Other Alternatives

Some other alternatives have emerged in parallel for blockchain consensus mech- anism. As PoW mining is costly in terms of energy usage, proof of stake (PoS) came as a substitution where computational power is replaced with the “stake” in the network. The idea is that the more capital a node has invested in the network, it is more likely that the node will want the network to succeed rather than attacking the system. In PoS, the probability of adding the block in the blockchain by a node is proportional to the relative stake of that node in the network. PoS can be incorporated with PoW as well as BFT based protocols.

In Algorand blockchain [58], the authors proposed a PoS Byzantine agree- ment protocol with participant replacement mechanism. Ethereum’s Casper [59] is another permissionless blockchain implementation with PoS consensus.

Proof of Elapsed Time (PoET) is a consensus algorithm proposed by Intel where the computational puzzle in PoW systems get replaced by trusted execu- tion environment (TEE) such as Intel’s Software Guard Extension (SGX). The consensus mechanism is leader based, and leader must be randomly chosen to add a new block. Each node has to wait a random time interval and node with the shortest waiting time will be the leader to finalize a block.

Furthermore, SGX can verify the proof that waiting time is indeed random, and the winner has completed that time duration. Currently, Hyperledger Saw- tooth platform deployed PoET in its permissionless and permissioned version. The security of PoET depends on the trusted hardware modules as an attacker nodes might perform rollback attacks and key extraction [44].

3.5. SUMMARY 31

3.5

Summary

We have discussed the necessary background on blockchain, its key components, and particularly different types of consensus mechanism. We outlined how con- sensus in Ripple or Stellar differ from PoW and standard BFT based consensus. In the next chapters, we will talk about the Ripple credit network, its consensus algorithm, and our security analysis.

Chapter 4

Ripple Credit Network

4.1

Introduction

Ripple is a distributed payment system and global remittance service based on credit networks [11]. The initial idea behind Ripple network started with I Owe You (IOU). It was drafted by Ryan Fugger back in 2004 [60]. Since then Ripple payment system [61] has evolved independently of Bitcoin and gained consid- erable popularity over the years after its public inception in 2013. Originally, Ripple has emerged as a competitor of Bitcoin with much faster transaction validation speed (average 5 seconds). In recent times, the Ripple network has flourished more as an alternative platform for traditional cross border payment systems (e.g., SWIFT). As a cross border transaction between two banks in- volves hefty processing fees and considerable time, the Ripple network promises to reduce both significantly. Over 200 banks and financial institutions (e.g., CBW Bank, Royal Bank of Canada, Santander) have already adopted the Rip- ple network to improve its payment processing [62]. For example, Spanish bank the Santander group has estimated using Ripple could save them 20 billion US dollars annually [63].

Ripple’s built-in currency XRP is consistently among the top three cryp- tocurrencies by market capital along with Bitcoin and Ethereum [64]. The XRP does not involve any mining like Bitcoin, and initially, a total of 100 bil- lion XRP units were created to start the system. In the beginning, Ripple founders held 20% of those units, Ripple Labs retained 25%, and the remaining 55% was planned to promote the growth of the network. It is by far, one of the largest holdbacks in any cryptocurrencies; however, it did not stop Ripple to attract a large pool of users. Currently, Ripple Labs releases that 55% of total XRP for public trading into a series of escrows [65]. For instance, the XRP circulating supply is increased from 27 billion units in 2013 to 43 billion units in 2019 [64]. On January 4th, 2018, XRP market capita momentarily surpassed 148 billion US dollars and recorded each XRP unit worth 3.84 US dollars [66]. At the time of writing, Ripple network claims to have a total network value

34 CHAPTER 4. RIPPLE CREDIT NETWORK

of approximately 26 billion US dollars over 1.8 million accounts [67, 68]. This has been a significant increase in terms of network growth since the time of our study in 2015 [16] when Ripple had a market value of 960 million US dollars with little above 150,000 accounts.

One can relate Ripple’s transaction mechanism to medieval Hawala system. At the core, Ripple’s transaction model is built upon a network of pairwise trust among users in terms of credits [69]. Ripple payment system enables the transfer of traditional fiat currency (e.g., USD, Euro) together with cryptocurrencies (e.g., BTC, XRP) through IOU credit paths in user-defined currency. An IOU transaction is only possible if there exists a credit path between two users. In 2014, the International Ripple Business Association deployed several Ripple gateways and market makers [70] around the world to make Ripple credit graph complete. The Ripple ledger (also known as XRP ledger ) is an immutable public blockchain which keeps track of the transactions, account information, credit links since the genesis block. The Ripple consensus protocol [5] supports its blockchain and helps participants to agree on a new block containing a set of transactions. However, Ripple’s consensus protocol is non-standard and differs from traditional PBFT consensus [4], which makes its security an open problem. The presented work in this chapter and the next chapter is based on the January 2015 version of Ripple protocol and previously published description in [16]. In this chapter, we give an overview of the Ripple system and related works on its security and privacy.