- 1 Introduction on the Ripple Mining Guide
- 1.1 Ripple Mining Guide – technical foundations
- 1.2 Ripple Mining Guide – how does Ripple work?
- 1.3 Ripple Mining Guide – IOU tokens
- 1.4 Ripple guide: virtual currency exchange
- 1.5 What additional products does Ripple offer?
- 1.6 What is XRP Coin?
- 1.7 Ripple guide: how does Ripple mining work?
- 1.8 Conclusion
Introduction on the Ripple Mining Guide
Ripple Mining Guide – Ripple is an open source protocol, developed for payment networks. The idea came from Ryan Fugger, Chris Larsen and Jed McCaleb. Currently, Ripple Labs’ idea is under development.
Plans include using the payment protocol as a distributed peer-to-peer payment method and for foreign currency exchange markets. The special feature of this network is that it supports all established fiat currencies, such as the euro, the US dollar and the yen.
In the following guide to Ripple, the word refers both to the system and to the associated currency.
Ripple Mining Guide – technical foundations
Ripple is a public database consisting of a register and account balances. The register is accessible to everyone on the Ripple network. In addition to the account balances, the register also contains information about purchases and sales of goods and foreign currency.
These transfers take place through the distributed trading center. The data in the register is determined in the network by consensus, which takes between two and five seconds.
In addition, Ripple is a cryptocurrency, traded under the symbol XPR. This currency is obligatory in the context of the network, since other currencies could be treated as spam communication. Alternatively, the token may also be used to store assets. Any increase in the value of XRP creates a corresponding increase in the financing of Ripple Labs.
Ripple Mining Guide – how does Ripple work?
The assumption is that digital monetary systems are based on trust. Especially important in the case of cryptocurrency deposits, investors want to be certain their money will have the same value tomorrow.
Ripple aims to create a technical solution that transfers this to a digital currency. Liabilities of private individuals and companies are stored in a public register, which provides an insight into solvency at any time. To avoid tampering, this data is stored in the distributed peer-to-peer network and then distributed by consensus across the network.
Ripple Mining Guide – IOU tokens
This process generates so-called ‘I owe you’ tokens (or IOUs for short), which quantify the indebtedness of one person to another. In this context, negative IOUs exist only between individuals. In addition, system gateways can be used to redeem traditional currency
. If the IOUs are no longer needed, they can be converted at any time. Thus, the role of the gateway is similar to the function of a bank, with liabilities stored on the network. Any payment within the system will result in a change in the IOUs.
Notably, the network cannot enforce but only store liabilities. Each user must, therefore, state how much trust the other party has and how many IOUs can realistically be converted into bankroll. If no degree of confidence exists, the social relationships are used to determine a suitable value.
Ripple guide: virtual currency exchange
In addition to IOU lending mechanisms, the system also features a virtual currency exchange, which can be used for the trading of IOUs. In addition to the extensive functionality included, Ripple offers three additional products.
What additional products does Ripple offer?
Firstly, xCurrent software for companies can be used to track cross-border payments. The product is also used by banks to define and confirm details of payments in advance. A rulebook ensures the operational consistency and legal clarity of a transaction.
The next product is xRapid, designed for payment providers and financial institutions. This product aims to minimize the cost of high liquidity while maintaining customer usability levels. Payments to emerging countries involve high upfront costs; accordingly, xRapid reduces the capital sums required.
The system employs XRP tokens that offer liquidity on demand and are, therefore, intended for use in companies and banks.
The last product is known as xVia, which enables payments across multiple networks. The classic API (application programming interface) does not require the installation of any software. It also allows transactions to be carried out with an unusually high degree of transparency.
What is XRP Coin?
XRP prevents network spam and is a bridge currency for the realization of transactions between different currencies. In fulfilling this role, some XRP is destroyed during each transaction, effectively reducing the number of tokens.
The initial maximum number of tokens was set at 100 billion. Subsequently, 80 billion tokens were distributed to the development team and 20 billion were distributed via the network.
Ripple guide: how does Ripple mining work?
Having defined the basics, it is clear that Ripple is not a typical cryptocurrency but, in effect, a digital billing system. By limiting the tokens to 100 billion, no further growth is planned and mining is not possible. This constraint means that no new tokens can be created. Instead, the system relies on a sustained elimination of tokens, so the number steadily decreases.
While other cryptocurrencies rely on mining to verify transactions in a similar way, Ripple is distinguishable by its consensus processes. Through distributed peer-to-peer networks, all computers are informed about the current IOUs so they can check transactions.
Bonds are updated, so no additional mining is needed. Thus, Ripple is also more economical in the use of hardware. However, by definition, it is not a typical cryptocurrency.
Ripple is an innovative and exciting product. Supported mainly by banks, the product closely matches their business model. However, with this particular cryptocurrency, mining is not possible. In December 2017, Ripple became the second most valuable new digital currency, when it achieved a market capitalization of some $85 billion.
Finally, as a user of the Ripple system, the profit of Santander Bank symbolizes the practical usability. However, this example dispenses with the principle of decentralization, which is usually a significant feature of cryptocurrencies.
Alexander Weipprecht is the managing partner of Provimedia GmbH. As a trained IT specialist for application development, he has been advising leading companies on the following topics for more than 10 years: online marketing, SEO and software. Cryptocurrency is becoming increasingly important to businesses and investors. Through Coin Report and Krypto Magazin Germany, Alexander wants to give all people easy access to the subject matter.