The Ripple Protocol ($XRP)?

12 Mar 2024

Interest and research in distributed consensus systems has increased markedly in recent years, with a central focus being on distributed payment networks. Such networks allow for fast, low-cost transactions which are not controlled by a centralized source. While the economic benefits and drawbacks of such a system are worthy of much research in and of themselves, this work focuses on some of the technical challenges that all distributed payment systems must face. While these problems are varied, we group them into three main categories: correctness, agreement, and utility.

By correctness, we mean that it is necessary for a distributed system to be able to discern the difference between a correct and fraudulent transaction. In traditional fiduciary settings, this is done through trust between institutions and cryptographic signatures that guarantee a transaction is indeed coming from the institution that it claims to be coming from. In distributed systems, however, there is no such trust, as the identity of any and all members in the network may not even be known. Therefore, alternative methods for correctness must beutilized. Agreement refers to the problem of maintaining a single global truth in the face of a decentralized accounting system. While similar to the correctness problem, the difference lies in the fact that while a malicious user of the network may be unable to create a fraudulent transaction (defying correctness), it may be able to create multiple correct transactions that are somehow unaware of each other, and thus combine to create a fraudulent act. For example, a malicious user may make two simultaneous purchases, with only enough funds in their account to cover each purchase individually, but not both together. Thus each transaction by itself is correct, but if executed simultaneously in such a way that the distributed network as a whole is unaware of both, a clear problem arises, commonly referred to as the “Double-Spend Problem” [1].

Thus the agreement problem can be summarized as the requirement that only one set of globally recognized transactions exist in the network. Utility is a slightly more abstract problem, which we define generally as the “usefulness” of a distributed payment system, but which in practice most often simplifies to the latency of the system. A distributed system that is both correct and in agreement but which requires one year to process a transaction, for example, is obviously an inviable payment system. Additional aspects of utility may include the level of computing power required to participate in the correctness and agreement processes or the technical proficiency required of an end user to avoid being defrauded in the network. Many of these issues have been explored long before the advent of modern distributed computer systems, via a problem known as the “Byzantine Generals Problem” [2]. In this problem, a group of generals each control a portion of an army and must coordinate an attack by sending messengers to each other. Because the generals are in unfamiliar and hostile territory, messengers may fail to reach their destination (just as nodes in a distributed network may fail, or send corrupted data instead of the intended message).

An additional aspect of the problem is that some of the generals may be traitors, either individually, or conspiring together, and so messages may arrive which are intended to create a false plan that is doomed to failure for the loyal generals (just as malicious members of a distributed system may attempt to convince the system to accept fraudulent transactions, or multiple versions of the same truthful transaction that would result in a double-spend). Thus a distributed payment system must be robust both in the face of standard failures, and so-called “Byzantine” failures, which may be coordinated and originate from multiple sources in the network. In this work, we analyze one particular implementation of a distributed payment system: the Ripple Protocol. We focus on the algorithms utilized to achieve the above goals of correctness, agreement, and utility, and show that all are met (within necessary and predetermined tolerance thresholds, which are well-understood). In addition, we provide code that simulates the consensus process with parameterizable network size, number of malicious users, and message-sending latencies.

2. Definitions, Formalization and Previous Work We begin by defining the components of the Ripple Protocol. In order to prove correctness, agreement, and utility properties, we first formalize those properties into axioms. These properties, when grouped together, form the notion of consensus: the state in which nodes in the network reach correct agreement. We then highlight some previous results relating to consensus algorithms, and finally state the goals of consensus for the Ripple Protocol within our formalization framework.

2.1 Ripple Protocol Components We begin our description of the ripple network by defining the following terms:

• Server: A server is any entity running the Ripple Server software (as opposed to the Ripple Client software which only lets a user send and receive funds), which participates in the consensus process.

• Ledger: The ledger is a record of the amount of currency in each user’s account and represents the “ground truth” of the network. The ledger is repeatedly updated with transactions that successfully pass through the consensus process.

• Last-Closed Ledger: The last-closed ledger is the most recent ledger that has been ratified by the consensus process and thus represents the current state of the network.

• Open Ledger: The open ledger is the current operating status of a node (each node maintains its own open ledger). Transactions initiated by end users of a given server are applied to the open ledger of that server, but transactions are not considered final until they have passed through the consensus process, at which point the open ledger becomes the last-closed ledger.

