Ripple Labs recently rebranded to Ripple, signaling its transition from experimental projects to market-ready solutions. As one of the earliest pioneers in distributed ledger technology (DLT), Ripple introduced its alternative consensus mechanism and native digital asset XRP back in 2012.
The Vision: Internet of Value
Ripple’s mission centers on creating an Internet of Value, where money moves as seamlessly as information. The newly released Interledger Protocol (ILP) serves as a cornerstone for this vision, designed to connect diverse ledger systems—both decentralized (like blockchain) and traditional centralized ledgers.
How Interledger Works
- No Native Ledger: ILP operates as a cryptographic escrow layer, enabling cross-ledger transactions via intermediaries called "connectors."
- Token-Agnostic: Balances remain in each ledger’s native currency (e.g., XRP, BTC, fiat), eliminating the need for a universal token.
- Privacy-Preserving: Enterprises can conduct transactions off public blockchains using private Ripple networks.
CTO Stefan Thomas explained:
"Interledger is a true protocol—it standardizes ledger interactions without requiring universal adoption of any single system."
Key Features of ILP
Two Transfer Modes:
- Atomic: Uses trusted notaries for validation.
- Universal: Relies on economic incentives for untrusted participants.
- Easy Integration: Existing platforms like PayPal only need minor API adjustments to adopt ILP.
- Open-Source: Reference implementations will debut later this month.
👉 Explore how Interledger could revolutionize cross-border payments
Crypto Escrow: Trustless Transactions
ILP’s escrow mechanism ensures connectors cannot misuse funds, removing the need for legal safeguards. Thomas likened connectors to "digital currency exchanges providing liquidity in a standardized way." This model contrasts with traditional systems reliant on contractual trust.
Comparison to Sidechains
While projects like Blockstream’s sidechains extend bitcoin’s functionality, ILP focuses on interoperability:
"Sidechains create ledgers; ILP connects them."
W3C Collaboration
Though independent, ILP’s development was influenced by Ripple’s participation in the W3C Web Payments Interest Group, aiming to establish open payment standards. A W3C community group—including members from the Federal Reserve and Eris Ltd.—is now evaluating ILP as a potential web standard.
Scalability Advantages
Thomas highlighted ILP’s potential for "horizontal scalability", addressing banks’ concerns about transaction volume spikes in low-cost systems (e.g., UK’s Faster Payments).
Market Validation and New Products
Ripple’s 2015 partnerships with 30+ banks validate its focus on cross-border settlement. New offerings like:
- Cross-Currency Settlement
- FX Market Making
Position XRP as a cost-efficient bridge for international transactions.
Monica Long, VP of Marketing, noted:
"Distributed financial technology isn’t just blockchains—it’s about decentralizing legacy systems."
FAQs About Interledger Protocol
Q: Does ILP replace Ripple’s existing products?
A: No—it complements solutions like Cross-Currency Settlement by enhancing interoperability.
Q: Who can act as a connector?
A: Exchanges, payment processors, or any entity facilitating liquidity between ledgers.
Q: Is ILP blockchain-dependent?
A: No. It works with any ledger, centralized or decentralized.
Q: How does ILP ensure security?
A: Cryptographic escrow locks funds until proof of payment is verified.
Q: When will ILP be widely adopted?
A: Ripple anticipates gradual integration as partners update their systems.
Q: Can ILP handle micropayments?
A: Yes, its scalable design supports high-volume, low-value transactions.
👉 Discover how financial institutions are leveraging Interledger