Ripple (payment protocol) facts for kids
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| Original author(s) | Arthur Britto, David Schwartz, Ryan Fugger |
|---|---|
| Developer(s) | Ripple Labs Inc. |
| Initial release | 2012 |
| Stable release |
1.0.0 / 15 May 2018
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| Written in | C++ |
| Operating system | Server: Linux (RHEL, CentOS, Ubuntu), Windows, macOS (development only) |
| Type | Real-time gross settlement, currency exchange, remittance |
| License | ISC license |
Ripple is a special computer system that helps banks and financial groups send money and exchange different currencies around the world very quickly. It was created by a company called Ripple Labs Inc. in the USA and launched in 2012. Ripple uses an open source computer system that is spread out across many computers.
This system lets people use digital tokens that can represent different kinds of value. This includes regular money (like dollars), digital currencies, or even things like frequent flyer miles. Ripple aims to make global money transfers safe, instant, and almost free, without payments being reversed. The system uses its own digital currency called XRP.
In 2020, there was a legal case involving Ripple Labs and its XRP digital currency. However, in July 2023, a court decided that XRP itself is not a "security" in the way some thought. This was an important decision for Ripple.
Contents
How Ripple Started
The idea for Ripple came from Jed McCaleb, and it was built by Arthur Britto and David Schwartz. They then connected with Ryan Fugger, who had started a financial service in 2005. This service helped people in online communities make secure payments using a global network. Fugger's system, called OpenCoin, later became Ripple.
The company also created XRP, its own digital currency. This was designed to help financial institutions send money with very low fees and almost no waiting time. By 2013, banks started showing interest in using Ripple's payment system.
Ripple's Growth and Challenges
By 2018, more than 100 banks had joined Ripple. However, many of them mostly used Ripple's messaging technology, called XCurrent. They often avoided using the XRP cryptocurrency itself because its value could change a lot, which is called volatility.
Some experts from SWIFT, another big global payment network, said that Ripple and similar systems still had problems handling a huge number of transactions. This meant they were mostly used for payments between just two banks or within one bank. A Ripple executive agreed in 2018 that while they loved their original system, banks found it hard to put "the whole world on a blockchain."
How Ripple Works
Ripple uses a shared digital record book, which is like a giant, distributed database. This database stores information about all Ripple accounts. Chris Larsen, one of Ripple's founders, explained that a network of independent computer servers manages this system. These servers constantly compare their records of transactions.
Anyone, including banks, can run one of these servers. Ripple quickly checks accounts and balances to send payments. It also sends payment confirmations within a few seconds. Once a payment is sent, it cannot be reversed.
Ripple Labs continues to be the main group that writes the computer code for the system that checks and approves transactions. In 2014, the Ripple system became connected to the US banking system.
Legal Case About XRP
In December 2020, the U.S. Securities and Exchange Commission (SEC) started a legal case against Ripple Labs and its leaders. The SEC claimed that XRP was an unregistered "security." A security is a type of investment that needs to be registered with the government. The SEC argued that Ripple Labs created and sold billions of XRP tokens to fund its operations and make money for its executives.
Ripple's CEO, Brad Garlinghouse, disagreed with the SEC and said Ripple Labs would fight the case in court. Because of the lawsuit, some cryptocurrency exchanges, like Coinbase, stopped allowing people to trade XRP for a while.
Court's Decision
On July 13, 2023, a judge made an important decision in the case. The judge stated that the XRP token itself is not a "security." However, the judge also said that the way Ripple Labs sold XRP to large financial institutions did count as selling unregistered securities. But, the judge ruled that Ripple's sales of XRP to the general public through exchanges did not count as selling securities.
This decision was seen as a significant moment for Ripple and the wider cryptocurrency world. The case could still go to a full trial or be appealed by either side.
See also
- List of online payment service providers
- List of cryptocurrencies
- Remittance
