Ripple is a real-time gross settlement system, currency exchange and remittance network produced by Ripple Labs Inc., a US-based technology business. Released in 2012, Ripple is built upon a distributed open source protocol and supports tokens representing fiat currency, cryptocurrency, commodities, or other units of value such as frequent flier miles or mobile minutes.Ripple purports to enable “secure, instantly and nearly free global financial transactions of any size with no chargebacks.” The ledger utilizes the native cryptocurrency referred to as XRP.
In December 2020, Ripple Labs and 2 of its executives were sued by the U.S. Securities and Exchange Commission (SEC) for offering XRP tokens, which the SEC classified as unregistered securities.
History
Ripple was conceived by Jed McCaleb and built by Arthur Britto and David Schwartz who then approached Ryan Fugger who had debuted in 2005 as a financial service to provide secure payment alternatives to members of an online community by means of a global network. Fugger had developed a system called OpenCoin which would transform into Ripple. The business likewise produced its own form of digital currency referred to as XRP to allow financial institutions to transfer money with negligible fees and wait-time. In 2013, the company reported interest from banks for using its payment system.
By 2018, over 100 banks had signed up, however most of them were just using Ripple’s XCurrent messaging technology, while avoiding the XRP cryptocurrency due to its volatility problems. Representatives of the Society for Worldwide Interbank Financial Telecommunication (SWIFT), whose market dominance is being challenged by Ripple, have actually argued that the scalability problems of Ripple and other blockchain solutions remain unsolved, restricting them to intra-bank and bilateral applications. A Ripple executive acknowledged in 2018 that “We began with your timeless blockchain, which we love. But the feedback from the banks is you can’t put the whole world on a blockchain.”
Ripple relies on a common shared ledger, which is a distributed database storing info about all Ripple accounts. Chris Larsen told the Stanford Graduate School of Business that the network was handled by a network of independent servers which compare their records, which servers might in theory come from anybody, consisting of banks or market makers. Ripple validates balances and accounts instantly for payment transmission and delivers payment notice within a few seconds. Payments are irreversible, and there are no chargebacks.
Ripple Labs continued as the of code to the agreement system behind Ripple. In 2014, the accessed to the United States banking system amidst issues over security and an absence of regulation.
Litigation
A class action was filed against Ripple in May 2018 “declaring that it led a plan to raise numerous millions of dollars through unregistered sales of its XRP tokens.” According to the complaint, “the business developed billions of coins ‘out of thin air’ and then profited by offering them to the general public in ‘what is essentially a relentless initial coin offering’.”
The U.S. Securities and Exchange Commission (SEC) initiated legal proceedings against Ripple Labs, CEO Brad Garlinghouse, and co-founder Chris Larsen on December 21, 2020, for apparently selling unregistered securities. In the lawsuit, the SEC that XRP was a security instead of a commodity, since it was generated and by Ripple Labs in a centralized style and was not being embraced by financial institutions for its advertised usage cases. The SEC stated that Ripple executives sold 14.6 billion of XRP for more than $1.38 billion to fund the company’s operations and themselves.
In response, Garlinghouse criticized the SEC and showed that Ripple Labs would defend itself in court. Coinbase delisted XRP on December 28; an investor filed a class action on December 30 alleging that Coinbase offered XRP tokens with the understanding that they were unregistered securities.
On April 13 SEC Commissioner Hester M. Peirce released the Token Safe Harbor Proposal 2.0 which is: ″ planned to supply Initial Development Teams with a three-year time period within which they can help with participation in, and the continued advancement of, a functional or decentralized network, exempt from the registration arrangements of the federal securities laws so long as specific conditions are met. ″.
Reception
For its production and development of the Ripple protocol (RTXP) and the Ripple payment/exchange network Ripple Labs was called as one of 2014’s 50 Smartest Companies in the February 2014 edition of MIT Review. A clinical study made by two researchers from Stanford and Stockholm University that studied the production from an energy point of view and a macroeconomic level specified that running a server on Ripple was comparable to the energy needs of running an e-mail server.
Source: Wikipedia
