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what is ripple?

Ripple is the name of a payment network and the payment protocol, authored by Arthur Britto, David Schwartz, & Ryan Fugger. It was developed and released in 2012 by a company of the same name, in order to enable “secure, instant and nearly free global financial transactions”. It is built on principles similar to those of Bitcoin, so many people consider it a cryptocurrency. However, unlike Bitcoin, the source code of Ripple’s technology is owned privately by the company, which means that it cannot be verified by any outsider. The network can operate without the Ripple Company. Among validators are companies, internet service providers, and the Massachusetts Institute of Technology. Ripple is a very popular network: many banks across the world use it as the basis for their own settlement infrastructure, and its native currency XRP (ripples) has been consistently present in the top 5 cryptocurrencies by market capitalization for the past several years. It is a digital currency system in which transactions are verified by consensus among members of the network, rather than by the mining process used by bitcoin, which relies on blockchain ledgers. This new version of the Ripple system was therefore designed to eliminate bitcoin’s reliance on centralized exchanges, use less electricity than bitcoin, and perform transactions much more quickly than bitcoin. The Ripple Transaction Protocol (RTXP) enables the instant and direct transfer of money between two parties. As such the protocol can circumnavigate the fees and wait times of the traditional correspondent banking system, and any type of currencycan be exchanged including USD, euros, RMB, yen, gold, airline miles, and rupees. To maintain security Ripple is programmed to rely on a common ledger that is “managed by a network of independent validating servers that constantly compare their transaction records.” Servers could belong to anyone, including banks or market makers. The company also created its own form of digital currency dubbed XRP in a manner similar to bitcoin, using the currency to allow financial institutions to transfer money with negligible fees and wait-time. According to the Consultative Group to Assist the Poor(CGAP), “Ripple does for payme nts what SMTP did for email, which is enable the systems of different financial institutions to communicate directly.”