
Ripple and XRP story
The Ripple protocol is multifunction. Both payment system and money transfers network, it allows free, real-time and secured transactions. XRP is its native crypto.
This article is for beginners in the field of Blockchain and cryptocurrencies. The information cited below is voluntarily simplified. If, however, you feel attacked for an article with a higher reading difficulty, do not hesitate to change the cursor in the box below. 🙂
Difficulty of the article:

Also named Ripple Transaction Protocol (RTXP), Ripple is a system for :
1/ real time payment (RBTR)
2/ an exchange place where one can realize currency transactions
3/a money transfer network
Launched in 2012, the Ripple network aims to permit « global low cost, real time, secured financial transactions for any size without chargeback». Ripple is both an Open Source distributed Internet Protocol , a consensus ledger and also a native crypto currency called XRP. Ripple relies on a public opened and shared (ledger) data base that uses a consensus algorithm allowing payments, exchanges and money transfers. That works whatever the payment unit is (fiat or crypto currencies, raw materials or any other unit of account).
– It is used by banking groups as Santander, UBS, Unicredit and also Crédit Agricole for organizing offshore clients money transfers. But the first bank that has adopted Ripple was the German on-line bank Fidor Bank
– Among all validators, we can find different corporates, Internet access providers and the MIT
Ripple Genesis
The former Ripple Payment protocol (Ripplepay) has been imagined in 2004 by a Canadian IT developer (Ryan Fugger )with the target of producing secured payment options to the ‘on line’ community through a global network.
This first step wa s the beginning of a story before the design of a new system led by the eDonkey network’s founder Jed McCaleb and two other developers (Arthur Britto and David Schwartz).In May 2011, they all started to develop a new digital payment system in which the transactions were verified by a consensus, instead of doing it by a mining process (as with Bitcoin). This new version aimed to consume less electricity than Bitcoin and generate transactions much quicker. End 2012, joined with several other specialists (Chris Larsen and some others) the team has co founded OpenCoin (reappointed Ripple Labs later in 2013) that started to develop a new Payment Protocol, named Ripple Transaction Protocol (RTXP)
As it is designed by Ryan Fugger at the beginning, the protocol can get around the traditional banking system fees and transactions time lags. Furthermore, any type of assets (fiat currencies, Gold, airlines miles,….) can be traded through Ripple.
In order to maintain the network security, Ripple is based on a common ledger managed by an automatic and independent validation servers network that constantly compare transactions. Servers can be owned by all participants, banks and market makers included.
In October 2013, Ripple Labs continued on the basis of a more advanced partnership ( ZipZap), the relationship having been perceived as a threat by the major money transfers companies, and firstly by Western Union.
A specialty : banking and financial transactions
Since the beginning , Ripple was adopted by a growing number of financial institutions for proposing an alternative money transfers offer. The protocol allows cross border money transfers for private clients, Corporates and banks. Following the first adoption by Fidor Bank in Munich, Ripple Labs started ( end 2014) to work with the global payment service Earthport, combining the Ripple software with the payment services system led by Earthport (presence and running in 65 countries). Earthport clients are banking corporations as Bank of America and HSBC.

End April 2015, Western Union announced that they are going to experiment Ripple. One month later, Commonwealth Bank of Australia announced the same experiment too.
In 2015,on the basis of a banking secrecy law breach and breach of the legal additional elements of the Financial Crimes Enforcement Network, Ripple Labs receives a $ 700 000 fine. The company quickly corrects the operational procedure in order to be compliant with an agreement that permits XRP trading operations and that permits « Ripple Trade » business by recorded money services only (MSB).The improvement also contained anti money laundering transactions ‘on line’ monitoring and enhanced the transactions analysis.
June 13, 2016, Ripple obtained a virtual money license from the New York Financial Services State Department, becoming the fourth company with a « BitLicense ».
In August 2016, SBI Ripple Asia announced the creation of a Japanese banking consortium within a new Ripple technology payment network. The consortium is officially launched October 25, 2016 with 42 banks . In July 2017, 61 Japanese banks joined the group, forming more than 80 % of the total banking assets owned in Japan.
September 23, 2016, Ripple announced the creation of the first cross banking global payments’ group, based on the distributed financial technology. In April 2017, the Global Payments Steering Group (as named or GPSG)network members are the following: Bank of America Merrill Lynch, Canadian Imperial Bank of Commerce, Mitsubishi UFJ Financial Group, Royal Bank of Canada, Santander, Standard Chartered, UniCredit and Westpac Banking Corporation.
October10, 2017, Ripple announced numerous partnerships with more than hundred financial institutions. Those banks or payment services providers are now using the Ripple technology for offering to their clients a real time global payment service.
XRP
The company has also created its own crypto currency named XRP. By using it, you allow financial institutions to transfer money at a very low cost (negligible fees) and almost instantly.

As said, XRP is the Ripple network native crypto currency. XRP units are currently divisible by 6 decimals, the shortest unit being named a ‘drop’ with 1 million drops equivalent to 1 XRP.
100 billion XRP have been created during its genesis and no more can and will be created ever.
As with Bitcoin, the system was designed to make XRP a scarce asset with a decreasing number of available Units. As unlinked with any third party for exchanging money, XRP is the only Ripple network’s currency without any counter part risk. Other Ripple network’s currencies are debt underlying (liabilities), and the Ripple network users are not obliged to pay with XRP, (if you consider XRP as a store of value or as medium of payment).However, each Ripple account needs a minimum size of 20 XRP.
Over the 100 billion XRP that have been created, 20 billion of them have been stored and withdrawn by the founders ( the same people that founded Ripple Labs). They gave the remaining 80 % of the total existing XRP to Ripple Labs, those XRP units being destinated as an incentive for market makers to improve liquidity.
In March 2015, 67% of the original 80% that was owned by Ripple Labs, were still retained by the company..
In May 2017, in order to soothe concerns about the XRP supply, Ripple was engaged to sell 55 billion XRP (88% of the total assets) under secured collateral . It allows to use up to 1 billion XRP every month and give back the unused coins quantity under an additional one month contract.
At the current price of $ 0.2333 (as of 01/20/2020), the XRP market capitalization is about USD 10 billion .
About the editor…
A passion : Economics, behavioural finance and emerging digital assets
Yves started his career in the asset management in 1986 where he worked at different positions as manager of equity funds and diversified funds. at Crédit Commercial de France and later, at Barclays group in Paris. In 1998, he took the lead of equity funds and diversified funds, then of the whole fund management business at the French team of the Dutch Robeco group before joining Natixis Asset Management in 2012 as Director of the Equity Investment business unit. Yves left Natixis AM in 2018 to start as an independant player for professional investors and corporates (advisor and fund raiser).
He likes to engages in sports that test his endurance like running and swimming, Yves is also fascinated by social sciences, and more specifically by history and economics. But this is the economics mechanisms behavioural aspect and the markets behavioural analysis that are a constant source of thought and discussion. Since few years, the blockchain issue and emergence of crypto assets is a new field of passion and opportunities for him.

Yves Maillot
Financial markets and asset management

Yves Maillot
Financial markets and asset management