First, early Ripple network
Ripple is an open payment network, its original intention is to solve the problem of high cost of remittance. According to statistics, in 2017 the global collection amount of $610 billion, an annual growth rate of 7.5%. As a matter of fact, Remittance is one of the world’s most expensive form of payment . The first quarter of 2018, global remittance costs incurred up to 9.05%. According to this ratio, the year 2018 remittance operation cost will reach $60 billion. To obtain huge profits from the remittance transfer fee, transfer agency fee, service fees and other charges in various names. In 2017, the world largest net profit remittance, remittance of $1 billion 250 million.
The reason is so costly remittances are often attributed to the huge infrastructure (such as fixed costs, financial partners, audit system, global institutions and global payment network) and manpower expenditure. But that is not the case, the world bank has said:” Remittance costs are so high is mainly due to opaque operation, can reduce the opacity of the competition .” Or, the remittance fee is high remittance agencies use industry resources and the advantage of the information asymmetry and set up their own monopoly weak originator of no choice, was forced to sign the unequal contract and remittance agencies, to bear their unreasonable costs.
2004, a Canadian RyanFugger launched the first version of Ripple. It was permitted to build a center, anyone to create their currency, virtual currency system. Ripple said in the network money “debt”, all transactions are to change the account balance. It operates in a similar way to the interbank clearing system. In the actual node interbank remittance transfer payments between banks is possible to postpone the night, calculate it and other banks should balance at the bank. May come from a bank to be transferred to a coincided with the bank to transfer it to a balance, so that it actually does not need to be transferred out of any money: if not completely offset it, the actual transfer amount is also far less than the amount of customers and transfer. RyanFugger hopes to reduce the cost of remittance by this way.
Therefore, P2P clearing network early Ripple project is a distributed. Everyone is their own bank, can be issued at the same time as the acceptance, borrowing, lending channels (such as A B want to borrow money, they do not know each other, but just know C, then C can be used as A, B channel, C B first to borrow money, then lend money to A, indirect implementation A to B money).
The project is almost rely on RyanFugger’s power support down, and achieved some success. But Ripple users have been much, only popular in a number of isolated small circle, the reason is very simple: the design of the Ripple based on the acquaintance and chain of trust, a person to transfer or lending the use of Ripple network, the premise is his friend already exists in the network, not everyone in the introduction of Ripple network network, give everyone’s ability to pay is to build trust chain between W users and other users. A personal payment range is so large, it is difficult to put all into the Ripple network, the network gives everyone the ability to pay is limited.
Two, reconstruction of Ripple network
The embarrassing situation of Ripple network with the establishment of OpenCoin company has been changed. The two founders of the company: ChrisLarsen and JedMcCaleb are non common people. The network finance has fought more than a decade, is the founder of the famous Internet Bank E-Loan and P2P credit company Ps, the latter is the largest bitcoin trading platform Mt.Gox developer (also the famous P2P network eDonkey – eMule developer).
OpenCoin company started the operation of Ripple network, the introduction of a small circle of isolation measures to solve the problems: one is the launch of the Ripple XRP coin, as the base currency of the Ripple network, like bitcoin can circulate in the whole network, and need not be confined to the circle of acquaintances; gateway (Gateway) system is introduced. It is similar to the currency exchange mechanism, allow people to see the currency injection, out of the Ripple network, and can serve as a bridge to a new version of the Ripple network trust between different users reserved to the center, it also maintains a contains the account, all transactions (and hence all the general ledger account balances), the general ledger this distribution in all network nodes and keep synchronization. The core mechanism and bitcoin is similar, but there are also important differences.
(1) Ripple transaction confirmation process can be completed in a few seconds. . Ripple introduced a “consensus (Consensus)” mechanism, through the special joint vote can be verified and validated to deal in a very short period of time. This time is much shorter than bitcoin, because bitcoin transactions need to confirm the continuous 6 times before enough to ensure safety, each verification will take about 10 minutes, mean a bitcoin transaction also requires a minimum time of 60 minutes (some clients are allowed to reduce the requirements, only confirm 3 times), and not every transaction can be continuously confirmed for hours and hours so bitcoin transactions It is often seen.
(2) Ripple client does not need to download the blockchain, It rejected has been verified in the general ledger chain ordinary nodes, only recently has been verified the general ledger and a pointer to the history books and download links, synchronization and total workload of books is very small. You need to download the complete bitcoin blockchain, at present the size is close to 170GB.
(3) no Ripple nor mining, Ripple coins (XRP) the number of control by OpenCoin company, the company has created 100 billion units of Ripple dollars, plans to eventually release 75% out as a money supply, and promised never to seo.
(4) the total amount of XRP can not only increase. . Spend a number to each transaction in the user’s XRP (the amount is very low, roughly equivalent to 1/1000 cents), the transaction fee not to anyone, just disappear. Therefore Ripple coins will be less and less, but the reduction is very slow. The new Ripple network test began in early 2013, February 20th, OpenCoi served in the famous bitcoin forum bitcointalkorg free XRP to attract users to join the test. In April 10th, OpenCoin acquired a few well-known venture capital institutions including Anderson Horowitz investment, May DG, Google investment fund. At the end of September, Ripple source code.
Three, the function of the Ripple network
1. account . The general ledger Ripple network maintenance of each user accounts and record books of the whole network, transaction history, balance of content. A powerful distributed billing system to maintain the consistency of accounts, and let Ripple deal very rapidly, usually a few seconds.
2. multi currency support . In addition to their XRP coin, it also supports legal tender (such as the dollar, euro, yen, etc.) and all kinds of virtual currency (bitcoin), the currency type has unlimited scalability.
