The Interledger Protocol facilitates sending funds across different payment networks by segregating transactions into smaller packets.
The Interledger protocol facilitates payments across two or more payment networks, aiming to enable direct transactions while also allowing for the involvement of intermediaries where necessary. It is a payment protocol fostering interoperability among diverse financial systems.
Although Ripple led the initiative, the World Wide Web Consortium provided feedback on the design of ILP, which is still undergoing active development, with numerous organizations and individuals contributing to its refinement.Conventionally, cross-border transactions often encounter challenges due to the fragmentation of payment protocols, making it difficult for the protocols to communicate via connectors.
The sender creates the prepare packet and sends it to the connector, who relays it until it reaches its designated recipient. The recipient could accept or reject the packet by responding with a fulfill or reject packet. Connectors relay the receiver’s response back to the sender. Upon receiving a fulfill packet, the sender confirms successful delivery and continues sending prepare packets until the full value transfer is complete.
In atomic mode, the system integrates notaries, an ad-hoc group entrusted with verifying and validating transactions. Atomic mode transactions typically take place between reliable connector nodes connected to financial institutions.native currency, to execute transactions. Fund transfers using universal mode are time-sensitive. If the transaction isn’t completed within the stipulated, the system nullifies it.
The Interledger Protocol’s architecture empowers developers to introduce innovative financial products, leveraging its decentralized design to create reliable and secure platforms. Notably, ILP supports micropayments, allowing users to make small payments globally and offering a distinct advantage over conventional payment methods.In addition, the ILP can handle a high volume of transactions over multiple networks because of its highly scalable design.
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