avoids the ACH, banks or credit-card networks, it has none of the associated costs. Did I mention that it’s also not for profit and open-source? Anyone can use it and anyone can build on top of it. Unlike Bitcoin, there is no money to be made from mining for new bitcoins, but there is a finite number that has been made.
Ripple is a peer-to-peer (think Napster) network where the interconnected servers run a shared copy of the ledger. No one owns it. The ledger is kept up to date by a technical process called consensus, whereby all servers in the network verify and agree on the correct view of the database in the processing, allowing only legitimate transactions. The ledger tracks account balances not people, so it’s super easy to move money from one account to another. Money moves across the world in the time it takes to update the ledger – literally a few seconds. Ripple has its own network currency called Ripples ( XRP) – essentially the first app built on top of the core technology. Since Ripple works off accounts not people, it means your wallet has to be treated l i ke cash. Of course, Ripple as a system has to work within the overall banki ng system via gateways: these al low t he entr y and existence of fiat money. Anyone can build a gateway as long as he/she complies with local laws, and gateways will charge a fee that will probably be close to what they currently charge.
A 100bn ripples have been made and no more will ever be. The minimal transaction cost for each transaction doesn’t go to anyone, it’s just destroyed within the network – the effect of which is to distribute them evenly to all account holders in proportion to their network. Unlike today’s system where the transaction costs go to make profits for the banks, the Ripple costs are there purely to prevent someone sending millions of transactions and swamping the system.
You can send Ripples to any other Ripple account with no counter-party risk, but to send any currency, including Bitcoins to someone else, you need to extend “trust” to that person or gateway. The amount of trust you extended is set per transaction or business and is tracked by Ripple. Your trusted accounts send you an IOU no larger than the amount of trust you’ve extended to t hem. By e x t ension, Ripple transactions are safe and irreversible – this gets around the problem with many international transactions where the customer disputes the transaction after goods have been delivered and charge-backs occur. Similar to a Public Key Infrastructure, Wallet IDs are public to receive money (mine is rDXx3WXLHJJM4YqJmnCZftzbbgTDa5ErBr), but only you know the Private key to access the wallet and make payments.
For a business trading internationally, Ripple removes many issues: it reduces costs, makes transfers instant and irrevocable, and automatically f inds the best price when converting currencies in or out of the network. If you’re doing any business internationally, it’s something you should consider, seriously. Visit Ripple.com for more, its early days but this stuff will change the world and your life.
If you’d like to test the system, send me a few XRP, and I’ll send them back to you. Less t ransaction fees of $ 0.0001 of course…
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