A Beginner’s Guide To Ripple

We thought we would turn our backs on banks. So why would a crypto that works with the banks be so popular? It could be due to Ripple’s efficient feature set or it could be due to the fact that we aren’t ready for the change we thought we wanted. Maybe banks aren’t so bad after all?


The birth of cryptocurrency was initiated due to strong demand for an alternative to our current banking and financial systems. After economic failures and excessive risk-taking by the banks, people started to lose trust in centralized institutions. While many sought to create entirely new alternatives to the current banking system built from the ground up, others decided to use crypto technology to make the existing banking system better. One of the most popular cryptocurrency projects that is current working WITH banks right now is called Ripple. If you are curious to know more about this network, here’s everything you need to know


One of the main misconceptions people have about Ripple is that it was designed to be nothing more than cryptocurrency, just like Bitcoin. However, the two crypto-coins are completely different. While Bitcoin’s main mission is to steer away from banks, Ripple is a system that was created to be used by banks.

Ripple is actually a payment protocol which can be used by banks and non-bank services regarding finance. The confusion comes from the fact that they too have their own cryptocurrency called XRP, or more commonly referred to as “ripples”, while the network itself is called the “Ripple protocol”.

Ripple is built on an open source protocol, enabling instant global transactions without charging fees. This network makes real-time gross settlement, currency exchange, and remittance possible. It is based on a public and shared ledger, which needs consensus to perform these tasks.


The story of Ripple goes way back to 2004 when RipplePay was developed by Ryan Fugger (Canadian web developer). was released in 2005 as a decentralized monetary system for members of an online community.

In 2011, under the leadership of Jed McCaleb, the development of a new version of Ripple started, with the mission to create a decentralized digital currency system without the use of mining and blockchain. Instead, the transactions would be verified by consensus reached within members of the network, allowing the transactions to be performed much faster and consume less electricity. This project was launched in 2012 under the name of OpenCoin.

The OpenCoin corporation started to develop a payment protocol called the Ripple Transaction Protocol (RTXP), based on the original RipplePay concept. In 2013, OpenCoin changed its name to Ripple Labs Inc, and their reference server and client became free software, releasing it as open source. Since that year, the protocol has been utilized by numerous financial institutions.


The Ripple protocol revolves around a public and shared ledger, and the content of this ledger depends on the consensus of the network members. The users can make payments to each other through transactions that are signed cryptographically, and these can be done with either fiat currency or XRP. The transactions made with XRP use the internal ledger of Ripple, while the ones made with other currencies only use this ledger to record the debt obligation between the users.

The transactions made with currencies other than XRP, are between two users that have established certain level of trust with each other, and it is shown as an adjustment of the mutual credit balance. When two people that don’t have a trust relationship want to make a transaction, Ripple’s job is to find a way to link the two through people that do trust each other. This method is called “rippling”.

The ledger is the base of Ripple, much like the blockchain is to Bitcoin and other cryptocurrencies. This is ledger is common and shared, containing information about all accounts. The network servers that manage the ledger, by constantly comparing transactions with each other and reaching consensus, could be a part of anything, be it a bank or a different institution. Every few seconds a new ledger is formed and the last one contains a perfect record of every account.

The goal of the consensus method is for every member of the network to have the same exact copy of the ledger. When transactions are agreed by a supermajority of servers, the transaction is validated. On the contrary, if this supermajority isn’t reached, the process to achieve consensus begins again, each time reducing the disagreement, and eventually reaching the supermajority.

One of Ripple’s most popular features is enabling cross-currency transactions in seconds. Secured through cryptography, and algorithmically verified, these transactions are processed without a middle man. They even offer what’s called the “Bitcoin bridge”, a link between Bitcoin and Ripple. This allows Ripple users to automatically pay Bitcoin users from their Ripple account, without the need to convert the coins.

As mentioned before, Ripple has their own native currency called the XRP. This is the only currency on Ripple that can be exchanged without being under a counterparty risk, as it isn’t dependent on third parties. The total supply of XRP is the 100 billion created at the beginning of Ripple, making it scarce. Out of the total 100 billion, 20 billion were retained by the creators.

One of the main goals the creators had in mind when creating XRP was to work as a bridge currency, and not to act as an alternative coin. This proved necessary for situations where two rarely traded currencies had to be exchanged. For this reason, XRP can be traded freely with other currencies.

When a transaction is made in the non-native currency, Ripple charges a fee in XRP. This helps by defending the network from malicious people, by making them pay for their attacks. Some attackers try to overload the network by creating numerous fake ledgers, so making them pay a fee for every ledger they create would stop them from doing that. For this reason, every account is asked to have a supply of at least 20 XRP


As stated in the beginning, Ripple differs quite a lot from other cryptocurrencies, starting from the fact that they were not designed primarily to be a real world method of payment for goods and services. In this sense, Ripple shares more similarities to Ethereum than it does to Bitcoin. In a nutshell, Ripple is free software aimed at banks with the main goal of making global transactions faster and more decentralized.

The big question is whether or not Ripple is considered a decentralized currency. Sure enough, their consensus method of verifying transactions makes them a decentralized network in nature, but their association with banks hurts their argument on this topic. Also, with transactions made with currencies that are not XRP, there is counterparty risk.

Ripple currently holds the number four position with regards to market capitalization, which means that users and investors find value in the idea.


Cryptocurrencies started to heat up because of public desire for radical change. It seemed interest was building and populations were preparing themselves to turn their backs on the banking industry once and for all. So why would a crypto that works with the banks be so popular? It’s an interesting question. It could be due to Ripple’s efficient feature set or it could be due to the fact that people aren’t ready for the change they thought they wanted. Maybe banks aren’t so bad after all?

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