What is Ripple?


Ripple has roots in a company called Ripplepay that predate Bitcoin and blockchain technology. It was first conceived as a network for banks to use as a settlement system. Essentially, the Ripplepay network was a way for participants to trade debt with each other. After the advent of Bitcoin and blockchain technology, Ripplepay was taken over by a company called Openpay, which is now Ripple Labs. When Ripple labs took over, they incorporated a blockchain into their process and create a token called XRP in order to help fascillitate more liquidity in their system. However, they differ from Bitcoin and other cryptocurrencies in how their token works, such as having a concensus protocol in place of proof-of-work. This concensus protocol is one of many differences that make Ripple controversial in the cryptocurrency market.


Ripple is directly targetting banks as its market, aspiring to become the default network that banking institutions use as a settlement system for all their transactions. The Ripple network, as conceived before blockchain technology, allows participants to trade debt of any kind. In this paradigm, a financial institution can store a debt made of any currency or other assets on the network, it does not necessarily have to be converted to XRP. XRP can be used as a medium of exchange or for handling fees associated with transactions of other types.

Anyone can buy XRP, but this is almost entirely for speculative purposes, because XRP is not targetting end users transacting amongst themselves directly.


Ripple's software is open source and any developer can submit proposals on their Git repository. However, because of the way the Ripple network is constructed, it is not a decentralized, trustless system.

The concensus protocol used by Ripple requires that each node on the network must be trusted by at least one other node on the network. In theory, any transaction can go from any node to any other node so long as each node trusts its immediate connection, even if it does not trust all nodes on the chain. However, in order for a transaction to be verified on the ledger, all nodes must eventually connect back to a servers operated by Ripple Labs which run the algorithms that establish concensus. This means that Ripple ultimately has central control over the network, and one needs to have trust in the company that runs it, Ripple Labs. This is the root of the controversy surrounding Ripple, as many cryptocurrency advocates believe this violates a central ideology of cryptocurrency, which is to be decentralized and trustless.


Ripple is number 3 in overall market capitalization, though it's place relative to other cryptocurrencies might not be the most relevant measure of Ripple's potential, because it is mainly competing to replace non cryptocurrency inter bank systems such as the SWIFT network.

Ripple Labs has set aside 55% of the tokens it has created for itself, which is a source of concern for investors, as it means Ripple Labs has a great deal of control over the market value, depending on whether they decide to hold or sell their holdings.

As of 2018, Ripple Labs is facing a lawsuit in the US by a plaintiff claiming that XRP is a security, and therefor has certain responsibilities to "shareholders" that they have not lived up to. Ripple Labs claims that XRP is a currency, and therefore not beholden to the laws that govern securities. Ultimately, only the SEC determines wether something is a security or a currency within the US. However, the market is paying close attention to how this lawsuit plays out, as any result may have an effect on how if the SEC regulates Ripple, and how that might affect its value.