Ripple (payment protocol)

From Wikipedia, the free encyclopedia

Jump to navigationJump to search

Ripple

Original Arthur Britto, David Schwartz, Ryan Fugger

author(s)

Developer(s) Ripple Labs Inc.

Initial release 2012

Stable release 1.0.0[1] / 15 May 2018[1]

github.com/ripple/rippled 
Repository

Written in C++

Operating Server: Linux (RHEL, CentOS, Ubuntu), Windows, ma

system cOS (development only)

Type Real-time gross settlement, currency

exchange, remittance

License ISC license

Website ripple.com

Ripple is a real-time gross settlement system, currency

exchange and remittance network created by Ripple Labs Inc., a US-based
technology company. Released in 2012, Ripple is built upon a distributed open
source protocol, and supports tokens representing fiat
currency, cryptocurrency, commodities, or other units of value such as frequent
flier miles or mobile minutes.[2] Ripple purports to enable "secure, instantly and
nearly free global financial transactions of any size with no chargebacks." The
ledger employs the native cryptocurrency known as XRP.
 In December 2020, Ripple Labs and two of its executives were sued by the U.S.
Securities and Exchange Commission (SEC) for selling XRP tokens, which the
SEC classified as unregistered securities.[3]

Contents

 1History
 2Litigation
 3Reception
 4See also
 5References
 6External links

History
Ripple was conceived by Jed McCaleb and built by Arthur Britto and David
Schwartz who then approached Ryan Fugger who had debuted in 2005 as a
financial service to provide secure payment options to members of an online
community via a global network.[4][5] Fugger had developed a system called
OpenCoin which would transform into Ripple.[6][7] The company also created its own
form of digital currency referred to as XRP to allow financial institutions to transfer
money with negligible fees and wait-time.[8] In 2013, the company reported interest
from banks for using its payment system.[9]
By 2018, over 100 banks had signed up, but most of them were only using Ripple's
XCurrent messaging technology, while avoiding the XRP cryptocurrency due to its
volatility problems.[10] Representatives of the Society for Worldwide Interbank
Financial Telecommunication (SWIFT), whose market dominance is being
challenged by Ripple, have argued that the scalability issues of Ripple and other
blockchain solutions remain unsolved, confining them to bilateral and intra-bank
applications.[10] A Ripple executive acknowledged in 2018 that "We started out with
your classic blockchain, which we love. But the feedback from the banks is you
can’t put the whole world on a blockchain." [11]
Ripple relies on a common shared ledger, which is a distributed database storing
information about all Ripple accounts. Chris Larsen told the Stanford Graduate
School of Business that the network was managed by a network of independent
servers which compare their transaction records, and that servers could in theory
belong to anyone, including banks or market makers. [6] Ripple validates accounts
and balances instantly for payment transmission and delivers payment notification
within a few seconds.[12] Payments are irreversible, and there are no chargebacks. [13]
Ripple Labs continued as the primary contributors of code to the consensus
verification system behind Ripple.[14] In 2014, the protocol gained access to the US
banking system amid concerns over security and a lack of regulation. [15]

Litigation
A class action was filed against Ripple in May 2018 "alleging that it led a scheme
to raise hundreds of millions of dollars through unregistered sales of its XRP
tokens." According to the complaint, "the company created billions of coins 'out of
thin air' and then profited by selling them to the public in 'what is essentially a
never-ending initial coin offering'."[16]
The U.S. Securities and Exchange Commission (SEC) initiated legal proceedings
against Ripple Labs, CEO Brad Garlinghouse, and co-founder Chris Larsen on
December 21, 2020, for allegedly selling unregistered securities. In the lawsuit, the
SEC claimed that XRP was a security instead of a commodity, because it was
generated and distributed by Ripple Labs in a centralized fashion and was not
being adopted by financial institutions for its advertised use cases. [3] The SEC
stated that Ripple executives sold 14.6 billion units of XRP for more than $1.38
billion to fund the company’s operations and enrich themselves. [17]
In response, Garlinghouse criticized the SEC and indicated that Ripple Labs would
defend itself in court.[18] Coinbase delisted XRP on December 28;[19] an investor filed
a class action on December 30 alleging that Coinbase sold XRP tokens with the
understanding that they were unregistered securities. [20]
On April 13 SEC Commissioner Hester M. Peirce published the Token Safe Harbor
Proposal 2.0 which is: ″intended to provide Initial Development Teams with a three-
year time period within which they can facilitate participation in, and the continued
development of, a functional or decentralized network, exempt from the registration
provisions of the federal securities laws so long as certain conditions are met.″ [21]

Reception
For its creation and development of the Ripple protocol (RTXP) and the Ripple
payment/exchange network Ripple Labs was named as one of 2014's 50 Smartest
Companies in the February 2014 edition of MIT Technology Review.[22] A scientific
study made by two researchers from Stanford and Stockholm University that
studied the money production from an energy consumption point of view and a
macroeconomic level stated that running a server on Ripple was comparable to the
energy needs of running an email server.[23]