Ripple

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Ripple is a part of the a peer-to-peer network protocol for making decentralized Ripple payments between users on different computers. The newest version is a fully decentralised system with no central server based on the same cryptographic code as Bitcoin but without the need for mining and with many other improvements. The new version of Ripple can be thought of as, and indeed was designed to be, a version 2.0 of the Bitcoin concept. The original version of Ripple is still available at classic.ripplepay.com, and the Ripple Union site offers exchanging between the two networks.

The main developer of Ripple is Jed McCaleb who wrote eDonkey2000 and set up MtGox, the largest Bitcoin exchange - some people even believe that Jed may be the true identity of Satoshi Nakamoto for example [1], [2]. Jed also co-founded OpenCoin Inc (not to be confused with OpenCoin.org) which guides the Ripple project and funds its development.

Ripple returns to the original purpose of money

The Internet created a shared global network of information… but one of the most important forms of information was left out of the equation: money. And, for decades, not much changed. Governments controlled physical currency. Banks controlled digital currency. And modern money, for all its advances, still lacked many of the advantages of Mesopotamian clay tablets.

In 2009, Bitcoin was invented and changed everything. The world’s first decentralized digital currency, Bitcoin accounts and transactions required no gatekeepers and were recorded across the largest human network: the Internet.

Now Ripple seeks to expand on what Bitcoin started. More than just a digital currency, Ripple is the world’s first open transaction network. It serves as a decentralized, shared record of accounts and transactions of any kind. By creating this global ledger, Ripple does for money what the Internet did for all other forms of information.

With Ripple, the history of money comes full circle. Once again, money can serve its primary purpose—to track value across a network—but, for the first time, that network can be the entire world.

Derived from LETS

The original inspiration for Ripple classic was LETS (Local exchange trading system), a mutual credit system where users issue new money for each other when it's needed to make a transaction. In LETS, however, users issue new money on behalf of the entire community of users and are not made directly accountable for their decisions. Ripple was originally intended to be an alternative currency system where instead of a single communal LETS, each user would operate their own mini-LETS, which other users could subscribe to at their own peril. The trick then is to route payments through this potentially complicated network of personal LETS currencies.

Ripple ideals

Interpersonal Ripple is in many ways an ideal. Instead of depending on labour-intensive legal frameworks to support formal institutional trust, interpersonal Ripple could build on existing informal trust relationships within communities. This should be both cheaper, and allow for a monetary system that better incorporates human and community values.

It would also be more democratic, as it would not depend on central authorities to regulate the money supply and in so doing direct the economy. Deciding when more money is needed for an entire nation involves not only a problem of data collection and analysis, but a whole set of value judgments, and the values of those making the judgements may not always agree with those of the citizenry. If everyone was responsible for issuing their own money, not only would the number of brains gathering and processing economic data multiply million-fold, the values underlying collective monetary policy would accurately reflect all participants in the economy.

XRP: The Ripple Currency

Like Bitcoin forms its own currency called "BTC", the Ripple network also has a similar currency based on a lot of similar cryptographic principles and code called "Ripple credits" or just "Ripples", and has the code XRP. Unlike Bitcoin though these XRP's are not mined, 100 billion of them were created with the network itself (pre-mined) and most of them donated to OpenCoin Inc to be given away and sold. They're much more abundant than BTC's and are not intended to be spent directly, but rather are used in conjunction with transactions made in other currencies such as fiat dollars or Bitcoin. The main purpose of XRP's is to protect the network from malicious attacks by requiring each account to have a reserve of a small number of XRP's. For more detail see Ripple credits and Reserves.

Where do I get my XRP's?

This leads to an initial problem for new users which is that they need to get some XRP's from somewhere as they're not automatically given to new users (as this would defeat the purpose of the account reserve requirement). If you don't know someone who can give some to you, then a couple of ideas are:

Ripple news & views

Smart contracts

One exciting things that's being developed at the moment for the Ripple system is a scripting language that executes within the distributed space itself. I don't know if it's being designed along the lines of The Ricardian Contract like Open-Transactions, but it would in the very least bring new tools such as automatic payments, escrow transactions and other forms of smart contract to the network. Even though these thing already exist in a number of different platforms and applications, having them operate within secure distributed space is a major milestone for the crypto-currency movement!

See also

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