XRPL DECYPHER Chapter 4: A Comprehensive Study of The XRP Ledger
Introduction
When we talk about a technology that helps develop and prepare the world for future digital finance and Business, the XRP Ledger comes to mind as they create value for the existing system while making preparations and provisions for the future financial ecosystem. Ripple started its humble beginnings in 2012 after three technology experts brainstormed for a new form of transactions ecosystem known today as The XRP Ledger (XRPL), a unique and outstanding Blockchain technology and the American response to the creation of Bitcoin. This Technology, its product, and its community all form a unique ecosystem. The Author of this article is very enthusiastic about XRPL’s abilities. This article enlightens and informs users about the Network.
History of The XRP Ledger
The XRP Ledger started in 2012 when Arthur Britto, David Schwartz, and Jed McCaleb launched the Network and its native token - Ripple Coin (XRP), known then as Open Coin (XNS). They cited that the Ledger was a faster, cheaper, and more energy efficient Distributed ledger technology to Bitcoin Blockchain due to its Federated Consensus Protocol. June 2, that same year, Arthur Britto minted 100 Billion Open Coin (XNS), marking the beginning of the Ledger as that was the Genesis Block.
The Trio, joined by Chris Larson in September 2012, founded Ripple Labs to create more utilities on the XRPL. The Founders gifted Ripple Labs 80 Billion XRP to aid the company’s research and development.
Today Ripple Labs has multiple real-life Blockchain utilities heavily related to the Financial sector and Global monetary transfer.
SEC US and Ripple Labs Case
In Late 2020, Ripple Labs got sued by the Security and Exchanges Commission (SEC) of the US for unregulated and unregistered sales of XRP, and Ripple Coin was also declared a security token by the SEC. This event occurred because Ripple Labs, Brad Garlinghouse, and Chris Larson Sold $1.3 Billion worth of XRP to further some Company Product development through contracts and the secondary market (DEXs and CEXs). SEC US declared that XRP was a security because the Cryptocurrency was sold to investors who expected profits on the sales, and XRP should undergo a Howey Test, a test done to Differentiate Cryptocurrencies or other assets from securities. All Securities must register with SEC, and other crypto companies Sued by this agency have always chosen to settle off the court, but Ripple Labs decided to fight, citing that the SEC was biased in its Decisions and that XRP was not a Security.
This case dragged on for years, and The XRPL experienced an investor drain. XRP saw drops in price as most US Based CEXs and Crypto payment platforms delisted the Cryptocurrency. Despite all obstacles, Ripple Labs stood its ground and continued the development of XRPL and its products, offering Blockchain solutions to foreign markets to the extent that 95% of its revenue came from outside the US. The Ledger also saw development as the XRPL Foundation and XAMAN were created to develop utilities for the Decentralized XRP Community and the birth of XUMM Wallet and XRPLedger services, known then as the XUMM community in 2021.
July 13, 2023, US Federal Court Judge Analisa Torres Ruled that XRP was not a security, and neither did the programmatic XRP sales by Ripple Labs, its Executives Christian Larson and Bradley Garlinghouse, nor other forms of XRP distribution by the Company constitute a Security sale. She also cited that Sales by Secondary market weren’t against the law and charity donations, compensations, and payments with Cryptocurrencies were not security offerings.
The ruling was a big hit for SEC as they’ve never lost a case and the beginning of a better approach towards global Cryptocurrencies regulation and Adoption.
CEXs and Payment companies began relisting XRP. The Ledger has gotten respect from other Crypto communities and is open to new investors. Alot more on Ripple and the XRPL history can be found on Wikipedia.
XRP Ledger Foundation (XRPLF)
XRP Ledger Foundation (XRPLF) was founded on September 24, 2020, as an independent non-profit entity with the mission to accelerate the development and adoption of the XRPL. The Foundation received an initial donation from Ripple Labs, Coil, and Gatehub that amounts to $6.5Mn to aid its work of growing the number of developers and community members on the XRPL.
The Foundation supports Ledger development through partnerships with other NGOs, Universities, and Companies to bring more use cases, utilities, and adoption of the Ledger. It supports creativity development on the XRPL in the following ways;
XRPL Hackathons: These events allow developers to brainstorm, explore and invent new ideas/projects on the Ledger; Awarded are given to participants at the end of the event.
XRPL Grants: These Grants support projects developing on the Ledger, whose ideas or business will increase adoption, and community members of the XRPL. The Grants funds vary from $10,000 to $200,000 according to the needs and impact of the project on the XRPL. Projects applicants are grouped into the following categories; Infrastructure/Security, NFTs, Sidechains, Social Impact, Sustainability, Usability/Developer Tooling, E-commerce, DAO, and many more. Grants offerings are in Waves; the last was Wave 5, and the Foundation currently has over 132 Grantees.
