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Ripple is a
real-time gross settlement Real-time gross settlement (RTGS) systems are specialist funds transfer systems where the transfer of money or securities takes place from one bank to any other bank on a "real-time" and on a " gross" basis. Settlement in "real time" means a paym ...
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 Distribution may refer to: Mathematics *Distribution (mathematics), generalized functions used to formulate solutions of partial differential equations *Probability distribution, the probability of a particular value or value range of a varia ...
open source
protocol Protocol may refer to: Sociology and politics * Protocol (politics), a formal agreement between nation states * Protocol (diplomacy), the etiquette of diplomacy and affairs of state * Etiquette, a code of personal behavior Science and technolog ...
, and supports tokens representing fiat currency, cryptocurrency, commodities, or other units of value such as frequent flier miles or mobile minutes. 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 The U.S. Securities and Exchange Commission (SEC) is an independent agency of the United States federal government, created in the aftermath of the Wall Street Crash of 1929. The primary purpose of the SEC is to enforce the law against market ...
(SEC) for selling XRP tokens, which the SEC classified as unregistered
securities A security is a tradable financial asset. The term commonly refers to any form of financial instrument, but its legal definition varies by jurisdiction. In some countries and languages people commonly use the term "security" to refer to any for ...
.


History

Ripple was conceived by
Jed McCaleb Jed McCaleb is an American programmer, entrepreneur and philanthropist. He is a co-founder and the CTO of Stellar. Prior to co-founding Stellar, McCaleb founded and served as the CTO of the company Ripple until 2013. McCaleb is also known for cr ...
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. Fugger had developed a system called OpenCoin which would transform into Ripple. 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. In 2013, the company reported interest from banks for using its payment system. 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. Representatives of the
Society for Worldwide Interbank Financial Telecommunication Swift or SWIFT most commonly refers to: * SWIFT, an international organization facilitating transactions between banks ** SWIFT code * Swift (programming language) * Swift (bird), a family of birds It may also refer to: Organizations * SWIFT, a ...
(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. 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." 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. Ripple validates accounts and balances instantly for payment transmission and delivers payment notification within a few seconds. Payments are irreversible, and there are no chargebacks. Ripple Labs continued as the primary contributors of code to the consensus verification system behind Ripple. In 2014, the protocol gained access to the US banking system amid concerns over security and a lack of regulation.


Litigation

A
class action A class action, also known as a class-action lawsuit, class suit, or representative action, is a type of lawsuit where one of the parties is a group of people who are represented collectively by a member or members of that group. The class actio ...
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. The
U.S. Securities and Exchange Commission The U.S. Securities and Exchange Commission (SEC) is an independent agency of the United States federal government, created in the aftermath of the Wall Street Crash of 1929. The primary purpose of the SEC is to enforce the law against market ...
(SEC) initiated legal proceedings against Ripple Labs, CEO
Brad Garlinghouse Bradley Kent Garlinghouse (born February 4, 1971) is the CEO of financial technology company Ripple Labs. He previously was the CEO and chairman of Hightail (formerly YouSendIt). Before Hightail, he worked at AOL and Yahoo! He was born February ...
, and co-founder
Chris Larsen Chris Larsen (born 1960) is a business executive and angel investor best known for co-founding several Silicon Valley technology startups, including one based on peer to peer lending. In 1996, he co-founded the online mortgage lender E-Loan, an ...
on December 21, 2020, for allegedly selling unregistered
securities A security is a tradable financial asset. The term commonly refers to any form of financial instrument, but its legal definition varies by jurisdiction. In some countries and languages people commonly use the term "security" to refer to any for ...
. 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. 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. In response, Garlinghouse criticized the SEC and indicated that Ripple Labs would defend itself in court.
Coinbase Coinbase Global, Inc., branded Coinbase, is an American publicly traded company that operates a cryptocurrency exchange platform. Coinbase is a distributed company; all employees operate via remote work and the company lacks a physical headq ...
delisted XRP on December 28; an investor filed a class action on December 30 alleging that Coinbase sold XRP tokens with the understanding that they were unregistered securities. 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.″


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 ''MIT Technology Review'' is a bimonthly magazine wholly owned by the Massachusetts Institute of Technology, and editorially independent of the university. It was founded in 1899 as ''The Technology Review'', and was re-launched without "The" in ...
''. 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.


See also

*
Diem (digital currency) Diem (formerly known as Libra) was a permissioned blockchain-based stablecoin payment system proposed by the American social media company Meta Platforms. The plan also includes a private currency implemented as a cryptocurrency. The launch was ...
*
List of online payment service providers The following is a list of notable online payment service providers and payment gateway providing companies, their platform base and the countries they offer services in: (POS -- Point of Sale) See also * Payment gateway * Payments as a se ...
*
List of cryptocurrencies , - , , , , , , , After the creation of bitcoin, the number of new cryptocurrencies expanded quite rapidly.
* Mojaloop


References


External links

* {{Cryptocurrencies, state=expanded Private currencies Cryptocurrency projects Foreign exchange companies Foreign exchange market Payment systems Mobile payments Micropayment Software using the ISC license