In 2008, Satoshi Nakamoto published a white paper introducing a new kind of currency and network known as Bitcoin. Was it possible to create a decentralized currency free from government or central bank authorities? While the general public was wrapping its head around the new proposal, many notable figures like Jared McCaleb were already working on similar projects. This, in turn, has generated a lot of interest in pro-blockchain figures such as Ernesto Lee.

The Ripple protocol and it native currency have also generated a lot of interests from companies and online portals that include Blockchain Training Alliance and TechBlue.

Bitcoin brought in a revolutionary idea although it was fundamentally limited in nature and use. Its important role was probably showing the world that such a system could be designed and made to work.

Bitcoin is still a success by many standards. It has also led to the creation of other decentralized platforms and their associated native tokens or cryptocurrencies.

One of those cryptocurrencies is Ripple, specifically designed for the remittance industry.

In this crash course, we look at Ripple’s origins, the technology behind it and the problem it tries to solve.

Introduction to Ripple

To begin with, the word Ripple can be confusing at first because it is used to refer to two related but separate concepts.

  1. Ripple Labs is the company behind an InterLedger Protocol (ILP) known as Ripple Connect. The Ripple connect is a network protocol that enables banks and other financial institutions to send each other money without going through intermediaries. This allows the process to be cheaper and faster because the route taken is direct.
  2. The Ripple token (XRP) is the native currency used within the Ripple network to facilitate transaction fees.

Ripple, as stated in point one above, is a peer-to-peer payment protocol that allows people and banks to send each other money or anything of value.

In the traditional model of the current banking system, sending money from one country to another involves a third party. This results in high costs and delayed transactions.

For illustration purposes, let’s say that John in Japan wants to send some money to his friend, Peter, in France. There is no straight path to do this.

A series of steps are involved in this transaction.

  • John deposits money into the bank. John’s funds are converted from the Japanese Yen to some well-known currency such as the American dollar.
  • The money is transferred to Peter in USD.
  • The funds are converted from USD to the Euro.

This process involves a number of steps that slow down the transaction and increase the costs. This is akin to flying from country A to country B via country C.

There are delays and extra costs involved. Ripple was created to remove the extra routes.

History of Ripple

The history of Ripple is quite interesting due to the fact that it precedes that of Bitcoin. While the decentralization of Ripple is still a bone of contention, Ripple’s initial idea was that of creating a decentralized monetary system.

The initial concept of Ripple was conceived by Ryan Fugger, a web developer based in British Columbia. Fugger wanted to create a decentralized monetary system that allowed individuals and groups of people to be at the forefront of creating their own form of money.

In 2005, Fugger released, a financial system that facilitated online payments using a global network.

Jed McCaleb, an American developer who had developed e-Donkey system was inspired by Fugger’s idea. McCaleb partnered with Arthur Britto and David Schwartz to create a new system similar to bitcoin but relied on less electricity to achieve consensus.

McCaleb brought Chris Larsen to the team in 2012. Larsen was brought on to take care of the business side of things.

Larsen and McCaleb approached Fugger to discuss their idea of a new digital currency. Larsen and McCaleb acquired Fugger’s new financial service and went on to found OpenCoin in September 2012.

McCaleb parted ways with OpenCoin in July 2013 due to differences with management. The company changed its name to Ripple Labs on September 26, 2013. The company announced another name change in October 2015 and was simply called Ripple.


Ripple has raised more than $95 million in several rounds of funding from several notable investors. The company raised $2.5 million in April 2013 from investors such as Bitcoin Opportunity Fund, Pantera Capital, Andreessen Horowitz, Lightspeed Venture Partners, and FF Angel LLC.

In May the same year, Ripple received $3 million from Google Ventures and IDG Capital Partners.

The company went on to receive $3.5 million in seed funding from Camp One Ventures, Core Innovation Capital, IDG Capital Partners, and Venture51 in November 2013.

In May 2015, the financial services company raised $28 million in Series A funding from Venture51, IDG Capital Partners, RRE Ventures, Bitcoin Opportunity Corp, Route 66 Ventures, Vast Ventures, China Growth Capital Seagate Technologies, Core Innovation Capital, AME Cloud Ventures, and ChinaRock Capital Management.

Santander InnoVentures gave another $4 million to Ripple in October 2015 as part of Series A funding.

The remittance company raised a further $55 million in series B funding from CME Group, Standard Chartered, SCB Digital Ventures, Santander InnoVentures, Accenture, and SCB Digital Ventures.

Ripple ICO

There is a debate on whether Ripple had an ICO or not. There is little to no information about it on the internet. That’s because there never was an ICO.

Ripple did not choose not to have an ICO. Initial coin offerings were not just a thing back then.

Ripple has a hard cap of 100 billion Ripple (XRP) tokens. The company set aside more than 50 percent of the tokens for itself. This is seen by many as a red flag.

The Ripple team holds more than 8 billion tokens while more than 39 billion tokens have been distributed to the public.

