Let’s talk about Ripple’s Interledger protocol and create a global unified payment standard. When will it be realized?

Establishing a global unified payment standard? Is this possible? Is there such an agreement that can unify global payment standards?

Ripple announced its "InterLedger" protocol project three months ago. The goal of the project is to create a global unified payment standard and a unified network financial transmission protocol.

Ripple’s CTO斯特凡•托马斯introduced the InterLedger protocol in this way:

I think there will definitely be such a protocol that is applicable to all accounting systems and can accommodate the differences of all accounting systems. We (Ripple) are doing this to establish a global unified payment standard.

Ripple’s initiative is also supported by Microsoft and the World Wide Web.

Ripple hopes to encourage more people to use Internet currencies through "InterLedger", and of course, ultimately achieve barrier-free cross-border payments and transfers. For example, if you send Bitcoin, after processing through the InterLedger protocol, these Bitcoins can be converted into Litecoin, Dogecoin or any other currency the recipient wants when they reach the recipient. The same is true for sending legal currencies such as US dollars and euros.

The problem is that there are still too few businesses and developers using this distributed protocol, so people cannot freely transfer payments between different networks. This is where Ripple's "Interledger" protocol wants to change.

In a sense, Ripple's initiative is not a new concept. People have been working towards this goal for more than a decade. We call it "an Internet for money". As early as the 1990s,马克•安德森, the creator of the Netscape web browser, had the idea of ​​establishing a unified standard for online remittances. The original hypertext transfer protocol HTTP actually included payment codes, but they were never used. However, in recent years, many people have tried to establish a unified standard for Internet currency, including Bitcoin exchange Coinbase and startups such as Stripe (Stripe is committed to helping companies integrate various online payment methods). Although this road is a bit long, we are at least moving in the right direction.

How did the idea of ​​Interledger come about?

Thomas said that after many large banks refused to use Ripple's distributed interbank financial transaction protocol (Translator's Note: In 2014, Germany's Fidor Bank was the first bank to access the Ripple protocol. In the same year, CBW Bank and Cross River Bank in New Jersey, USA also agreed to use the Ripple protocol. However, so far, no mainstream bank has accepted the Ripple protocol), Ripple designed the Interledger protocol.

Banks basically run their own accounting systems in a huge network, which is composed of independent machines from different countries. InterLedger will create an independent currency system that is not controlled by any bank or government. While bringing freedom to people, it will bring many new troubles to big banks.

As Thomas explained, banks don't like to put machines abroad, and they don't like to let machines placed abroad verify domestic transactions. In short, they don't like public processing methods, and they don't like semi-public processing methods. Because both methods may give outsiders the opportunity to peek into their internal data.

So how do they like to use blockchain technology? That's right, it's a "private blockchain." Thomas said that banks are very willing to "fork" Ripple's code to build their own internal systems.

But banks are destroying the value of blockchain by doing so.马力•格雷, head of Microsoft’s Azure blockchain project, said:

“If a blockchain is only used internally by a single organization, it’s essentially worthless.”

So what can be done? To resolve this contradiction, Ripple developed the "InterLedger" protocol, which can be said to be a compromise. Thomas explained:

“Since it’s hard to build a global financial transmission protocol that everyone agrees on, we can develop a protocol that connects all the accounting systems we currently use.”

The Interledger protocol creates a system in which two different accounting systems can freely transfer money to each other through a third-party "connector" or "verification" machine. The accounting system does not need to trust the "connector" because the protocol uses a cryptographic algorithm to create a fund custody for the two accounting systems and connectors. When all participants reach a consensus on the amount of funds, they can trade with each other.

For domestic transactions, participating accounting systems can only choose domestic "validators". Only the accounting systems involved can track transactions, and the details of transactions can be hidden. "Validators" are run through encryption algorithms, so they cannot directly see the details of transactions. Thomas said that in theory, interledger can be compatible with any online accounting system, and the existing accounting systems of banks can use the protocol with only minor changes.

A single spark can start a prairie fire

Thomas said that in the short term, the interledger protocol will improve the efficiency of banks and other financial institutions in processing remittance payments. In the long run, this can increase the adoption of digital currencies because interledger can link all accounting systems together. "Digital currencies can provide liquidity and are no longer controlled by a large authoritative gateway." Digital currencies enable us to make cross-border payments and remittances at a lower cost because we no longer have to rely on central institutions (such as Visa, Western Union or big banks).

Thomas said that due to the huge inherent system and authoritative status of big banks, it is not so easy for them to access the interledger system, but in this transformation, big banks will always lose something to adapt to this change, because this is the development trend of the world. Small banks will be easier and more willing to access the interledger system. On the one hand, this provides them with a new way to get rid of big banks, and on the other hand, it reduces their costs. Small banks are like sparks, although their power is small, but with this advantage, they will obtain more and more resources, and digital currency will form a huge pool of funds, which will eventually make those old big banks unable to ignore it.

Ripple is not the only company working towards this goal, and Thomas is not the only one who has spared no effort to promote this concept. Microsoft's Azure blockchain project is also working on this. Since Microsoft launched this BaaS (Blockchain-as-a-Service), it has attracted many Bitcoin or blockchain startups such as CoinPrism, ConsenSys, Eris Industries, Factom, BitPay, etc., and the Interledger protocol developed by Ripple has also been favored by Microsoft and will be added to Microsoft's BaaS platform.马力•格雷said: "With so many blockchains, I hope they can be freely connected and work together, while allowing each chain to play to its own strengths."

In Gray's view, what they are doing will not only promote the use of digital currency, but will eventually drive companies to adopt these online accounting systems as a channel for transferring value, not only currency, but also stocks, other financial securities, ownership of houses and cars, etc. Overstock.com's T0 project and IBM's "Open Ledger" project have already taken experimental steps. The "interledger protocol" will further promote the realization of the goal. In the future, we will see various financial instruments freely transmitted on the Internet, just as it is as simple as sending an email or texting through the Internet now. Of course, this goal cannot be achieved by Ripple or Microsoft alone. It requires each of us to work together and reach a consensus on achieving this goal.

Original article: http://www.wired.com/2016/01/project-aims-to-unite-bitcoin-with-other-online-currencies/
Compiled by: printemps
Source (translation): Babbitt Information