What is Ripple?
Ripple is a system of payment, exchanging currency transferring network made by Ripple Labs. It is created based on a distributed, open source internet protocol, consensus ledger and native currency known as ripples. The Ripple network aims to enable safe, immediate and free global transactions of various sizes without chargebacks. It backs any fiat currency like Yen, Dollars, cryptocurrency like Bitcoin, Litecoin, and commodity or other valuable unit. Ripple at its core is based around a distributed, public database or ledger. For a balanced way, the ledger holds data about offers to purchase or sell currencies and assets, formulating the first shared exchange. Participants in the network come into agreement to the changes in the ledger through a process known as consensus and it’s reached in every 2 to 5 seconds.
The process of consensus gives room for payments, exchanges and remittances without the importance of a centralized clearing house. The consensus ledger allows the Ripple network energy to gain more efficiency and increase against attacks which is different from other cryptocurrencies like Bitcoin that are safe via the process of mining. As of 26th of Sep., 2013, the Ripple reference server and client are software free, launched based on the terms of ISC License. The present release of the client 0.2.48-3 version and the server recognized as Rippled is version 0.24.0
Ripple was first launched in 2004 by a web developer named Ryan Fugger, he came from Vancouver, B.C, in Canada. In year 2005, Ryan Fugger started to build Rippleplay as a financial service to offer a safe payment option to members of online community through a global network. This brought about the growth of a new Ripple system in year 2011 led by Jed McCab. It was created to prevent Bitcoin from relying on centralized exchanges, consumes less electricity compared to Bitcoin, and performs transactions much faster than Bitcoin. OpenCoin Inc. was established in year 2012 when McCaleb joined hands with Chris Larsen to execute the project. Larsen recently established lending services companies including E-Loan and Prosper, while McCaleb recently established eDonkey network and also Mt. Gox, an exchange for Bitcoin. On the 26th of Sep. 2013, OpenCoin Inc. renamed its company to Ripple Labs Inc., and launched the source code for Ripple’s peer to peer node software known as Rippled, as an open source.
In Ripple, users make transactions between themselves through cryptographically signed transaction in denominations which can be in Ripple international currency known as XRP or arbitrary assets that includes real world assets like dollars, gold, and so on. For denominations in XRP Ripple can use its internal ledger. For payments of assets in other denomination, the Ripple ledger keeps record of the amount owed by a use to another. In this process, all the assets are signaled as debt. Since Ripple only keep records in ledger and possess no enforcement of real world power, it is based on trust. Users have to show the other users that are trusted and specify the minimum amount. This can be revealed for every asset type individually.
When a payment that is not a XRP is carried out between two users that work based on trust, the balance of the mutual credit line will change, based on the limit set by each user. For assets to be sent between two users that possess no trust relationship, all the balances on the path can then be changed at the same time and atomically. This process of making payments via a network of trusted associates is known as Rippling. It is a digital version of the age old Hawala system and has been recognized as Facebook for money.
When carrying out a trust line, there will be a pop up option in the client to allow Rippling. If the person is confirmed and a new trust is created in the same currency an existing trustline, the Ripple client will show a warning to the user. Trusting various gateways on same currency and giving room for rippling functions will make the balance of the user of the currency to switch automatically between a gateway and another.
A gateway is someone or agency that enables users to deposit or withdraw money on the Ripple network. They accept deposits of currencies from users and grant balances to distributed ledger of Ripple. Hence, gateways redeem ledger balances against the deposits thet hold when currency is taken out.