Ripple is a real-time gross settlement system (RTGS), currency exchange and remittance network by Ripple. Also called the Ripple Transaction Protocol (RTXP) or Ripple protocol, it is built upon a distributed open source Internet protocol, consensus ledger and native currency called XRP (ripples). Released in 2012, Ripple purports to enable "secure, instant and nearly free global financial transactions of any size with no chargebacks." It supports tokens representing fiat currency, cryptocurrency, commodity or any other unit of value such as frequent flier miles or mobile minutes. At its core, Ripple is based around a shared, public database or ledger, which uses a consensus process that allows for payments, exchanges and remittance in a distributed process. The network is decentralized and can operate without Ripple (enterprise), it cannot be shut down. Among validators are companies, internet service providers, and the Massachusetts Institute of Technology. Used by companies such as UniCredit, UBS and Santander, Ripple has been increasingly adopted by banks and payment networks as settlement infrastructure technology, with American Banker explaining that "from banks' perspective, distributed ledgers like the Ripple system have a number of advantages over cryptocurrencies like bitcoin," including price and security.


Early development (2004–12)
The predecessor to the Ripple payment protocol, Ripplepay, was first developed in 2004 by Ryan Fugger, a web developer in Vancouver, British Columbia. Fugger conceived of the idea after working on a local exchange trading system in Vancouver, and his intent was to create a monetary system that was decentralized and could effectively allow individuals and communities to create their own money. Fugger's first iteration of this system, RipplePay.com, debuted in 2005 as a financial service to provide secure payment options to members of an online community via a global network. This led to the conception of a new system by Jed McCaleb of eDonkey network, which was designed and built by Arthur Britto and David Schwartz. In May 2011, they began developing a digital currency system in which transactions were 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. Chris Larsen, who had previously founded the lending services companies E-Loan and Prosper, joined the team in August 2012, and together McCaleb and Larsen approached Ryan Fugger with their digital currency idea. After discussions with long-standing members of the Ripple community, Fugger handed over the reins. In September 2012 the team co-founded the corporation OpenCoin, or OpenCoin Inc.

OpenCoin and Ripple Labs (2012–13)
Main article: Ripple (company) OpenCoin began developing a new payment protocol called the Ripple Transaction Protocol (RTXP) based on Ryan Fugger's concepts. The Ripple protocol 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 currency can be exchanged including USD, euros, RMB, yen, gold, airline miles, and rupees. To maintain security OpenCoin programmed Ripple 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 insititutions to transfer money with negligible fees and wait-time. Among OpenCoin's early investors were Andreessen Horowitz and Google Ventures. On July 1, 2013, XRP Fund II, LLC (now called simply XRP II) was incorporated as a wholly owned subsidiary of OpenCoin, and headquartered in South Carolina. The following day, Ripple announced its linking of the bitcoin and Ripple protocols via the Bitcoin Bridge. The bitcoin Bridge allows Ripple users to send a payment in any currency to a bitcoin address. Ripple also developed early partnerships with companies such as ZipZap. On September 26, 2013, OpenCoin Inc. changed its name to Ripple Labs Inc., with Chris Larsen remaining CEO. On the same day the Ripple reference server and client became free software, released as open source under the terms of the ISC license. Ripple Labs continued as the primary contributors of code to the consensus verification system behind Ripple, which can "integrate with banks’ existing networks."In October 2013, Ripple partnered further with ZipZap, with the relationship called a threat to Western Union in the press.

