XRP
Ripple and XRP: From OpenCoin to RippleNet
Few projects in cryptocurrency history have a more complicated origin story than Ripple. The name has referred to multiple different things at different times: a payment philosophy, a software protocol, a company, a consensus network, and a digital asset. Untangling these threads requires going back to before Bitcoin existed — to a Canadian web developer who wanted to build a community currency system in the mid-2000s.
Ryan Fugger's RipplePay
In 2004, Ryan Fugger launched RipplePay.com, a web application built on a deceptively simple idea: money doesn't have to be a fixed thing that moves between accounts; it can be a network of trust relationships where people extend credit to each other.
The model worked like this: if Alice trusts Bob for up to $50, and Bob trusts Carol for up to $50, then Alice can effectively pay Carol through a chain of trust relationships even if Alice and Carol have never met. The payment doesn't move a physical asset — it adjusts the credit balances along the chain. This is, roughly, how the traditional correspondent banking system works, and it is how informal value transfer systems like hawala have operated for centuries.
Fugger's RipplePay was a small community project, not a cryptocurrency. There was no blockchain, no mining, and no native token. It was a social network for money built on mutual trust. The system worked, but it required users to extend trust to specific people they knew, which limited its scale.
The concept, however, was intellectually rich. It would eventually attract the attention of people who thought it could be combined with blockchain technology to build something far more powerful.
Jed McCaleb and the Founding of Ripple
In 2011, Jed McCaleb — best known as the founder of the Mt. Gox Bitcoin exchange — began thinking about how to build a Bitcoin-like system that didn't require mining. He was skeptical of proof-of-work: it consumed enormous amounts of electricity, and the concentration of mining power in large pools seemed to undermine the decentralization that made Bitcoin valuable.
McCaleb designed a system called Ripple that combined a distributed ledger with the credit network ideas from Fugger's RipplePay. He convinced Fugger to transfer the Ripple name and concept, and in 2012 he co-founded a company called OpenCoin with Chris Larsen, a serial entrepreneur who had previously founded E-LOAN and Prosper.
OpenCoin created the XRP Ledger — a distributed ledger secured not by mining but by a consensus protocol called the Ripple Protocol Consensus Algorithm (RPCA). They also created XRP, a native digital asset on the ledger, with 100 billion units issued at genesis and no mechanism for creating more.
The XRP Ledger and RPCA
The XRP Ledger's consensus mechanism is fundamentally different from Bitcoin's proof-of-work or standard proof-of-stake. Rather than a global competition among all participants, RPCA uses a federated model in which each participant defines a "Unique Node List" (UNL) — a set of validators they trust.
How RPCA Reaches Consensus
In each round of consensus, each validator proposes a set of transactions it believes should be included in the next ledger. Validators then exchange proposals and iteratively update their positions based on what they see from validators on their UNL. A transaction is included in the ledger if it achieves a threshold of agreement (initially 50%, then rising to 80%) among a validator's trusted set.
The system is designed to converge quickly — typically within a few seconds — and to be tolerant of offline validators. If a validator on your UNL goes offline, it simply doesn't contribute to consensus for that round, but the remaining validators can still reach agreement.
The security model relies on "overlapping trust": if the UNLs of different validators significantly overlap, the network will converge to a single consistent ledger. If two groups of validators have completely disjoint UNLs, they could diverge to different ledgers — a partition. The recommended Ripple UNL is maintained by Ripple (the company) and includes trusted financial institutions, making the network more centralized than Bitcoin but more efficient and less energy-intensive.
finality-and-transaction-speed">Finality and Transaction Speed
Because RPCA doesn't use probabilistic finality, transactions settle definitively in 3-5 seconds. There is no waiting for confirmations, no possibility of reversal if you transact quickly enough after the ledger closes. For payment use cases — where the recipient needs to know definitively that funds have arrived — this is a significant practical advantage over Bitcoin's 60-minute (6 confirmations) wait for high assurance.
The XRP Ledger can process around 1,500 transactions per second, orders of magnitude more than Bitcoin or Ethereum in their base forms.
The Name Change and Corporate Evolution
OpenCoin rebranded to Ripple Labs in 2013, and then simply to Ripple in 2015. This naming has caused persistent confusion because "Ripple" now refers both to the company and, colloquially, to XRP (though Ripple the company does not prefer this usage — they are distinct entities). Ripple the company holds a large portion of the XRP originally created at genesis, which has made XRP's price sensitive to Ripple's sales of its XRP holdings.
Jed McCaleb departed from Ripple in 2013 following internal disagreements. He went on to found Stellar, another payment-focused blockchain that shares much of its conceptual DNA with early Ripple — and that forked the Ripple codebase as its starting point. McCaleb retained a substantial allocation of XRP when he left, and his periodic sales of that XRP became a recurring source of market concern for years.
XRP as a Bridge Currency
Ripple's core commercial pitch is not about replacing banks — it's about making banks better. The vision described in Ripple's documentation is a world where banks and payment providers use XRP as a bridge currency for international transfers.
Traditional correspondent banking works through a network of pre-funded accounts (nostro accounts) that banks maintain with each other in foreign currencies. A bank that wants to send dollars to a recipient in Japan must either have a relationship with a Japanese bank or route through intermediaries. These nostro accounts tie up capital and create settlement risk.
Ripple's proposal: instead of pre-funding nostro accounts, a bank can convert dollars to XRP, send XRP over the XRP Ledger, and convert XRP to yen at the destination — all in a few seconds. The XRP transaction settles so quickly that the currency exposure is minimal, reducing the need for pre-funded accounts.
This "On-Demand Liquidity" (ODL) product has seen real adoption by payment companies in corridors like Mexico, the Philippines, and Australia, where traditional remittance infrastructure is slow and expensive.
The SEC Lawsuit
In December 2020, the U.S. Securities and Exchange Commission filed a lawsuit against Ripple Labs, claiming that XRP is an unregistered security. The lawsuit alleged that Ripple's sales of XRP to fund its operations constituted an unregistered securities offering.
The case became a landmark in cryptocurrency regulation. In July 2023, a federal judge issued a partial ruling that XRP sold on public exchanges was not a security — a significant victory for Ripple — while finding that programmatic sales to institutional investors may have constituted securities offerings. The case was settled in 2024, with Ripple paying a fraction of what the SEC initially sought.
The lawsuit had highlighted the peculiar status of XRP: unlike Bitcoin (which the SEC has acknowledged is not a security) or Ethereum (which has generally been treated similarly), XRP had a clear issuer — Ripple — with a clear financial interest in its price, which made the securities law question harder to resolve cleanly.
From OpenCoin to a Global Payments Network
The journey from Fugger's community credit network to a global payment infrastructure company is one of cryptocurrency's more improbable origin stories. RipplePay was a hobby project for small communities; Ripple today has partnerships with hundreds of financial institutions and has processed billions in payment volume.
The XRP Ledger remains a distinctive technical achievement: a fast, energy-efficient distributed ledger with final settlement in seconds, designed from the beginning for payment applications rather than adapted to them. Whatever one thinks of Ripple's corporate structure or XRP's regulatory status, the technical vision of the XRP Ledger — that distributed ledgers could make global payments as fast and cheap as sending an email — continues to animate real commercial activity.