Ripple's founders are the latest crypto billionaires.
The price of ripple has increased by 1240 per cent in the last 30 days, from around 25 US cents to $US3.38, surging past bitcoin cash and ethereum to become the second largest cryptocurrency.
This time last year, ripple was sitting at just under 0.7 of a US cent. That's an increase in value of 51,542 per cent in 12 months.
Ripple's market capitalisation — the price multiplied by the number of coins in circulation — is now $US130 billion ($181b), roughly half that of bitcoin, with ethereum on $US96b and bitcoin cash on $US41b
Two weeks ago, ripple's market cap was just US$36b.
Mike Novogratz, the billionaire investor who last month revealed he was "pressing the pause button" on plans for a cryptocurrency hedge fund amid uncertain market conditions, has warned 2018 will be a "wild ride".
"Ripple Labs worth $US225 billion," he tweeted on Thursday. "Tenth largest company by market cap in the world. Makes [co-founder] Chris Larsen worth $US55 billion tying Mark Zuckerberg as fifth richest man in the world."
He added in a follow-up tweet, "At one point in the 1989 Japanese real estate bubble, the Imperial Palace in Japan was said to be worth more than the entire state of California, things that don't make sense don't last ... be careful out there."
Larsen owns 5.19 billion XRP — the native currency of the ripple network — and a 17 per cent stake in the company he co-founded in 2012, according CNBC, putting his net worth at an estimated $US59.9 billion, ahead of Google founders Larry Page and Sergey Brin and just behind Facebook founder Mark Zuckerberg.
So what exactly is ripple, what makes it different from bitcoin, and what's behind the surge in interest? Ripple is similar to bitcoin in that both are decentralised ledger systems designed to facilitate transactions across the internet.
But while bitcoin is a decentralised digital currency, ripple is a "decentralised transaction network that also contains a digital currency", as former employee Nathan Ihara explained on Quora in 2013.
"The bitcoin network tracks the movement of bitcoins. The ripple network can track information of any kind," he wrote. "As a result, ripple can track account balances of any existing currency."
That, along with its capacity to rapidly settle cross-border transactions, has made it attractive to traditional banks and financial institutions, with more than 100 adopting the technology so far, including Westpac and UBS.
"Bitcoin and ripple use a different method to reach network consensus," Mr Ihara adds. "Bitcoin uses proof-of-work (mining). Ripple uses an iterative consensus process. As a result, ripple is faster than bitcoin. It only takes a few seconds to finalise transactions. It's also more energy efficient."
As IG analysts wrote in a recent note, ripple effectively positions itself as a "complement" to bitcoin, rather than its rival. "The ripple network is meant to allow the transfer of any form of currency, regardless of whether it is the traditional sort, such as dollars or euros, or the new types such as bitcoin," IG wrote.
Unlike bitcoins, which are "mined" by computers on the network at a set rate to a fixed 21 million out to the year 2140, ripple is "pre-mined", with 100 billion units in existence, 20 billion of which were retained by the founders.
"The interest in XRP appears to tie in with its proprietary blockchain that's focused on financial service companies," Motley Fool analyst Sean Williams wrote recently. "In particular, ripple's blockchain could allow for cross-border payments and transactions that occur instantly, rather than waiting days as under the current system."
In a 2015 report, cryptocurrency researcher Tim Swanson argued banks would embrace "permissioned" ledgers like ripple — which use legal entities to validate transactions on the network — as opposed to bitcoin's "unpermissioned" ledger which relies on anonymous miners.
"No bank's going to want to put a billion dollars of value [on a ledger] if it can be destroyed by anonymous validators," he told American Banker.
"The idea with the distributed ledger system is to say, 'How can we take the useful parts of bitcoin — or at least the ledger idea — and integrate it with businesses that have legal reputations?'"
But that cosiness with the traditional financial industry also creates suspicion among cryptocurrency diehards — after all, bitcoin's original purpose was to cut out banks altogether.