Ripple History The Early Days
A web developer from Vancouver, Ryan Fugger, developed Ripplepay in 2004. This eventually led to the development of the Ripple payment protocol. Fugger worked in Vancouver on a exchange trading system when he thought of the idea, and started to create a decentralized monetary system to allow communities and individuals to make their own money. The first iteration of the system made its debut in 2005.
Jed McCaleb saw Ripplepay and decided to take it further by creating a digital currency system where transactions would verified by consensus among network members. This system was designed and built in May 2011 by David Schwartz and Arthur Britto. The system did not rely on blockchain ledgers and the mining process utilized by bitcoin. This new Ripple system aimed to eliminate any reliance on a centralized exchange, use less electricity and perform transactions faster than bitcoin does.
In August 2012, Chris Larsen joined the team. He was the founder of Prosper and E-Loan, two lending services companies. Larsen and McCaleb approached Fugger with their idea for a digital currency and after discussions with Ripple community members, Fugger handed over control. The OpenCoin Corporation was founded in September 2012 by the team.
A payment protocol known as the Ripple Transaction Protocol (RTXP) was developed by OpenCoin based on the concepts of Fugger. This protocol enabled direct, instant transfers of money between parties. The protocol therefore allowed for the circumnavigation of fees and waiting times of traditional banking systems. Many currency types could be exchanged, including USD, euro, renminbi, yen, rupee, airline miles and gold. Ripple was programmed to depend on a common ledger to maintain security. The ledger is maintained through independent validating servers on a network by constantly comparing their transaction records. A servers can be owned by anyone, including market makers and banks. In a way much like bitcoin, OpenCoin also created a new digital currency called XRP. The currency was used to enable a financial institution to transfer money with small wait-times and fees.
Google Ventures and Andreessen Horowitz were amongst the first investors in OpenCoin. XRP Fund II, LLC, with headquarters in South Carolina, was incorporated as an OpenCoin subsidiary on the 1st July, 2013. Ripple announced the linking of the Ripple and bitcoin protocols by using the Bitcoin Bridge on the next day. This bridge allows users of Ripple to send payments in any currencies to bitcoin addresses. Ripple also established partnerships with various companies. The name OpenCoin Inc. was changed to Ripple Labs Inc. on the 26th September 2013, and Chris Larsen remained CEO. The Ripple reference client and server became free software on the same day, and was released under the ISC license as open source. Ripple Labs is still the primary code contributor to the system of consensus verification, which is able to integrate with the existing networks of banks. Ripple further partnered with ZipZap in October 2013, with some labelling the relationship as a danger to Western Union.
The banking market
Ripple Labs undertook several protocol development projects in 2014, and released among other things an iOS app that allowed iPhone users to use their phones to receive and send any currency. That app does however no longer exist. Ripple Labs also proposed Codius in July 2014. The goal of this project was to develop a programming language agnostic smart contract system.
The Ripple protocol has been implemented by various financial institutions who wanted to offer their customers an alternative option for remittances. Ripple enables payments across borders for banks, corporations and retail customers. According to Larsen, the process is simplified by creating transparent point-to-point transfers where banks don’t have to pay bank fees. Fidor Bank, an online-only bank based in Munich, was the first financial institution to implement Ripple early in 2014. In September 2014, CBW Bank in Kansas and Cross River Bank in New Jersey announced they would use Ripple’s protocol. In December 2014, Ripple Labs started working with Earthport, a global payments service. Earthport’s system for payment services was combined with Ripple’s software. Earthport has clients in 65 countries, including HSBC and Bank of America. This partnership was the first time the Ripple protocol was used on a network. The XRP price rose by more than 200% in December 2014, and Ripple surpassed Litecoin to become the 2nd biggest cryptocurrency. Ripple’s market cap was 73 billion USD at that stage.
Fidor Bank started implementing an global money transfer network using the Ripple protocol in Feb 2015, and Western Union experimented with Ripple in late April 2015. This was followed by Commonwealth Bank of Australia announcing in late May 2015 that it would experiment with Ripple for intrabank transfers.
Ripple Labs have reportedly supported governments regulating the cryptocurrency market since 2012, claiming that regulations would help business growth, but FinCEN fined XRP II and Ripple Labs US$700,000 for Bank Secrecy Act violations in May, 2015. The fines were based on 2013 add-ons to the act. Ripple Labs decided to take steps that would ensure future compliance. These involved the agreement to only trade “Ripple Trade” activity and XRP through registered MSB (money services businesses). They also agreed to enhance the Ripple Protocol by adding AML transaction checking to their network, thereby improving transaction analysis.
The New York State Department of Financial Services issued a virtual currency license to Ripple in June 2016, thereby becoming the 4th company to hold a BitLicense. SBI Ripple Asia announced on 19 August 2016 that they would create a Japanese bank consortium that would use the Ripple technology for settlements and payments. This consortium was launched with 42 members on 25 October 2016 and has grown to 61 Japanese banks. This represents more than 80% of Japan’s total banking assets.
Ripple also announced the first global payments interbank group using distributed financial technologies in September 2016. The network is called the Global Payments Steering Group (GPSG) and members include Canadian Imperial Bank of Commerce, Bank of America Merrill Lynch, Royal Bank of Canada, Mitsubishi UFJ Financial Group, Standard Chartered, Santander, Westpac Banking Corporation and UniCredit. GPSG oversees formal standards to use Ripple, and Ripple payment transaction rules.
PNC Financial Services stated in September 2018 that it would do international payments using the Ripple xCurrent system. The system allows for bi-directional messaging which is able to integrate with blockchains. Neither Ripple’s xRapid system based on blockchain, nor XRP will be used by PNC.