The global settlement network Ripple, whose protocol has been already introduced by a number of influential banks and which, according to the BNY Mellon's analysis, is likely to compete with SWIFT in the foreseeable future, released a new protocol for payments across different payment systems called Interledger.
The protocol allows those who use different ledgers to connect them with each other and to produce secure transfers between the ledgers. The protocol itself is not a ledger, nor does it require a blockchain, thus being able to connect bitcoin's blockchain with traditional payment networks. The operation is made via so-called connectors which, unlike those used previously, make it impossible to lose the data or get the money stolen.
“The sender of a payment is guaranteed a cryptographically signed receipt from the recipient, if the payment succeeds, or else the return of their escrowed funds,” says the original white-paper.
According to the official press-release, what Ripple wants to achieve with Interledger is the diminution of the two core problems their partners have often drawn their attention to. The first one, namely the scalability problem, is resolved through Interledger “simply by adding more connectors and ledgers”, to make the protocol able to handle unlimited payment volumes.
The second problem is privacy of transactions, as “banks prefer not to have aggregate transaction data recorded on the ledger”. The privacy is secured by the technology called cryptographic escrow:
“Transfers are escrowed in series from the sender to the recipient and executed using one of two modes. In the Atomic mode, transfers are coordinated using an ad-hoc group of notaries selected by the participants. In the Universal mode, there is no external coordination. Instead, bounded execution windows, participant incentives and a “reverse” execution order enable secure payments between parties without shared trust in any system or institution.”
The Interledger creators believe that the new protocol will also enhance Ripple's core product, Ripple Consensus Ledger, which serves as a base for Ripple's own cryptocurrency called XRP.
Four days ago Ripple raised $4 million from the London-based tech investment fund Santander InnoVentures. The fund was established by Santander Group in 2014 “to support the digital revolution”. A report published by Santander InnoVentures in June claimed that banks could save up to $2 billion a year using blockchain technology. The bank itself is currently developing the "proof on concept" based on Ripple's international payments technology.