Brief History Of Money
Over human history we have used various methods of ‘currency’ to exchange something for something as a payment, this something must be accepted as valuable, portable and exchangeable
Some examples of payment is history have been:
- Your Children, but not acceptable in modern times
- 4,000 years ago we use shells known as ‘cowries’ beautiful, unique and could not be ‘made’
- 2,000 years ago wheat was used, as it was a common and an important part of our diet
- Precious stones and metals, most common of these Gold and Silver made or minted into portable exchangeable coins
Over the last few decades most of the world has gone digital/electronic and people understand this concept well, written letters turned into emails, talking to family eye to eye turned into text/instant messaging. Who remembers flipping through yellow pages phone book trying to find a number and now you can ask Siri, Alexa and others to do all that for you!
One big thing that has not gone completely digital is the currency you have in you purse, pocket or a leather Wallet, ** remember Wallet as this is important later on.
Making Money Digital
Most people use electronic banking to transfer money here and there, but we still need money in our pockets to pay for some things and to give to each other.
The digital age of money had a Eureka moment 10 years ago after a mathematician clever clogs and software developers created Bitcoin, the intentions were that Bitcoin will do to money what email has done to writing letters. Bitcoin is called a crypto currency which is explained later.
For a number of reasons this change is still making painfully slow progress around the world 10 years later, but in 2019 this change is expected to speed up very quickly. partly due to XRP!
Also in the last few years many more Crypto currencies similar to Bitcoin have been created, one of these is called XRP
However XRP has some major differences compared to Bitcoin such as it does not need huge factories called processor farms full of computers using precious electricity to create the coins, and work unacceptably slowly to process the transactions. You could purchase a coffee and have to wait 1hr for the payment to be settled and then drink it, yuck!
Also XRP is not a ‘centralised currency’ like the US have central control of the $ or the British government have central control of the £ or the European parliament have central control of the €, there’s that word, central or centralised, again it will be explained later, XRP has no central control, it is controlled by the global markets so no one country or entity can control or manipulate it, if something is not centralised you can just says it’s decentralised.
Is it a bird! Is it a plane! No, its a Digital Wallet! Hmm
To use XRP you must have a XRP account normally refered to as a Wallet, unlike a leather wallet that you have in your pocket a XRP wallet is a computer application that is loaded into your computer or smart phone, this wallet app is then used to receive XRP to it and send XRP from it and check your balance. If you use a banking application on your smart phone or a Bank website to move your money from your current account to your savings account your not moving the cash from account to account by a little van, its just numbers changing within the banking network. XRP moves in a similar way and the XRP Wallet (account) is held within a computer network called the XRP Ledger.
When you create a XRP Wallet you are creating an account on the XRP Ledger. This account has two keys assigned to it, a Private and a Public key.
A Public key is used to receive XRP into your wallet you can give this out freely in the hope random strangers will send XRP to your public key (one can only hope 🙂
A Private key allows you to send XRP from your account to somewhere/someone else. It is critical you do not share this Private key as you are giving someone the authority to take your XRP!
An Exchange will not have thousands of Public keys (accounts) on the ledger as it would currently consume 20XRP for each users Public key. Instead they have a Pool of XRP and you are given a Tag which identifies your XRP within this larger Pool. When your XRP is left on an Exchange you do not own the Public or Private keys, if you do not own the Private key then it is questionable if the XRP yours! Even if you are told it is yours the issue is you do not have full control as to what happens to it! Some Exchanges are known to PLAY with your XRP for their own gains!
In this example Tony is sending 10 XRP from his Toast Wallet, he does not need to add the Private key to allow him to send the XRP as most Wallet’s will do this for you automatically. He is sending (transferring) this 10 XRP to John so he must provide John’s Toast Wallet Public key to make sure it goes to his Toast Wallet account. If Tony was sending the XRP to John’s Exchange account, ie Wirex, he would need to provide the Wirex Public Key and a Tag so that it reaches John’s wirex account, missing or incorrect Tags may cause the XRP to be irrecoverable lost within the Wirex XRP public pool!
There are step by step Tutorials for creating a Desktop Toast Wallet and a USB Toast Wallet in the tutorials pages, as you may have guessed I do really like the Toast Wallet 🙂 and it comes highly recommended by the XRPcommunity.
When is a Ledger not a Ledger? A: When its a Distributed Ledger, Hehehe
As mentioned previously when you create a Wallet you are creating an account on the XRP Ledger, but what is a LEDGER?
The word Ledger was and still is the name for a paper book that a company may hold for accurate accounting of a company’s finances, it records what payment was received and from who and what money was paid out and to who and how much the company is worth, the cash balance. Even with the popular accounting application Quickbooks on desktop/mobile doing all your accounting it still refers to Ledgers.