Focus on banking market (2014–17)
By 2014, Ripple Labs was involved in several development projects related to the protocol, releasing for example an iOS client app for the iPhone that allows iPhone users to send and receive any currency via their phone. This Ripple Client app no longer exists. In July 2014, Ripple Labs proposed Codius, a project to develop a new smart contract system that is "programming language agnostic." Since 2013, the protocol has been adopted by an increasing number of financial institutions to "[offer] an alternative remittance option" to consumers. Ripple allows for cross-border payments for retail customers, corporations, and other banks, and Larsen was quoted stating that "Ripple simplifies the [exchange] process by creating point-to-point and transparent transfers in which banks do not have to pay corresponding bank fees." The first bank to use Ripple was Fidor Bank in Munich, which announced the partnership in early 2014. Fidor is an online-only bank based in Germany. That September the New Jersey-based Cross River Bank and Kansas-based CBW Bank announced they would be using the Ripple protocol. By December Ripple Labs began working with global payments service Earthport, combining Ripple's software with Earthport's payment services system. Earthport's clients include banks such as Bank of America and HSBC, and it operates in 65 countries. The partnership marked the first network usage of the Ripple protocol. In December 2014 alone, the XRP price value rose over 200%, helping Ripple surpass litecoin to become the second biggest crypto-currency, and setting Ripple's market capitalization at close to half a billion dollars. In February 2015, Fidor Bank announced they would be using the Ripple protocol to implement a new real-time international money transfer network, and in late April 2015, it was announced that Western Union was planning to "experiment" with Ripple. In late May 2015, Commonwealth Bank of Australia announced it would be experimenting with Ripple in relation to intrabank transfers. Since 2012, representatives of Ripple Labs have professed support for government regulation of the crypto-currency market, claiming that regulations help businesses grow. On May 5, 2015, FinCEN fined Ripple Labs and XRP II US$700,000 for violation of the Bank Secrecy Act, based on the Financial Crimes Enforcement Network's additions to the act in 2013. Ripple Labs agreed to remedial steps to ensure future compliance, which included an agreement to only transact XRP and "Ripple Trade" activity through registered money services businesses (MSB), among other agreements such as enhancing the Ripple Protocol. The enhancement won't change the protocol itself, but will instead add AML transaction monitoring to the network and improve transaction analysis. As of 2017, the current release of the server (known as rippled) is version 0.70.1. The year 2015 and 2016 marked the expansion of Ripple (company) with the opening of an office in Sydney, Australia in April 2015 and the opening of European offices in London, United Kingdom in March 2016 then in Luxembourg in June 2016. Many companies have subsequently announced experimenting and integrations with Ripple.


Ripple's website describes the opensource protocol as "basic infrastructure technology for interbank transactions – a neutral utility for financial institutions and systems." The protocol allows banks and non-bank financial services companies to incorporate the Ripple protocol into their own systems, and therefore allow their customers to use the service. Currently, Ripple requires two parties for a transaction to occur: first, a regulated financial institution "holds funds and issues balances on behalf of customers." Second, "market makers" such as hedge funds or currency trading desks provide liquidity in the currency they want to trade in. At its core, Ripple is based around a shared, public database or ledger that has its contents decided on by consensus. In addition to balances, the ledger holds information about offers to buy or sell currencies and assets, creating the first distributed exchange. The consensus process allows for payments, exchanges and remittance in a distributed process. According to the CGAP in 2015, "Ripple does for payments what SMTP did for email, which is enable the systems of different financial institutions to communicate directly." In Ripple, users make payments between each other by using cryptographically signed transactions denominated in either fiat currencies or Ripple's internal currency (XRP). For XRP-denominated transactions Ripple can make use of its internal ledger, while for payments denominated in other assets, the Ripple ledger only records the amounts owed, with assets represented as debt obligations. As originally Ripple only kept records in its ledger and has no real-world enforcement power, trust was required.However, Ripple is now integrated with various user verification protocols and bank services. Users have to specify which other users they trust and to what amount. When a non-XRP payment is made between two users that trust each other, the balance of the mutual credit line is adjusted, subject to limits set by each user. In order to send assets between users that have not directly established a trust relationship, the system tries to find a path between the two users such that each link of the path is between two users that do have a trust relationship. All balances along the path are then adjusted simultaneously and atomically. This mechanism of making payments through a network of trusted associates is named 'rippling'. It has similarities to the age-old hawala system.