The ripple network uses similar technology to bitcoin. The system is essentially a modification of the bitcoin code. This creates a new cypto-currency with different features and the ability to change the methodology to how it is run and maintained.
One of the fundamental difference is that the ripple ledger is stored on a distributed network rather than a decentralised one. What is that? Well with bitcoin there is no controlling party and the program is run in a democratic way by the people who choose to use it. Anyone can choose to run a bitcoin server and we call this a decentralised system. Ripples operations however are controlled by Ripple Labs who distribute the program to parties of their choice. In this way they also retain control over the future of the ripple. They can change the total number of ripples to be supplied and have control over changes to the functionality of the program.
This has lead to a model where Ripple markets itself directly to banks and existing financial companies. Those companies in turn run the programs needed to keep the system operating on the web. In this case, ANZ and Westpac operate ripple servers to run their transactions. Ripple also publicly states its intention to work with banks and that it needs them to provide security and front end services, this is all over the ripple website. This has been a key in establishing its point of difference and its position as number two crypto-currency in terms of market capitalisation ($259m). It passed litecoin in late 2014 to take this spot but it it far from bitcoin which has a market cap in the billions.
Another difference is that unlike the bitcoin blockchain, which is optimised for the use of bitcoin as its token, Ripple's blockchain has been set up to allow any currency to be used across it freely. This allows easy low cost transactions in all kinds of currencies and is one of the prime reasons it's attractive to banks and payment processors.
At first glance you can see why banks want to take on ripple rather than bitcoin, but from an experianced crypto-currency perspective there are some significant issues here. Ripple is whats called an "altcoin". This advanced concept for people new to crypto-currencies is simply put, an alternative coin to bitcoin. Think of bitcoin as the US dollar and altcoins as all the other fiat currencies in the world. They are variations to bitcoin but essentially based on the same programing.
There is no limit on the creation of alternatives. There are in fact hundreds of altcoins and many have come and gone. Everything from darkcoin, made for super secret untraceable payments, to solarcoin, where your money insentivises solar power generation, or stellar, a coin based around charity. A full spectrum of moral appeal exists to go each altcoin which is in an attempt to capture a niche market.
The economic dynamics of altcoins is not well known beyond pump and dump type plans. They are new and small when compared with bitcoin. The possibilities of these parallel systems however are huge and certainly intricate. The point is here that banks know even less of this than your average crypto-addict. Altcoins are much more volatile and unpredictable than bitcoin. People can also easily move from one to the next and when they do it has a big impact.
Because of the nature of programmable crypto-currency having spawned from one place (bitcoin) they work very well with each other. Exchanging between bitcoin and ripple as with other altcoins is instant, free and unhindered. In this way proliferating ripple also helps proliferate bitcoin.
Ripple in particular also functions much like an auxilary to bitcoin. If you've followed the blocksize debate your mind may be pickled by now, you will however understand what a bitcoin "sidechain" is. For the vast majority however a "sidechain" is something that helps reduce the transaction traffic on the bitcoin blockchain network. It is where a sub-blockchain is linked to the bitcoin blockchain. You could say ledger within the ledger or think of it as an on and off ramp on a freeway. Ripple is a particularly dynamic sub-blockchain because a lot of information can be imbedded within each ripple. At present 50% of all ripple transactions are used in coordination with bitcoins! Many of these transaction have been used by organisations like BitStamp (a bitcoin exchange) which uses ripple to reduce its bitcoin blockchain requirements. In this way ripple and bitcoin are very interdependent and reinforce each others financial ecosystems.
Unlike bitcoin, ripples main founders are known people. these people have a large stake in ripple. In 2012 Jed McCaleb wanted to sell his 9 billion ripples when he quit. This caused a bit of drama with his colleagues who didn't want the price to dive. These large interests in the currency itself. can manipulate the market in favor of those in the know. This is where the litigation begins. Google Ventures and Apple are even an early adopters in ripple. With ripples traditional centralised structure like that of normal companies today we get the traditional power struggle going on. This may have conflicts of interest for big banks.
Whilst ripple markets itself as the banks best friend and wins them over with great efficiency. There are some intricate issues yet to be fully unveiled. There is an anti-democratic aspect and economic nature not yet fully understood or tested here. Its good to see modern banks taking step to the crypt-currency that they once wrote off completely. It is a deep pond they are stepping into.
During the first five weeks, the coins will earn APYs of up to 50% and will become worth up to $1. It is possible to earn high yields in both currencies. You can earn an APY by staking, and then trade it for fiat. For more ideal details about freeway, pop over to these guys.
ReplyDelete