XRPL Accelerator: This 12-week program is for entrepreneurs building on the XRP Ledger to scale their projects into thriving businesses. They stand a chance to earn $50,000 in grants and a pitch for venture funding.
XRPL Bounties: These are awards for developing software and integrations that enable and improve specific use cases for the XRP Ledger. Generally, these awards are worth $500 to $100,000 per milestone.
Creator Fund: This is a $25 million Commitment made by Ripple Labs to the XRPL Foundation to aid NFT creators in minting on the XRPL. Ripple partnered with some projects on the XRPL and Crypto space to make this process possible. Access all the XRPL Developer Funding programs here.
XRPL Campus Ambassadorship: This program aims to elevate the impact of college students who are passionate about blockchain technology. In their role, Campus Ambassadors help educate other students about crypto and how to start building on the XRPL. The benefits of this program to the student are the following:
Stipend, Mentorship, Swag, Education, Career Acceleration, and Exclusive Opportunities. You can apply for this program here.
The XRPL Foundation also has its Unique Node List (UNL) which represents its accredited Nodes on the XRPL. This organization Verifies Fungible Tokens associated with projects building on the Ledger after the project Team pass their KYC verification process.
The XRPLF is doing a lot to develop the Ledger. Learn more about them here.
XRPL Labs
XRPL Labs was founded in 2019 by Wieste Wind with two other prominent XRP developers. The company develops tools that allow XRPL users to access the Ledger safely and securely. The community had been waiting desperately for a way to harness and build on the Technologies and utilities of the Ripple Ledger.
The Team was embarking on a mission to create Two things:
XUMM Wallet
This wallet has three parts which are listed below:
XUMM App
XUMM Tangem Cards
XUMM DEX
Each of these components integrates seamlessly together in multiple ways. I’ll explain the features of each Part of the XUMM wallet.
XUMM App: This signing and interaction Software (Android & iOS) allows XRP wallet users to interact with XRPL in real time. The app grants users access to their funds, and the ability to send and receive XRP and other XRP IOUs or tokens on the Ledger. Other functionalities the app offers are issuing of IOUs, Access to the Inbuilt Ledger DEX, sign-in access to xApps, and many more.
XUMM Tangem Cards: These are Cold storage wallets. They grant their users XUMM usability and Cold and hardware wallet security. XUMM Tangem Cards allow users to send and receive payment without online interaction with the XRPL. The receiver or sender will scan the wallet bar code that prompts a transaction notification in their device for the card owner or sender to sign. This functionality is possible by partnering with Tangem, a reputed Hardware wallet creator. The scan code validation for the cards was made possible by a tech created by XRPL Labs known as XRP Proof of Payment (XPOP).
XUMM DEX: This is a public, open-source DEX user interface of the Inbuilt XRPL DEX. This web interface allows users to create, check and cancel their offers, view and export their trade history, and discover issuers, trust lines, and other DEX functions. DEX Trade is for Mobile interface, the PC or Mac interface of the XUMM DEX is called Unhosted Exchange, and it allows XUMM users to sign in and carry out trades on their Laptops and Desktops.
xApps
This application interface or platform allows other XRPL developers to create Web and Decentralized applications that users can sign in with their XUMM wallet without trusting their private keys to the third-party platform. Every action requiring a user’s transaction signature is sent to their XUMM Wallet where they can accept or reject the transaction. xApps has helped XRPL projects in user-friendly application development that allows XRPL users to enjoy XRPL utilities. Most DEXs, Utility platforms, and Secondary Marketplaces on the XRPL use xApps APIs for XUMM users can interact with their platform. Some xApps are on the XUMM wallet and are listed below; Casino Coin Lobby, Escrow Creator, Gatehub Trade, DEX Trade, XRP Ledger TipBot, and many more.
XRPL Labs was funded in two successive seed rounds by Ripple’s Tech investment arm Xpring. Currently, the company is involved with a couple of projects that will bring more utility to the XRPL. The Hooks Sidechain Development is a notable example.
Learn more about XRPL Labs here.
The XRP Ledger Consensus Protocol
The Ripple Ledger (XRPL) is an open-source, decentralized, trustless, distributed ledger technology (DLT) Network that uses a federated consensus protocol known as the Ripple Consensus Algorithm (RPCA) to execute, validate and confirm transactions across the Network and the Ripple Coin (XRP) Cryptocurrencies as its utility and native Token. The XRPL is a first-of-its-kind DLT focused on global monetary payment and currency exchange. The technology was brought to life by 3 American Software Engineers in 2012. The XRP Ledger technology is unique for the following features:
- Inbuilt DEX
- Inbuilt Escrow & OTC
- Inbuilt Asset Compactibility
- Hooks & Evernodes
- Standard Transaction Fees
- RPCA (Consensus mechanism)
This section will talk about the Consensus mechanism and how it affects transactions.