3.P2P currency exchange . For any two currencies, as long as the corresponding gateway support, users will be able to publish their own exchange needs to the network, the other is the reverse exchange needs of the user can directly exchange with the user, the gateway will charge exchange fee but the cost is extremely low.
4.P2P transfer . If both a user and another user if there is a trust relationship (i.e. whether it is a friend, he can pay XRP) to each other. If you want to pay the XRP currencies, need to establish a trust relationship with each other, or gateway through both trust transfer payment and automatic exchange.
5. automatic swap and pay . For example, if a user only $to another user pay in euros, he can pay directly in dollars, the system will automatically complete the exchange for him.
6. IOUs to pay . If the user A and user B trust, A can be freely issued a bill payable to B, the value of the 2 agreed by ious. Issued IOUS and does not cause any money transfer, the system only changed one of the digital books. However, if the C trust B, B can also put the ious payable to C, between A, IOUs can like currency in circulation.
In Ripple network, gateway is an extremely important role. We can think of Ripple as a clearing bank in the real world, the gateway is equivalent to the clearing bank for commercial banks to cooperate. The user is clearing bank customers (clearing bank to provide clearing services directly to the user), is a commercial bank customers. The user to the clearing bank recharge, must be carried out by commercial banks. In addition to the users do not know a user to transfer, if two people are of the same commercial bank customers can directly transfer: if the payee is another commercial bank customers, as long as his bank and the remittance bank access is a clearing bank, and the two commercial banks trust each other transfer can also be. Which between the commercial banks involved in the liquidation of funds, completed by the clearing bank.
In other words, if there is a trust relationship between users, Ripple network will be directly between the two payment liquidation, if there is not a direct trust relationship between two people, but there are indirect trust (the trust chain), Ripple network will be one by one of the nodes on the settlement of the trust chain. The gateway plays a central role of local trust, do not know who is the gateway trusted connections, the establishment of trust chain, payment can be operated. In fact, if a Ripple user name is particularly large, we all trust him, he can also play the role of the gateway part.
Four, Ripple network personal money
Ripple network ious payment function hides a subversive thought, is that the user can issue their own currency! The user can set the name, IOUs units, and even provided it with other currency exchange relationship, for the trust of the user who can ious in their hands like currency circulation, personal monetary thought but it is directed at the seems to be a wild legend. The core of credit currency.
M Micronesia Pacific is one of the three island groups, including the Caroline Islands the West Island of Yap has lived a group of aborigines, they use stones as money and is known for. Yap stone coins have a very interesting feature. Both parties decide on use of big stone money paid, if the stone is too big, not easy to transport, so as long as the seller in the buyer’s stone make a mark even pay. The mark that the stone already belongs to the seller, but the stone is still lying in the house buyers.
More than that, there is a rich island, all that their home is the richest man. The family owned property is a huge stone money, only the size of their talents on the know, because the stone money storm in the process of transportation to sink into the sea. But people are involved in the transport of witness, the stone coins of immense size and high quality. So all the people think that stone money sink does not affect its value, its owner can still use it to buy things, just like the stone money home store as well.
More surprisingly, the Germans in 1898 from Spain bought the island, several tribal chiefs organization road. The road is completely meaningless to the natives, so ordered a few times are being ignored. So the German government sent these tribes to every household, their most precious stone coins with the black cross mark, claiming that the stone money has returned all the German government. This method is really effective, all the people think that the government robbed their money, not to be stealing money, so helpless for the government to build roads. At the end of the road repaired, the German government had wiped out those marks and feel the islanders become rich.
The Yap stone money story is not a myth, it comes from the American anthropologist WilliamHenry Furness “TheIslandofStoneMoney”, a book is the author’s personal information. This story strongly suggests that: in an acquaintance society, the essence of money is trust, but trust is the carrier of stone. In the Internet era, with the trust relationship as a link to create a broader social acquaintances, individual currency is also the carrier of trust, which is the core of the currency of the credit, the true interpretation of the credit value.
When everyone can issue their own currency, when the payment and transfer of users from the bank and third party payment platform, directly in the P2P network, is not only the remittance institutions will be affected, the state of the currency issuance mechanism will also be affected. Individual monetary success (even in a limited range), can change the state of the currency issuance pattern, can weaken the center and national monetary authority, can produce a competitive currency Hayek said the issue is the most exciting Ripple network brings people into the experiment.
To sum up, in fact Ripple network at the same time the three levels of financial.
The first is the technical level of the transaction point of payment, the bank put aside, put aside the remittance institutions, only through the chain of trust and gateway between individuals to pay, thereby greatly reducing the cost of payment.
The second is mixed network structure of the transaction level, each user is a node of the network, each gateway is a network node (local center node), between users, users and the gateway between the gateway and gateway, there are connections between perplexing relations. There is a competition between the nodes (such as the gateway between the business competition), also has a partnership (jointly build trust chain to connect more users). This network provides diverse transaction path for users, provides a fully competitive environment for professional service providers.
The last is the new power of contract, the contract in two aspects: the gateway service contract, according to the quality of the user gateway service, through the establishment of a trust relationship, to lift the vote for the gateway, so that the gateway can give the power of good talent shows itself, the larger the gateway: personal credit contract, individual currency depends on individual credit issued. Their friends can accept, reject the money through the trust relationship or even to lift the vote, to determine the value of personal credit and personal money. The two kind of contract justice, democracy.
Ripple network experiment has in the past more than 10 years, with rich and profound contents, we should look forward to.
(author: Green hidden content from the chain have open platform content too “; this paper represents the views of the authors and do not represent the official position of the chain too)