Ripple Technology

Launched: 2011

Ripple is basic infrastructure that optimizes the payment process. It is a neutral Internet-based protocol for connecting banks and payment systems. Banks can use Ripple as a common ledger to clear and settle transactions in real-time at the lowest-possible cost.

Pathfinding algorithm
Consensus confirms transactions in an atomic fashion

Ripple is the open-source, distributed payment protocol that enables instant payments with low fees, no chargebacks, and currency flexibility (for example dollars, yen, euros, bitcoins, or even loyalty points). Businesses of any size can easily build payment solutions such as banking or remittance apps, and accelerate the movement of money. Ripple enables the world to move value the way it moves information on the Internet.

Ripple works with gateways: independent businesses which hold customer deposits in various currencies such as U.S. dollars (USD) or Euros (EUR), in exchange for providing cryptographically-signed issuances that users can send and trade with one another in seconds on the Ripple network. Within the protocol, exchanges between multiple currencies can occur atomically without any central authority to monitor them. Later, customers can withdraw their Ripple balances from the gateways that created those issuances.

How do Ripple payments work?

A sender specifies the amount and currency the recipient should receive and Ripple automatically converts the sender’s available currencies using the distributed order books integrated into the Ripple protocol. Independent third parties acting as market makers provide liquidity in these order books.

Ripple uses a pathfinding algorithm that considers currency pairs when converting from the source to the destination currency. This algorithm searches for a series of currency swaps that gives the user the lowest cost. Since anyone can participate as a market maker, market forces drive fees to the lowest practical level.

What can you do with Ripple?

The protocol is entirely open-source and the network’s shared ledger is public information, so no central authority prevents anyone from participating. Anyone can become a market maker, create a wallet or a gateway, or monitor network behavior. Competition drives down spreads and fees, making the network useful to everyone.