How do they compare?
In Ripple, users make payments between themselves by using cryptographically signed transactions denominated in either Ripple’s internal currency named XRP or in arbitrary other assets (including real-world assets such as dollars, gold, air miles, etc.). For XRP-denominated transactions Ripple can make use of its internal ledger. For payments denominated in all other assets, the Ripple ledger only records the amounts owed by one user to another. In this way, all these assets are represented as debt. Since Ripple only keeps the records in its ledger and has no real-world enforcement power, this requires trust. Users have to specify which other users they trust and to what maximum amount. This can be specified for each asset type individually.When a non-XRP payment is made between two users that trust each other, the balance of the mutual credit line is adjusted, subject to limits set by each user. In order to send assets between users that have not directly established a trust relationship, the system tries to find a path between the two users such that each link of the path is between two users that do have a trust relationship. All balances along the path are then adjusted simultaneously and atomically.[13] This mechanism of making payments through a network of trusted associates is named ‘rippling’. It is a digital version of the age-old hawala system[20] and has been referred to as ‘Facebook for money’.