RPCA — The Federal Consensus Protocol
RPCA is a consensus process based on the Practical Byzantine Fault Tolerance (PBFT) algorithm. This process divides nodes in the Ripple Ledger into three:
- Stock Nodes
- Validator Nodes
- Hub Nodes.
Stocks Nodes: These Nodes relay information (transactions) to Validator Nodes for confirmation and validation. They also elected Validator Nodes that confirm their information on the Ledger Network through a list called Unique Node List (UNL). Generally, these are the Nodes where developers connect their software and xApps.
Validator Nodes: These are the selected Nodes that the Stock and Hub Nodes add to UNLs to partake on their behalf in the transaction validation, confirmation, and ledger creation. They are also the Nodes that vote in the Protocol Amendment process.
Hub Nodes: These Nodes relay all validated and unvalidated information on the Ledger Network to everyone. They serve as news feeds that enable users to know what is happening on the XRPL Network. They also elect their trusted validator Nodes through their UNLs.
UNLs allow Stock Nodes and Hub Nodes to choose their Validators Nodes by adding proven ones and removing unreliable ones after comparing their UNLs. This process aids the XRPL Network to work in a Decentralized and secure manner in its operations.
The RPCA protocol is effective in two ways which are the Transactional protocol and the Amendment process as these two events affect the longevity and efficiency of the Network.
Transactional Process
Only Validator Nodes partake in the transaction validation or consensus process and must hold a minimum amount of XRP as a security deposit to ensure they have a stake in the XRPL Network’s operation. Here is how the process works:
- When a transaction is initiated on the XRP Ledger network, the sender’s node validates the transaction and signs it with a private key.
The transaction is broadcasted to a group of trusted nodes on the network. - The nodes add the new transaction to a list of other transactions waiting to be processed. This list is called the transaction pool.
- Each node reviews the new transaction in the transaction pool and creates a list of transactions to include in the next ledger. This list is called a candidate set of transactions.
- Each Node shares its candidate set with the other trusted nodes and reviews the candidate sets submitted by the other Nodes.
- Each Node decides whether to keep its candidate list of transactions or optimize it using part (or all) of another Node’s candidate list.
- This process of sharing, reviewing, and iteratively improving candidate sets is repeated until a supermajority of nodes agrees on a set of candidate transactions to include in the next ledger.
- Once a supermajority of validators agrees on a set of candidate transactions, they create a new ledger that includes those transactions and broadcasts it to the Network. The ledger is then added to the blockchain, a tamper-evident record of all transactions on the Network.
Amendment Process
Unlike Other Distributed Ledger Technologies, the XRPL is in a continuous process of technology, protocol, and infrastructural improvement and amendment as seen in the XLS-20 Amendment (Native NFT Compatibilities), Hooks Amendment (on-chain transaction automation), XLS-30D Amendment ( Automatic Market Maker Functionalities) And many more. Validator Nodes are the Nodes that partake in this process, and here is how it works:
- After an amendment proposal has passed the necessary Code and security audit, it is put up for the Voting or Amendment Process.
- During the Amendment process Validator can vote for or against the proposal, but if the number of votes for the Amendment proposal sits above 80% of the Validator Nodes' votes for two weeks, the proposal is passed and Amended to the ledger.
- If the proposal fails to meet the above-stated conditions, the amendment fails, and the issues noted must be reviewed and re-audited before being proposed to the Ledger for Amendment.
- Likewise, all other nodes have a two-week period to download the amended source code to enable usage of the newly amended protocol, as they will be marked amendment uncompliant and disconnected from the ledger if they fail to comply.
This method allows for the continuous longevity and Development of the XRPL. Here is a YouTube Series by the XRPL Foundation that throws more light on how the XRP Ledger works.
Features Of The Ripple Ledger
Aside from the RPCA Consensus Protocol, there are other features that the XRPL has to offer to its users, which are listed below:
In-built DEX: The XRP Ledger has a built-in Decentralized exchange that allows users to trade Cryptocurrencies, CBDCs, and IOUs directly on the XRPL Network using XRP as a token for trading fees and creating and canceling trade orders. Notable currency pairs are XRPL IOUs/XRP, XRP/USD or EUR or CYN, BTC or ETH/XRP, and Stablecoins/XRP. This feature allows users to exchange value across the XRPL Network without smart contracts.
In-built Asset Tokenization Compactibility: This built-in functionality allows any wallet on the XRPL to issue IOUs or tokens on the XRPL Network without a smart contract, and these tokens are by default tradable against XRP on the In-built DEX. Blackholing is an action that stops the issuer wallet of an IOU from issuing more units of the IOU. Token Issuer wallets on the XRPL are either blackholed or not blackholed. This Blackhole phenomenon also tells if their token supply is finite or infinite.
