Rippling on the XRP Ledger refers to an atomic net settlement process between multiple parties with trust lines for the same token.
It’s a way to simplify the settlement of interconnected debts. Instead of each party paying each individual debt directly, rippling allows these debts to be consolidated and moved around in a more efficient manner, according to Daniel’s analyses on X (Twitter).
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How does it work?
Consider a scenario where you, Alice, and Bob all owe each other money in a circle (You owe Alice, Alice owes Bob, and Bob owes you). If Alice wants to pay back some of what she owes to Bob, rippling allows this payment also to reduce what you owe to Alice and what Bob owes to you simultaneously, in one neat move. Here’s a step-by-step analogy:
- Alice owes Bob 10 digital dollars (let’s say these dollars were issued by Bank A).
- Bob owes you 10 digital dollars (issued by Bank B).
- You owe Alice 10 digital dollars (issued by Bank A).
Alice wants to reduce her debt to Bob, but Bob doesn’t trust Bank A’s dollars. With “rippling”, Alice can pay Bob using the debt you owe to Alice, and simultaneously, the debt Bob owes to you can be reduced. So, Alice’s payment to Bob “ripples” through the connected obligations, settling multiple debts in one go.
Rippling and Trust:
Rippling is an efficient process, but it’s important to note that it doesn’t involve you ending up holding tokens you don’t trust. Instead, it simply adjusts the balance of the debts.
No Ripple Flag (for user accounts)
Sometimes, accounts might not want their debts (trust lines) to be adjusted by others, especially when dealing with different issuers (different banks/companies/projects). The No Ripple Flag is a setting that prevents these automatic adjustments or “rippling” through your account. When you “set” this flag, you say, “Don’t let others adjust my debts in their transactions.”
This is recommended for users!
The Default Ripple Flag (for issuers)
The Default Ripple Flag is a general setting that, when turned on, allows all incoming trust lines (debts owed to you by others) to be rippled through by default. Issuers usually need to enable this to allow users to send tokens to each other using the rippling process.
Using and Checking No Ripple Status
- Enabling/Disabling: You can turn the No Ripple flag on or off with specific transactions, given that certain conditions regarding the account balances are met.
- Checking Status: The status (on/off) of the No Ripple flag for any trust line can be checked using certain technical methods (like API calls) within the XRP Ledger. (See notes at the end for additional infos)
In a nutshell:
In simple terms, rippling allows easier settling interconnected debts in the XRP Ledger. However, with the No Ripple Flag, users can prevent their account balances from being involved in the rippling of others’ transactions. The Default Ripple Flag is a broad setting issuers use to allow or prevent rippling through their incoming trust lines.
Remember, while rippling is a fascinating feature that simplifies complex debt settlements, its usage and the usage of No Ripple flags need to be understood and managed well to ensure balances are not unexpectedly affected in the network.
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