• Unique Node List (UNL): Each server, s, maintains a unique node list, which is a set of other servers that s queries when determining consensus. Only the votes of the other members of the UNL of s are considered when determining consensus (as opposed to every node on the network). Thus the UNL represents a subset of the network which when taken collectively, is “trusted” by s to not collude in an attempt to defraud the network. Note that this definition of “trust” does not require that each individual member of the UNL be trusted (see section 3.2).

• Proposer: Any server can broadcast transactions to be included in the consensus process, and every server attempts to include every valid transaction when a new consensus round starts. During the consensus process, however, only proposals from servers on the UNL of a server s are considered by.

What is XRP?

XRP is the cryptocurrency supported by the XRP Ledger.

What Is Cryptocurrency?

A cryptocurrency is a digital or virtual currency that is secured by cryptography and tracked using a blockchain. The security and integrity of cryptocurrency makes it nearly impossible to counterfeit or double-spend.
Cryptocurrencies, digital currencies, and digital assets all fall into the same general category. Cryptocurrencies are:

  • digitally native (meaning they are built for the internet)
  • programmable
  • fast to transfer at a low cost
  • open and transparent
  • not restricted by borders or governments (so no need for nostro accounts that hold funds in another country)
  • not subject to counterfeit
  • do not require a bank account or infrastructure to settle payments.

Cryptocurrencies are fungible tokensFungible means that you can replace one token with other tokens of equal value. Postage is an example of a fungible token: if it costs 50 cents to mail a letter, you can use 2 25-cent stamps or 5 10-cent stamps for the postage, because postage stamps are fungible (consistent in relative value and interchangeable).
Cryptocurrencies are also decentralized. There’s no central authority governing the currency. Once a transaction is on the blockchain you cannot change it. It is difficult to censor cryptocurrency: so long as the system is sufficiently decentralized, no one can roll back transactions, freeze balances, or block someone from using a decentralized digital asset. Rules do not change without significant coordination among all participants.
Cryptocurrencies are compelling for investors and developers because no single entity can “pull the plug” on them and have them disappear.

But Why Is It Valuable?

It might seem strange that cryptocurrency is based solely on computer data, and not on any sort of tangible commodity such as precious metal. Traditionally, currencies have been based on cattle, sea shells, rare metals, stones, or other physical objects. But these items have value only because there was agreement between people in a culture.
While it might seem safer to have something “real” in your hand, many people wouldn’t know fool’s gold from the actual thing, or cubic zirconia from a genuine diamond. Paper money can be counterfeit. You can forget you have a $10 bill in your pocket and ruin it in the wash. It is costly to safely store and transport valuable items for payment.
The value of cryptocurrency comes from the faith that holders place in the currency. Given the distributed nature of the records and the cryptographic safeguards to secure the funds, cryptocurrency could be considered a much more robust, secure, and convenient form of currency than traditional fiat currencies.

XRP is Cryptocurrency

The XRP Ledger was built over 2011 – early 2012 by Jed McCaleb, Arthur Britto and David Schwartz. At the time of its creation, there were 100 billion XRP. In September 2012, Jed and Arthur, along with Chris Larsen formed Ripple (the company, called OpenCoin Inc. at the time) and decided to gift 80 billion XRP to Ripple in exchange for Ripple developing on the XRP Ledger.
Since then, the company has regularly sold XRP, used it to strengthen XRP markets and improve network liquidity, and incentivized development of the greater ecosystem. In 2017, the company placed 55 billion XRP in escrow to ensure that the amount entering the general supply grows predictably for the foreseeable future. Ripple's XRP Market Performance site reports how much XRP the company has available and locked in escrow at present.


Originally, the XRP Ledger was called "Ripple" for the way the technology allowed payments to ripple through multiple hops and currencies. For the native asset built into the ledger, the creators chose the ticker symbol "XRP" from the term "ripple credits" or "ripples" and the X prefix for non-national currencies in the ISO 4217 standard. The company registered itself as "Ripple Labs". The name "XRP" came to be used to refer to the asset in all contexts, to avoid confusion with the similar names for the technology and company, and eventually the company shortened its own name to "Ripple". In May 2018, the community selected a new "X" symbol to represent XRP to differentiate it from the triskelion logo that had previously been used for both the company and the digital asset.
XRP "X" LogoRipple triskelion


"XRP" is a registered trademark of the XRPL Foundation in the U.S.A. and other countries like China and Estonia.
The trademark application was registered with the United States Patent and Trademark Office (USPTO) in 2013 with OpenCoin Inc and Ripple Labs Inc as assignees. In 2022, the trademark assignment was updated and is now assigned to the MITTETULUNDUSÜHING XRP LEDGER TRUST (“XRPLF”).

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