Ripple is an open-source Internet protocol: it is not owned or operated by any entity, but it facilitates operational processes between its members.
Cross-border payments require settlement in multiple currencies and thus depend on a foreign exchange transaction, which is processed via pre-funded NOSTRO/VOSTRO account pairs.
Distributed settlement settles transactions without a central settlement institution. Ripple processes transactions through a public ledger that is distributed among Ripple users. The public ledger records every single transaction processed through the Ripple protocol and keeps track of all Ripple users’ balances.
Distributed settlement has 2 problems that the Ripple technology solves:
- The double spending problem: To prevent this double-spending problem, distributed settlement systems must ensure the accurate ordering of transactions. Decentralized Ripple users – that are not party to the transaction – update a single, public ledger via a Consensus protocol. Consensus
- Sybil attacks : A malicious attack to break the Consensus protocol by creating many accounts to exert a disproportionately large influence. Virtual currency XRP is created to solve this problem. The Ripple protocol requires each account to hold 20 XRP in order to participate be part of the network--the idea is to make it very expensive for attackers to flood the network.