Trustline (IOU/Token Account Database): XRP wallet can only receive a token/IOU by opting into that token/IOU account database. When a Token/IOU issuer wallet issues a token/IOU, it creates a unique transactions path or database for that token on the XRPL Network that allows other wallets to receive, send, hold, and trade the token/IOU on the XRPL. This database is called a trustline, and 2 XRP is needed to opt into an issuer’s trustline.
In-built NFT Tokenization Compatibility: The ledger has a built-in NFT issuing mechanism that allows users to mint NFTs, add Royalty fees, receive NFTs, and bid for or list NFTs for sale without smart contracts. The protocol for this functionality on the XRPL is called XLS-20. This protocol allows users to receive an NFT on the XRPL Network without manually adding the NFT trustline.
In-built Escrow Creator: Escrows are wallets or smart contracts that lock Cryptocurrencies for a certain period or condition. The XRPL has its escrow creator built-in to the XRPL Network that allows users to lock a certain amount of XRP for a certain period or condition using an escrow account system that uses 2 XRP to create an account.
Multi-Sign Wallets: The XRP Ledger has a functionality built-in to the XRPL Network that ties the signing of transactions on a wallet to multiple wallets. This wallet has good use in securing funds for companies, projects, and banks as the system ties the ability to withdraw funds from the company wallet to all the Key Executives' wallets.
Hooks & Evernodes: Upon the Successful amendment of Hooks and Evernodes on the XRPL Network, XRPL will have full transaction automation or smart contract Compatibility. These functionalities will allow Developers and businesses to automate and add logic to multiple transaction systems.
Destination Tags: To start receiving and sending XRP on the Network, a 10 XRP deposit must be locked in the user’s wallet to keep the account active on the XRPL. Creating multiple wallet accounts like most CEX, crypto payment platforms, and Utility companies for other Blockchain Networks is not beneficial due to the activation fee. This issue is solved using a system that allows a 10 Digit code sequence to be attached to the deposit wallet. Each Digit sequence represents a user on the platform’s database. Users can now make deposits to a single wallet, knowing that the 10-digit code is their identity on the platform database. These Digit code sequences are called Destination Tags.
Ripple Coin (XRP) — XRPL’s Native Token
Ripple Coin (XRP) is the Native Token of the Ripple Ledger (XRP), and it has multiple purposes and utilities on the Network from transaction fees, trading fees, issuing fees, all types of account creation locking (Trades, NFTs, IOUs, escrows) and other functionalities on the XRPL.
XRP is a pre-minted Cryptocurrencies as the creators minted 100Bn XRP and blackholed the issuer wallet making the Token a deflationary Asset. Ripple Labs uses XRP as its Utility Token on its Global payment and exchange platform RippleNet.
Token Name: Ripple Coin
Token Symbol: XRP
Blockchain: XRP Ledger
Total Initial Supply: 100 Billion Units
Benefits of The Ripple Ledger
Carbon-neutrality: The RPCA allows for a cohesive validation process at high speed without the need for large computational power. This process emits carbon footprints that are negligible according to global standards. Hence, it is the first Carbon-neutral Blockchain.
Cost Effectiveness: The XRPL has a standard cost for all transactions equal to 0.000012 XRP. This value is equivalent to a fraction of a USD cent and allows for cheap and fast transactions on the Network.
Speed: From Records, the average transaction completion time is between 3 - 4 seconds per transaction, faster than most Blockchains and payment system completion time.
Scalability: The XRPL Network can execute up to 1,500 transactions per second every day. This fit makes it more scalable than most Blockchains Networks.
Security: The XRPL is a value layer Blockchain, and all the Compatibilities that require smart contracts are in-built. Funds are lost when malicious hackers or entities gain access to users' private keys. The XRPL is a more secure network than other Blockchains that use smart contracts.
Conclusion
The XRPL is a trustless network that allows its users to carry out transactions in a fast, cheap, scalable, and environmentally friendly way. The XRPL Cryptocurrencies allow users to transfer and exchange monetary value across borders without third-party hindrances. We can not overemphasize the benefits of this network as it is a global hidden gem. The XRPL community encompasses a lot of hidden gem Blockchain and real-life utility projects. We hope that after you’ve read this article, there is a clear insight into what the XRPL Network utilities has to offer to the crypto space.
Thank you for reading
XRPL Contact and Resources
XRPL Community website
XRPL Whitepaper
XRPLF Twitter
XRPL Labs Twitter
Wieste Wind Twitter
An Old XRP Blog
Cryptocurrencies are volatile assets, and it is important to do your research and due diligence before making any investment decisions, as the Author of this series will not take responsibility for any loss of funds due to wrong investments. This article is for education and information purposes. Thus, it should not be seen as financial advice.
Marvin Sunday
You can access the Article Series here and you can also reach out to the author here
