The Interledger Protocol (ILP) is an open standard for routing payments across different payment networks and ledgers — in the same way that the Internet Protocol (IP) routes data packets across different computer networks.
The goal is an "Internet of Value": a world where money moves as freely and cheaply as information, without being locked into any single payment network, bank, or blockchain.
The Problem ILP Solves
Today's financial system is fragmented. A bank account at JPMorgan Chase, a PayPal balance, a mobile money account in Kenya, an XRP wallet, and a Bitcoin address are all fundamentally isolated from each other. Moving value between them requires crossing institutional boundaries, each with their own rules, fees, and settlement times.
The Internet solved a similar fragmentation problem for data. Before the Internet, computer networks were proprietary and isolated — sending a message from an IBM network to a DEC network required manual conversion. TCP/IP created a universal routing language that any network could speak, allowing packets to traverse multiple incompatible networks on their way to the destination.
ILP proposes the same solution for value. Instead of routing data packets, ILP routes payment packets — small units of value that can cross from one ledger or payment network to another, with each hop either settling natively or using a connector (an entity that holds accounts on both sides of a hop and facilitates the transfer).
How ILP Works
ILP defines a simple layer on top of any payment system. The core concepts:
Accounts and ledgers — an ILP address identifies a payment destination, independent of which underlying ledger or payment system holds the actual funds.
Connectors — entities that hold accounts on multiple ledgers and agree to route payments between them for a fee. A connector might hold both USD bank accounts and XRP. When a payment needs to cross from a dollar ledger to an XRP ledger, a connector bridges the gap.
Packets — payments in ILP are broken into packets, each carrying a small unit of value plus routing and cryptographic commitment data. Large payments route as multiple packets; failed packets can be retried without losing the whole payment.
Atomic settlement — ILP uses a cryptographic commitment mechanism (based on hash-lock conditions) that ensures either all legs of a multi-hop payment settle, or none do. This prevents a connector from receiving value on one leg without delivering it on the other.
The analogy to TCP/IP holds technically as well: ILP operates at the application layer of payment systems, regardless of the underlying settlement mechanism — blockchain, bank transfer, or mobile money.
ILP, XRP, and Ripple
Ripple co-created the Interledger Protocol in 2015, with Stefan Thomas and Evan Schwartz as the primary authors. Ripple donated ILP to the World Wide Web Consortium (W3C) as an open standard, meaning it is not owned by Ripple and can be implemented by anyone.
XRP and the XRP Ledger fit naturally within an ILP network as a settlement layer for connector liquidity. When two connectors hold XRP, they can settle obligations to each other instantly and cheaply via the XRP Ledger. This is the architectural logic behind Ripple's On-Demand Liquidity product: XRP serves as bridge currency in an ILP-style routing architecture.
But critically, ILP doesn't require XRP. Any liquid, low-cost settlement asset — or even direct bank connections — can serve as the settlement layer for ILP connector hops. The protocol is deliberately asset-neutral.
Web Monetization and Browser Integration
ILP's most unusual application is Web Monetization — a W3C proposed standard that allows websites to receive micropayments directly from visitors' browsers, rather than serving ads.
The concept: a user subscribes to a Web Monetization provider (like Coil, which has since evolved) and their browser streams tiny ILP payments to any website they visit that includes a Web Monetization meta tag. Publishers receive fractions of a cent per second of engagement — microtransactions that are too small for credit cards but trivial on ILP.
This application targets the attention economy: a payment mechanism that pays content creators directly proportional to how much their content is consumed, without requiring ads, subscriptions, or payment friction.
ILP's Relationship to ISO 20022
ILP and ISO 20022 operate at different layers of the payment stack.
ISO 20022 is a messaging standard — it defines the format and data structure of financial messages (payment instructions, account statements, trade confirmations). It doesn't specify how payments route or settle.
ILP is a routing protocol — it defines how payment packets move from ledger to ledger. It doesn't specify what data travels inside those packets.
In theory, the two are complementary: ILP could route payment packets that carry ISO 20022-structured payment data, enabling automated routing of structured financial messages across a multi-ledger network. This integration is architectural potential rather than deployed reality, but the technical pieces are compatible.
Current Status
ILP is maintained by the Interledger Foundation, a non-profit that stewards the open standard and supports ecosystem development. The protocol is live and operational — there are running ILP connector networks, and Ripple's ODL product uses ILP architecture.
Mass adoption of ILP as a universal payment routing layer remains a long-term vision. The practical challenge is the same as any network protocol: adoption requires simultaneous participation from many parties on both sides of each corridor. The technical standard exists; the network effects required for ubiquity take longer to build.
This article is for informational purposes only and does not constitute financial or investment advice. Always conduct your own research before making investment decisions.