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## Interledger
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Interledger is a protocol stack for routing and clearing payments through a distributed financial architecture and automatically settling those payments through many possible underlying systems, which may not even include blockchain. It is akin to the Automated Clearing House (ACH) in the USA, the EBA Clearing network in the Single European Payment Area (SEPA), AusPayNet in Australia, VisaNet, and SWIFT for international transfers. It is more flexible in its design the the above, and can actually be seen as an upgrade to ISO8583 (financial card spec with a hierarchical addressing scheme, like a credit card).
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Within a local network, Interledger can facilitate the accounting for transfer of value between each resource specification in a ValueFlow. However, this requires each entity creating resource specifications to create a reserve account with an asset code for each type of resource specification along with a conversion rate to the asset code for the local currency in which value flows between organizations.
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The basic technical flow:
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* To initiate a payment, the application layer (likely a wallet) looks up a dynamically created Interledger protocol (ILP) address and shared secret by using the Payment Pointer spec and SPSP (simple payment setup protocol) over TLS.
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* With the ILP address and shared secret it can initiate a connection through a tunnel to it's local connector.
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* Once it is connected it can use ILDCP to know the asset code (essentially the local currency or token used) and asset scale (a number determining the power of ten to represent the minimum denomination, like 2 for 0.01) and begin negotiating a payment.
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* A route is either found or not found to the final address while beginning to negotiate the payment.
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* The applications communicate with the network with the STREAM protocol over ILP.
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* Data and payment packets are routed over the negotiated route(s) to the final address.
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* Payment is cleared through the ILP network.
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* At mostly regular intervals, the connector nodes use their settlement engines to settle their balances between them.
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* When the final wallet wants to claim the funds transferred to their ILP address, the settlement engine needs to initiate a transaction from the connector's reserve into the receiver's wallet, limited by the unclaimed amount in associated with the dynamically created ILP addresses and shared secret. This step might happen daily, hourly, or whenever a convertible amount of value streams into the account.
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Interledger is a protocol stack for routing and clearing payments through a distributed financial architecture and automatically settling those payments through many possible underlying systems, which may may not include various blockchains. It is akin to the Automated Clearing House (ACH) in the USA, the EBA Clearing network in the Single European Payment Area (SEPA), AusPayNet in Australia, VisaNet, and SWIFT for international transfers. It is more flexible in its design the the above, and can actually be seen as an upgrade to ISO8583 (financial card spec with a hierarchical addressing scheme, like a credit card).
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* [Interledger Onboarding](interledger) |
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