Ripple Token Distribution

Source: Ripple

The initial token distribution was even more centralized. The founders allocated 20 billion tokens for themselves and gave 80 billion to the company.

There was a great public outcry over Ripple’s distribution of XRP tokens. The company was criticized for owning more than 50 percent of the total XRP supply.

Investors were worried that Ripple would sell its 61.68 billion XRP tokens and kill the market. Ripple removed the uncertainty by placing 55 billion tokens in an escrow account secured by cryptography.

Ripple XRP escrow

Ripple created 55 contracts that release a maximum of 1 billion tokens every month. Ripple had a backup plan of what to do in case not all 1 billion are released into circulation at the end of each monthly period.

Ripple’s chief technology officer David Schwartz said: “Any additional XRP leftover each month will be placed into a new escrow to release in the first month in which no escrow currently releases.”

Ripple says that 300 million XRP tokens are released into circulation every month and the balance is sent to an escrow queue.

Let’s say, for example, that 500 million XRP tokens are unused and sent into a new escrow account, then token distribution curve will be as below.

XRP distribution curve

Source: Ripple

Ripple adopted the multisignature model to secure the safety of the escrow accounts. The model has the following advantages over other schemes including:

  • It is easy to change to signers without altering or affecting the receiving address.
  • The credentials of the signers can be rotated without having a negative impact on ledger funds.

The escrow accounts are more or less like smart contracts. The tokens in the accounts are released to a destination account if the preset conditions are met otherwise the tokens are sent back to Ripple’s account.

Ripple fundamentals

Like its predecessors such as Bitcoin, Ripple was designed to bring a new novel way of solving problems or improving on existing solutions.

The best way to understand the relevance of Ripple is to first understand the problem or challenge it is trying to solve.

The challenge

Ripple claims that the current payment infrastructure does not truly reflect the technological progress made so far. The company further claims that the payment system was made long before the internet and needs to be updated or overhauled.

Ripple has highlighted four major key weak points:

  • Speed — international payments are extremely slow as they take between 3–5 days.
  • Expensive — people are paying for up to $1.6 trillion per annum in transactions costs.
  • Unreliable — the current payment infrastructure is susceptible to failures.
  • Unacceptable — people require a new payment method that is faster and efficient.

Ripple solution

Ripple Labs developed the Ripple protocol, a real-time gross settlement system (RTGS) and remittance network that facilitates instantaneous and near-free international payment solution.

In general terms, gross settlement refers to the bank-to-bank transfer of securities and money. The transfers are normally bulked together and sent together at once at a specified time, say at day end.

On the other hand, the real-time gross settlement means the transfers are done on a case-by-case basis without bundling them together.

The Ripple platform has a native token known as XRP. The differences between Ripple and XRP are better explained by the infographic below:

Difference between Ripple and XRP.

Source: Ripple

Ripple technologies

RippleNet (or Ripple Protocol) is an open source infrastructure that allows interbank transactions. The Ripple network enables banks and other financial institutions to integrate the XRP Ledger into their networks.

A regulated financial institution and a market maker are the parties required by Ripple for a successful transaction. The financial institution holds customer funds.

Market makers are institutions such as trading desks, hedge funds, etc. Their roles include:

  • providing liquidity
  • rippling
  • intra-gateway conversion of currency

Ripple design features

Ripple is built with a number of design features and technologies that enable it to facilitate global transactions with speed and ease.

Some of Ripple’s products include xCurrent, xVia, and xRapid.


xCurrent is Ripple’s banking solution built around an open InterLedger Protocol that allows different networks and ledgers to work together. xCurrent provides a payment system secured by cryptography.

xCurrent is designed to fit seamlessly with any bank’s existing architecture and does not result in any disruption or integration expenses.

xCurrent has four important components:


This is the messaging aspect of xCurrent. It provides the transaction parties the required information before the transaction proceeds.

It reports any missing information before the transaction is initiated. Transport Security Layer (TLS) technology is used to send the messages securely.


Validators use cryptography to confirm the failure or success of transactions.

ILP Ledger

The ILP Ledger is the component of xCurrent that allows payments to go through in a few seconds.

FX Ticker

Connects IPL ledger and facilitates the posting of FX rates by liquidity providers


xRapid facilitates real-time cross-border payments by providing liquidity. Liquidity refers to the easiness of performing a transaction.


xVia is an API that allows financial institutions to transact across a number of networks.

Is Ripple centralized or not?

Ripple is very different from Bitcoin in many ways. Unlike Bitcoin which has a pool of miners that actively participate in the minting of coins, Ripple was premined from the onset.

Ripple was created with a hard cap of 100 billion coins and around 80 percent was reserved for founders and the company.

This has led many people to think that Ripple is centralized. Ripple initially refuted the centralization but is now slowly working towards decentralization.

The company recently promoted its long-time cryptographer Schwartz to assume the role of chief technology officer. His main role is to improve Ripple’s decentralization.

Ripple’s lack of decentralization is costing. Several cryptocurrency exchanges are not listing XRP because it is deemed a security token by the authorities.



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