways to transfer money between countries.

Unfortunately, though, these methods can sometimes operate painfully slowly, requiring complex procedures to complete. 

And usually with pretty high fees! 

Users typically have to bear these costs, and when transfers use several banks or currency changes along the way, things soon add up.

So, it’s from these issues that Ripple became necessary…

Where did Ripple actually originate? 

Ripple’s origins trace back to 2004 when it emerged as RipplePay, founded by Ryan Fugger in Vancouver, Canada. 

It was an innovative concept, aimed at creating a secure channel for global fund transfers. 

In 2012, the company underwent a transformation, reimagining itself as a digital currency network.

In 2013, the company assumed the title of Ripple Labs, to show how it was changing to focus on research. 

Ultimately, in 2015, this evolution was completed, becoming known by its current name, “Ripple.” 

But how does Ripple work exactly? 

Well, to understand it properly, you need to know about some important concepts…. the first of which is RippleNet.

How does RippleNet Work?

RippleLabs created RippleNet to enable easy money transfers across its network with the same speed as simply transmitting data.

Doesn’t take that long to send an email right? 

Well, Ripple creators felt the same way about financial transactions.

It’s designed as a platform that permits quick currency conversion along with smooth domestic and international transfers. 

RippleNet executes them with minimal fees, allowing banks to transact using its messenger system. 

And in order to get it all done, RippleNet needs specialized network nodes, called gateways. 

These gateways, also known as validators, can include banks or crypto exchanges. 

They’re nodes spread across the world that keep track of ownership, account balances, money destinations, and transaction receivers. 

Although anybody can operate as a validator, it’s important to note that Ripple has an approved list; more on that shortly.

To simplify how transactions are processed, 80% of the validator network needs to agree that things look OK before going ahead.

This step reduces transaction times to mere seconds.

Before I move on to the next concept, how about I show you a transaction flow? 

Here’s a Real World Example of a RippleNet Payment

Let’s say I own a company, and I need to settle an invoice from a Swedish supplier with RippleNet.

First, I contact my bank to start the payment.

Using RippleNet Messenger,  the bank sends out a transaction request. 

It’s basically an inquiry for information about the receiving bank, transaction costs, and exchange rates drawn from RippleNet.

After I accept the conditions, both banks exchange payment details. 

This includes compliance steps, like anti-money laundering measures.

Next, the amount required gets taken from my account and converted to XRP, Ripple’s native token. 

After deducting fees, my bank temporarily holds the amount in place.

RippleNet validators assess the transaction, verifying what was agreed upon. 

If everything looks good, the transfer goes through.

The XRP gets converted into euros, in this case, and my Swedish supplier receives their payment. 

Pretty neat, right? 

But clearly, Ripple’s native token is crucial in getting all this to work… 

Now let’s take a closer look at the XRP Token

So XRP, Ripple's native token, isn't just any old digital asset. 

It's the backbone of Ripple, enabling transfers from the ground up. 

Unlike traditional methods that can take days, XRP makes seriously fast global transactions possible.

But it also brings cheaper transfers, too. 

By removing the need for multiple steps along the way, XRP makes cross-border payments much more affordable.

XRP is also a kind of universal bridging currency. 

Because XRP stands in the middle, it can connect different fiat currencies and make their exchange a whole lot easier.

Lastly, it’s actually recognized by banks. 

Thanks to its flexibility, XRP has gained the attention of big global banks interested in using it for their operations.

In short, XRP is not just a cryptocurrency; it’s a pretty major step in changing how money moves around the world.

With such influential tech, though, how does Ripple make sure everything stays honest?

What is Ripple’s Unique Node List, or UNL?

The UNL is like Ripple's elite guard, a core group of validators responsible for overwatch. 

Beyond just verifying, these nodes monitor the security and authenticity of every transaction on the network. 

They're handpicked, based on their reliability and how trustworthy they are.

It isn't a secretive, exclusive club either - as it includes industry leaders like Microsoft and MIT. 

In this way, Ripple ensures a balanced power structure, stopping excess influence and shielding the network from disruptions.

Now, not all disruptions are about hacking. 

Ripple has faced some regulatory issues, which you may have heard about already…

Ripple vs SEC Controversy

For almost three years, Ripple had issues with the U.S. Securities and Exchange Commission, commonly referred to as the SEC. 

The SEC believed that Ripple Labs was offering unregistered securities by selling XRP tokens, which is a big no-no.

In the world of finance, a security is a broad term that refers to any financial instrument or investment contract that has monetary value. 

Things like stocks, bonds, and mutual funds. 

They’re different from currencies, which are used to buy and sell goods and services.

One of the core reasons behind the charge was that Ripple Labs has major control over issuing XRP tokens, making it look more like a security.

Is XRP actually a Security?

Well, Ripple Labs argued that XRP is simply an exchange method for cross-border transactions, like Bitcoin.

They also asserted that the SEC failed to provide clear guidance on XRP’s status before filing the lawsuit, not exactly fair!

So what happened next?

On July 13, 2023, the courts ruled that Ripple’s XRP token qualified as a security during its initial sale to institutional investors. 

It meant the SEC won in that specific scenario. 

However, the court also decided XRP isn’t a security when traded on a digital exchange or through a trading algorithm for the wider public.

So moving forward, it kind of worked out in Ripple’s favor!

Despite these hiccups, Ripple clearly still has plenty going for it…

The Core Benefits of Ripple

Because of how Ripple transactions are structured, power consumption differs from, say, Bitcoin’s approach. 

It doesn’t use mining as a core process to get transactions done, meaning its energy consumption is low.

Ripple also allows for extremely fast and low-cost cross-border transactions, making it a great solution for international payments.

Aside from being very fast, it’s also designed to handle a tonne of transactions efficiently, giving it great scalability. 

Furthermore, Ripple has formed partnerships with numerous banks and financial institutions. 

So it’s really demonstrating the potential for real-world adoption.

Lastly, the XRP token is a bridge currency, which makes it super useful in international finance.

But of course, there are still some downsides to the system…

What are some of Ripple’s Disadvantages?

Well, one major drawback of Ripple is the amount of control Ripple Labs has over it. 

Even though transaction validation is decentralized, there are still concerns over how Ripple Lab runs its blockchain activities. 

For example, Ripple Labs itself solely drives the development of its technology.

Another issue with Ripple is market volatility, as XRP’s value has seen a lot of fluctuation over the years.

As a result, many of its bank partners only use RippleNet messenger, rather than the XRP token.

Lastly, there are claims that the senior board members of Ripple Labs own a large proportion of XRP. 

With only a few people holding the majority of XRP, it doesn’t put the project in such a good light, especially compared to decentralized alternatives. 


So there we go! 

Throughout this article, I've taken you on a deep dive into the world of Ripple. 

Since its inception as RipplePay back in 2004, you've seen its transformation into a formidable platform designed to revolutionize the financial landscape. 

I showed you RippleNet’s inner workings, exploring its potential to turn international transfers into quick and easy transactions.

You learned all about the XRP token, too. 

It's not just a digital asset—it's a groundbreaking bridge enabling cross-border exchanges, getting attention from some of the biggest banks. 

I also introduced you to Ripple’s Unique Node List, an essential security measure reinforced by trusted entities like Microsoft and MIT.

However, Ripple's journey has had its challenges. 

As well as its regulatory issues with the SEC, there may be problems with centralization.

But ultimately, Ripple isn't just a cryptocurrency or a tech platform; it’s truly a digital financial innovation.

I hope you enjoyed the article. I’ll talk to you soon!

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