What is Ripple?

A study guide for Cryptocoins News

Tiffany Hayden
4 min readMay 19, 2017


“The technical description of Ripple is rather ambiguous.

It was once said that it would take the average person around 6 months to fully understand Ripple. I have to agree. I can understand why people would shy away from putting in the effort. What I can’t understand is why uninformed people keep choosing to write about it though. Hopefully, I can help clarify things a bit.

To start, it’s helpful to look at Ripple as something completely different from Bitcoin. Ripple is back-end infrastructure and not a consumer facing product. Ripple is not a currency. It’s an open-source, global exchange. Anyone can access it and everyone has an equal right to use it. Ripple, the company, does not control the network, collect fees, or limit access.

Ripple is a distributed, real-time payment protocol for anything of value. It’s a shared public database, with a built-in distributed currency exchange, that operates as the worlds first universal translator for money. Ripple is currency agnostic and has a foreign exchange component built right into the protocol. Ripple acts as a pathfinding algorithm to find the best route for a dollar to become a euro or airline miles to become Bitcoin. It will look at all the orders in the global order book. ANYBODY can put a bid-ask on anything of value. The Ripple protocol is designed to route every transaction to the cheapest price available in the market.


There is a transaction fee to use the exchange (~.00001XRP) and it must be paid in XRP, the native asset of the network. This transaction fee is not collected by anyone; the XRP is destroyed and ceases to exist. Having a cost associated with ledger entries helps prevent ledger flooding attacks. Like Bitcoin, XRP has no counterparty risk. Unlike Bitcoin, XRP transactions clear in 4 seconds or less. XRP is a digital asset with verifiable mathematical properties, similar to how we can reliably verify gold as a substance made of 79 protons. XRP also serves as a currency of last resort that can bridge between any currency, asset, or thing of value in the world. If every currency is liquid to XRP, it is also liquid to other currencies. By design, 100 billion XRP were created at Ripple’s inception, and per the protocol rules, no more XRP can ever be created.

Nostro Accounts

Tied-up capital accounts for more than 80% of payment costs for every industry. Worldwide, businesses have more than $27 trillion in capital sitting idle in nostro accounts. Ripple aims to free up this capital by using its global exchange as a market place for float. Financial brokers, market makers, anyone, really, can offer up their cash positions. With a marketplace for cash inventory, businesses no longer need to keep funded positions in every country they send payments to. This also means that the payments will be sent from a local provider, allowing businesses to avoid hitting the international SWIFT rail, which is expensive, slow, and doesn’t scale.

Global Settlement

The global foreign exchange market does $5.7 trillion per day and that’s the market Ripple is after. Ripple Consensus Ledger can handle 1,000 transactions per second and XRP Payment Channels allow transaction throughput to increase to tens of thousands of transactions per second, bringing scalability to the same level as Visa.

XRP is not the core utility of Ripple. External currencies are the focus of the protocol. Ripple is a global settlement network.

There’s been a lot of quasi-religious Bitcoin nonsense spewed, ever since the price of XRP started to rise. Alleged free market capitalists are horrified that Ripple, the company, wants to make a profit and doesn’t plan to distribute XRP in any sort of socialist, utopian manner.

Because Ripple is a payment network first and foremost, XRP will be used to make the network as healthy as possible, which will most likely mean managing liquidity with XRP.



Tiffany Hayden

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