Financial Calculators

Ripple (XRP) Profit Calculator

Calculate the profits of your XRP investments with this free profit calculator.

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Table of contents

What is Ripple?
Understanding Ripple
Ripple, a Digital Hawala Network
Ripple's Digital Currency: XRP
How Ripple Works

What is Ripple?

Ripple is a technology that acts both as a cryptocurrency, and a digital payment network to facilitate financial transactions. Chris Larsen, Jed McCaleb, and Jed McCaleb founded it in 2012. Ripple is a payment settlement and remittance exchange that is very similar to the SwIFT system which allows for international money transfers and security transfers.
The token for cryptocurrency is premined. This ticker symbol XRP is used. Ripple refers to the company and network. XRP, the cryptocurrency token, is also the name. XRP serves as an intermediary mechanism of exchange between currencies or networks. It is a temporary settlement layer denomination.

Understanding Ripple

Ripple uses a decentralized platform and open-source that allows for seamless transfers of money, dollars, yen, or euros. Ripple, a global payments network, counts many banks and financial services as its customers. XRP can be used in Ripple's products to allow quick conversion between different currencies

Ripple, a Digital Hawala Network

You can understand the system by looking at a money transfer structure. The two parties involved in the transaction use their preferred middlemen to get the money. Ripple acts as a digital Hawala service. Hawala is an informal means of moving money, often across borders.
Imagine that Lawrence has to send $100 to River. River lives in a different place. Lawrence sends the funds to River to Lawrence's agent Kate. Lawrence also provides River with a secret password, which River must answer correctly in order to receive funds in their respective cities. Asuka, River's agent is informed by Kate about the transaction details--recipient and funds to be reimbursed as well as the password. Asuka grants $100 to River who gives Asuka the correct password.
However, Asuka received the money, meaning that Kate owes Asuka 100 dollars (which will be paid at a later date). Asuka could either keep a log of all Kate’s debts that Kate would pay on a specified day or make counter transactions to balance it. As an example, suppose Asuka was Martin's agent. Martin would need to transfer $100 money to Etios, Kate's agent. This would equal the $100 Asuka owes. Etios will then be paid by Kate.
The Ripple network is more complex than the one in this example but it shows how the Ripple system works. As you can see, trust is needed to initiate transactions. Trust between Lawrence and Kate, Kate as Asuka, River as Asuka.
Ripple uses the medium known as a Gateway to connect two parties that want to conduct a transaction. The gateway is the credit intermediary which receives and sends currency to public addresses on the Ripple network. Anybody, including businesses, can register to open a gateway. The gateway allows the registrant authorization to act as an intermediary in order for currency exchange, maintenance liquidity, or transferring payments over the network.

Ripple's Digital Currency: XRP

The digital currency, XRP is a bridge currency that can be used to exchange other currencies. It does not distinguish between any cryptocurrency/fiat, making it possible for any currency that can be exchanged for another. Each currency within the ecosystem has a gateway - e.g. CADBluzelle (BTCbitstamp), USDsnapswap (USDsnapswap). Lawrence does not have to own bitcoins if River wants to pay for Lawrence's services. The river can send money to his gateway in Canadian dollars, and River may also receive bitcoins through his gateway. A single gateway does not have to be used for a complete transaction. Multiple gateways can be used to create a trust chain that reaches across users.
Counterparty risk can be incurred by holding balances with a Gateway. This is the same risk as in traditional banking. A gateway that fails to honor its responsibility could cause the user to lose all of their money. A gateway user can be trusted to transact with, and then the gateway can deal with, an untrusted gateway. This way the IOU will be transacted through the trusted, or creditworthy-certified, gateway. Because bitcoins and most altcoins are not subject to counterparty risk, a user's bitcoin does not become another user's IOU.

How Ripple Works

Ripple doesn't run on a proof-of-work or proof-of-stake systems like bitcoin. Transactions rely instead on a consensus protocol to validate account balances as well as transactions on the Ripple network. The consensus is used to prevent double-spending and improve the integrity of our system.
Ripple users that attempt to send the identical $100 to multiple gateways will have all transactions except the first deleted. Individual distributed nodes agree to decide which transaction was made. The confirmations take about five seconds and are instant. Ripple is decentralized as there is no central authority that decides who can create a node to confirm transactions.
Ripple keeps track of all IOUs for any gateway or user in a currency. Ripple makes all transactions between Ripple wallets public on its consensus ledger. Although financial transaction history can be made publicly available on the blockchain website, it is not linked to any account or ID. However, because all transactions are public (i.e., on the blockchain), the information is susceptible to anonymization measures.
PureCalculators assumes no responsibility or liability for any errors or omissions in the content of this site. The information contained in this site is provided on an "as is" basis with no guarantees of completeness, accuracy, usefulness, or timeliness.
Parmis Kazemi
Article author
Parmis Kazemi
Parmis is a content creator who has a passion for writing and creating new things. She is also highly interested in tech and enjoys learning new things.
Ripple (XRP) Profit Calculator English
Published: Mon Mar 14 2022
In category Financial calculators
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