If a company has a single Ledger within a company and the accountant looking after the Ledger is a very naughty accountant they could manipulate the numbers and steal money easily and no one would know. In accounting there is a system called Double Entry accounting to identify any errors within the books ledger. Now applying a similar system to the XRP Ledger this Ledger has many copies of itself in many places that can be compared to see if they match up. Each Ledger is held on a high powered computer and the computer is referred to as a network node or a Validator. The Validators that make up the XRP Ledger are all over the world, you me or anyone around the globe can run a XRP Ledger node/Validator. By spreading or distributing the Validators around the world by many unconnected people like this removes single places of failure making the system robust and near impossible to cheat, this Distributed Ledger Technology is shortened to DLT and for XRP we say XRP DLT, simples! 🙂
How many Validators does it take to reach consensus on how to change a lightbulb!
When someone sends XRP to someone else its called a transaction, or TXN for short, the XRP token value being sent is debited or taken from their XRP wallet balance and credited to someone else’s Wallet, the request is sent over the XRP Distributed Ledger, the TXN (transfer) is picked up by multiple Validators and each checks their own local Ledgers to make sure both wallets actually exist and that the balance of XRP in the senders wallet will cover the request, all the the validators that are involved in this TXN come to consensus (they all compare their own local Ledgers to each others and make a decision) and if consensus is agreed (all the involved validators confirm the TXN is valid) that both wallets do exist and the sender does have enough XRP to complete the transfer then the Ledger entry on all involved validators will reduce, debit, the senders wallet and increase, credit, the receivers wallet by the transferred amount, they all now update their own Ledgers and all is done in the blink of an eye, all involved validators will now sycronise their ledgers with others validators (nodes) in their set group or whats called a UNL (unique node list). As each of the validators may also exist in a different group/UNL, called overlap, the other group where they also exist is also synchronised with this TXN. Due to this overlapping of group eventually every validator (node) in every UNL will be synchronised, therefore the Distributed Ledger across all nodes (validators) will be synchronised. Pheww that was a tough bit! 🙂 Here is a pic that might help,or maybe not 🙂
Consensus Verification and no supper for you!
I remember as a kid I might ask my mum if I can come home late and she would say yes, I will come home late and get in trouble by my dad because I never asked him, and vice versa! So I learnt quickly that to avoid getting in trouble and avoid getting no supper I would ask both mum and dad, I now had consensus agreement from all parties that I could come home late! If a validator consistently fails to come to consensus, it’s Ledger is not identical with other validators, then it is thrown of the DLT network, either it is being very naughty (or someone is trying to be very naughty) or its just a slacker server, either way it gets no supper! Until it can prove it can behave.
Irreversible, no charge-back and written in blood on the Blockchain
OK so its not actually written in blood but when a transfer has been verified by consensus and completed a space within the Ledger, refereed to as a block, records the transaction as a block of code (computer data), lots of transactions grouped together create a Blockchain (a long chain of blocks of transaction codes), this code is irreversible and permanent and open to the world to see. Every time you complete a transfer from your wallet or an Exchanges wallet or what ever you used to make the XRP transfer you will be given a type of receipt with a Blockchain reference or ID, this reference points to the position within the chain of blocks (Blockchain) where the record of your transfer is permanently recorded and kept, forever!
The use of the word TOKEN does cause confusion, tokens are what you buy to go on fair ride, visit a Casino or releases a shopping trolley, you pay for them then stick them in you pocket. XRP is actually refereed to as a Digital asset! An asset is something that you own, like a house, a car, a Rolex timepiece, these are all assets that have an exchangeable value.
If I own £100 of the digital asset called XRP then I buy another £100 of XRP do I now own 2 XRP digital assets each worth £100? NO, I now own a digital asset called XRP that is worth £200
The XRP Digital Asset exists as only as a digital value within the XRP Distributed Ledger, my XRP digital asset might be worth £100 and your XRP Digital asset might be worth £10,000 and both will be recorded the XRP ledger, exact same copies of the Ledger are held on hundreds of servers called nodes/validators and they are spread around the world making it a Distributed Ledger, robust and indestructible, if I ran a node from my house and an asteroid hit my house nothing would happen to the XRP DLT.
A XRP Wallet is simply an account that exists on this Distributed Ledger, a bit like how your bank account holds your savings, and it can read the XRP balance for this wallet from the distributed Ledger. When you request to transfer XRP ( you are only transferring a balance value not actual XRP tokens) a number of validators then have have a chat and if consensus is reached, if one validator disagrees it is ignored but ordered to sync, the XRP token value transfer is verified and the TXN is written into the Blockchain, all the Ledgers in the same UNL (group) synchronise their Ledgers with the respective credit and debit values between the wallets (Ledger accounts), due to Validator overlapping within other UNL’s the other validators in the different UNL on the DLT also then sync their Ledgers with each other’s, almost like a virus spreading through a network. When TXN is written into the Blockchain it is kept forever for the world to see and is therefore Not Private or said to be Uncensored!
As the XRP DLT Blockchain is Uncensored it is no good to drug dealers or kidnappers who want to keep their transactions Private and censored, this contradicts some uneducated persons and what some media outlets like to report about ALL Blockchains.
However, Some Crypto coins do have a censored/private Blockchain
Easy peasy lemon squeezy! 🙂