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Analysis of XRP Ledger Protocol

XRP Ledger Protocol

December 8, 2020 | 

JOHN K MWANIKI |  0 Comments| 



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Cryptocurrency is the new order of the financial system. It seeks to liberate the world from the central banks in the traditional economy. It will create a universal, inclusive financial system.

While digital currencies have performed well, they face some challenges. Top of the challenge is the risk of a double spend

The traditional currency system has commercial banks for the supply and use of money. They determine the legal tender and create trust.

This is different from the decentralized virtual currencies. They rely on the goodwill of the users to do the right thing. Not everyone is willing to do that. Bitcoin and other preceding coins like Ethereum have had the challenge. They both have mining protocols where users verify transactions before confirming.

Mining involves checking the validity of the nodes before joining a chain. Every node must look like the past and leave space for the next. Any strange node affects the whole block; hence the transaction is rejected.

The only concern with mining is slow transactions. The blockchain can only accommodate limited transactions at a go. That is where the XRP's ledger protocol comes in. 

The XRP ledger is a distributed payment system. It allows users to transfer money anywhere across the world. 

The ledger operates on a Byzantine fault-tolerant agreement protocol. This runs on trusted subnetworks called XRP ledger consensus protocol

The ledger consensus protocol is all about allowing for agreement in the system. Several nodes agree on the transactions to confirm. They determine the rules to order for each transaction and how to apply them.

The protocol does not determine whether the transaction is faulty or not. It allows the participants to decide on everything. The system accepts the presence of a few malicious participants. It, however, doesn't let them prosper as the good outnumber them.

Components of the XRP Ledger Protocol

The XRP ledger protocol has three main components;

1.    Deliberation
This is the first step in the protocol. The nodes select a transaction set to verify. These they choose from the received proposals from other nodes. 

It considers the transactions based on the specific rules and how to apply them. It applies the rules when it believes enough of the proposals agree. Then passes it to the next step. 

2.    Validation
The nodes have to check if the ledger meets all the rules certified by the protocol. The trusted nodes take turns in confirming the status of the transaction. It only becomes validated once it meets the quorum. In this case, it should have the support of more than 80% of the nodes.

Once validated, the transaction is authoritative and irrevocable. It then heads to the last component. 

3.    Preferred branch
It's where the nodes determine the appropriate working branch of the ledger history. They use the ledger ancestry of trusted validations to select the preferred ledger.

The multi-step validation process is like proof-of-stake validation. Most of the newer digital currencies prefer it for accuracy and faster transactions.

XRP Ledger Properties

Reaching an agreement among the different nodes from varying servers is such a task. The system still has to find a way for the nodes to reach a common understanding. It doesn't matter if some had failed.

To reach the agreement, the system provides for various conditions. One of such conditions is validity. Every non-faulty process final decision must be the same value it started with.

The final decisions by all no-faulty processes must be identical for agreement. Every non-faulty process must decide, thus reaching a termination.

The XRP ledger protocol requires every transaction to meet all the above conditions. It thus looks to achieve two main properties;

  • Safety

Safety is all about the validity and agreement of the transaction. It ensures nothing bad occurs in the system. 

The other nodes cannot confirm a contradictory ledger than the one from an honest ledger.

  • Liveliness

Liveness ensures the transaction takes place. It is all about something good coming out of the system.

An honest node broadcasts a valid proposal, which the other honest nodes must accept. They will then include it in the validated ledger.

How XRP Ledger Protocol Foster Industry Performance and Innovation 

XRP's main goal is to solve the global payment issues. It seeks to make the sector fast, reliable, and scalable. It can only perform this function if the XRP ledger protocol works to perfection.

The ledger protocol keeps records of ownership. It ensures a secure transaction execution mechanism. It also helps in assets and accounts management. 

The XRP ledger protocol allows security and freedom at the same time. It allows neutrality and fairness by using diverse validator nodes. It also allows participants to choose nodes and servers they trust. The system thus doesn't struggle with censorship. 

The XRP provides the ideal grounds for settling payments and exchanging digital assets. The security and reliability of the system have made it more popular among the users.

Several traditional businesses already use XRP and XRP ledger protocol for service delivery. Examples include;

  • Coingate – provides a system for consumers to pay merchants through cryptos. 

  • Coil – allows creators to monetize content by allowing crypto payment methods. It supports XRP payments. 

  • Puma browser – paying for online content doesn't have to risk security anymore. The privacy-based browser allows payment of the content through XRP. 

The XRP ledger protocol has built a quick, reliable, and scalable platform. These are the features most entities look for innovating. It will keep on becoming a big deal as it improves robustness and attack resistance.

Bottom Line

Understanding transaction validation in the age of decentralized finances is important. The detailed analysis of the XRP Ledger protocol helps understand the system's security.

Given the role of XRP in banking, it can do with as much user trust as possible. Those who swear by traditional currencies can start warming up to XRP. It has a fast and secure transactions validation system.

This article is the best starting point for potential XRP investors. Also, look into the other cryptocurrency validation processes to determine the best one. As a new medium of exchange, you need every piece of information about digital currencies.  

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