Ripple’s David Schwartz recently released a blog post on Ripple’s ‘Insight’ page on why open payment protocols will be the first step in changing payment and settlement systems across the world.
He started by talking about the genesis of the Internet, and how various standardized protocols made it into what we know today. Standards such as the Internet Protocol, HTTP, and SMTP allowed for the interoperability and connection we see today. These open protocols were then developed upon to allow newer advancements such as streaming and the Internet of Things.
As Ripple pushes its vision for the Internet of Value, it is apparent that they intend to establish it in the same way the Internet grew. InterLedger Protocol [ILP] is a universal format protocol just like IP, except it takes the form of an open protocol suite for payments across different ledger systems.
David Schwartz developed the protocol along with Stefan Tomas, who left Ripple to start a company known as Coil. Coil demonstrates the use of the ILP to change the way content is monetized on the Internet.
The ILP has also been integrated into Ripple’s product for cross-border payments, xCurrent. This is keeping in view with the privacy, speed, and flexibility needs expressed by Ripple’s partners. ILP satisfies these needs by allowing for instant and certain transactions to be processed across an infinite number of ledgers.
“By connecting bank ledgers and existing infrastructure investments via ILP, banks are taking the first steps in improving global payments today — and in enabling a true Internet of Value.”
Ripple also aims to scale global payments as a part of their vision. Banks are under pressure from a small group of correspondent bankers charging high fees, and from non-bank payment companies that capitalize on these opportunities.
Therefore, Schwartz states that the next step after connecting these ledgers is to allow for settlement using a digital asset for on-demand liquidity. This takes the form of Ripple’s xRapid solution. The solution will allow aforementioned banks to save time and money on cross-border payments, as seen by the results of recent xRapid pilots.
Schwartz also believes that Ripple’s products will lay the foundation for the next 50 years. In accordance with this, he stated:
“This starts with providing technology that the current financial structure is comfortable with: xCurrent, blockchain technology that provides cryptographically secure transactions across a dispersed network of ledgers and integrates easily with existing systems…In the same way that IP dug new plumbing for the Internet, revamping global payments must start at the bottom infrastructure layer and move up from here.”