Traditional payment networks struggle to keep up with the pace of technology. Currently, it’s only easy to send money to another person if you’re both in the same network or country. For instance, if you’re in California, it’s typically fast and easy to send USD to someone in Michigan. But if you’re in the U.S. and your recipient is in Europe and wants to receive their money in EUR, you’re looking at a much slower and more expensive transfer.
But what if you could send money to anyone in the world and they’d receive it quickly, inexpensively, and easily in their native currency? The Interledger Protocol offers that solution.
Intereldger is an open protocol (i.e. anyone can adopt and use it) that allows for value transfers across different ledgers and networks. It works much like the Internet, but instead of routing packets of information like the web, it routes packets of value. And these packets can connect to any ledger, from traditional banks and payment systems to digital wallets and blockchains.
Even better, the value packets can be split into lower-value packets, lowering the risk of large values being lost. And these packets take the shortest path to their destination, so they’re super fast, secure, and come with much lower fees than traditional transfers.
Using Interledger, you can quickly and easily send USD to someone who wants to receive it as EUR. You can even send XRP to someone who wants to receive ETH or USD. Much like you can easily send an email to someone virtually anywhere in the world regardless of their email provider, Interledger allows you to send money to anyone regardless of their location, currency, or payment network.
The Interledger network comprises computers called nodes. The protocol includes rules that define how nodes send value packets across the network. The nodes might assume one or more of three roles:
The sender initiates a private value packet transfer, aka sends money
The exchange node applies a currency exchange so the receiver can get the money in their preferred network and currency. It then forwards the packets of value that the sender initiated to the receiver (or another exchange node if it cannot directly reach the receiver).
The receiver gets the value packet(s) in their network and currency of choice.
These individual transactions don’t touch the underlying payment system because Interledger sits on top of it, allowing for an unlimited number of transactions, which are fast, secure, and inexpensive. It’s basically a messaging system for payments.
Because Interledger doesn’t rely on an individual payment network, it’s entirely interoperable, allowing for value transfers across virtually any network type. This interoperability unlocks all sorts of potential for traditional and nontraditional payments alike.
For example, right now, blockchains are essentially siloes—the tokens you have on one chain mean nothing everywhere else, so you can’t send Ethereum to your friend’s Solana wallet. To create strong mainstream use cases for blockchain, tokens need the ability to travel across multiple blockchains, which is exactly what Interledger’s interoperability offers.
In a fully Interledger-enabled world, you could send Ethereum, Solana, USD, EUR or any other currency to anyone anywhere in the world, and they’d receive it quickly, inexpensively, and in the currency they find most useful. So not only is Interledger interoperable, but it has the potential to increase financial access and inclusion on a global scale.
If you’re interested in further exploring Interledger and its vast potential, check out the following projects and opportunities to get more involved.
The Interledger Foundation is a nonprofit organization advocating for the creation of open payment standards and technologies that promote innovation, creativity, and inclusion. The site offers many resources and opportunities for developers, creators, and others who are looking to build with and advance the Interledger Protocol.
Grant for the Web is an Interledger Foundation program funded by Coil. The program offers grants for content creators, developers, and other web custodians seeking to tackle some of the web’s most pressing issues, such as centralization, inequality, and lack of privacy.
To get involved with Interledger and the vibrant community working to build a better web, check out the Interledger Summit 2022.