Ripple Payment System
Commonwealth Bank, ANZ and Westpac announced recently that they are testing out payment technology from the US-based company Ripple Labs. The news comes after CBA made headlines around the world by presenting itself as the first major bank to go public with its trials of Ripple for transferring payments between its subsidiaries. CBA’s chief information officer David Whiteing described the payment technology as developed by Ripple as “the way of the future”.
What is Ripple?
Ripple is a universal payment system enabling users to transfer funds (including fiat (i.e. paper) currencies, digital currencies and other forms of value) across national boundaries as seamlessly as sending an email. Ripple enables peer-to-peer transaction settlement across a decentralised network of computers. Ripple interconnects all the world’s disparate financial systems to enable the secure transfer of funds in any currency in real time.
How does Ripple work?
First, let us have a look at the Ripple Protocol. Simply put, protocols are a way for distinct computers or systems to talk to one another and exchange information. A protocol serves as a system of rules that allows for a message sent by one system to be decoded by another. A near-ubiquitous protocol that people use on a daily basis is the communications protocol HTTP (Hypertext Transfer Protocol). This protocol is a set of rules for building and sharing websites, and allowed for the creation of the World Wide Web, as users on distinct Internet networks found a common language. SMTP (Simple Mail Transfer Protocol) is another protocol that did the same thing for email.
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