What is Ripple?
Ripple is both an open payment network and digital currency (XRP). It’s an open source, distributed payment system which is still in beta. The Ripple system aims at helping users break free from what they call “walled gardens” of payment and financial network, i.e. banks, PayPal, credit cards and other financial systems that charge for currency exchange and restrict access with fees.
In essence, the Ripple system is a cryptocurrency that targets to connect banks worldwide to facilitate cross-border transactions and payments systems. Ripple has faced some backlash in the cryptocurrency world given that it aims at assisting banks while a majority of other cryptocurrencies such as Bitcoin aim at eliminating banks.
What Is the XRP token?
A Ripple token is a native cryptocurrency and a consensus ledger; think of it as a digital coin. It was built specifically for financial institutions and enterprises for acquiring liquidity in cross-border transactions on-demand. Banks and other financial institutions can use the XRP tokens to source liquidity instantly. Payment providers can use it to improve speeds of settling payments, reach other markets and reduce the foreign exchange cost. You can also exchange or buy XRP on various popular cryptocurrency platforms.
Who’s behind Ripple?
The Ripple Protocol is being built by Ripple Labs (formerly known as OpenCoin), a company that was co-founded by Chris Larsen and Jed McCaleb. Larsen is also the co-founder and pioneer of an online financial company known as E-LOAN. McCaleb has deep knowledge and experience in the digital currency world, having previously worked with Mt. Gox and creating eDonkey, Overnet and Stellar. Most of the other Ripple’s developers also do have extensive Bitcoin experience.
Other notable members of the Ripple team include Marcus Treacher (Head of Strategic Accounts), Antoinette O’Gorman (Senior Compliance Officer), David Schwartz (Chief Cryptographer), Patrick Griffin (Head of Business Development), John Mitchell (Head of Global Sales) and Stefan Thomas (CTO). The company’s board of directors has vast experience in regulation, policy, and finance.
Ripple is a truly international company with offices in many countries around the world. Some of the offices are in San Francisco, New York, London, India, Luxembourg, Singapore, and Sydney. Stellar Labs has also recently received funding from a number of sources including Andreessen Horowitz, Lightspeed Venture Partners, Bitcoin Opportunity Fund and Vast Ventures.
How does Ripple work?
The Ripple system has three main elements i.e. xCurrent, xRapid, and xVia. However, we will try and keep things simple by focusing on the core function of the system; allowing cross-border transactions between banks. The system essentially provides a bridge between currencies.
If a bank wishes to trade its GBP for a USD for instance, it might take several days and can be quite costly. The ripple platform works by providing a central currency; the XRP. So instead of directly trading the GBP for the USD, the UK bank trades the GBP for the XRP and then trades the XRP for USD. The reverse is also true for a bank trading USD for GBP.
While this might seem to add an extra step in the transaction process, it actually takes just about 5 seconds and costs a very small fraction of the current cost. This would allow the bank in the above example to trade GBP for USD in just 10 seconds for a fee of less than 0.1%. This is extremely fast compared to the old system that takes several days.
This particular example demonstrates how the Ripple system speeds up the cross-border trade and reduces fees. Let’s take another quick look at the specific use cases of the Ripple.
Use cases and real market problems that Ripple aims to solve:
• Slow Settlement Speeds: as explained above, banks and institutions currently require a number of intermediaries to execute cross-border payments. As a result, payments can take about 3 to 5 days to go through successfully with the current system. The Ripple Payment system will speed up transactions from 3-5 days to about a little as 5-10 seconds.
• High Operational Costs: By reducing the number of intermediaries involved in cross-border payments, the Ripple transaction will be able to reduce the cost of transactions by up to 60%.
• Payment Failure: the current rate of cross-border payment failure averages at 4%. Failed payment courses unnecessary delays and inconveniences to the parties involved. The Ripple system promises to track all payments made on the blockchain and prevent any potential transaction failures.
Other use cases of the XRP:
• Real time Gross Settlement
• Payment for digital goods and other near-instantly products and services.
• P2P purchases
• Central Bank IOU
• Decentralized Exchange
• Online Voting
Ripple (XRP) News
If you want to keep up with the news about Ripple, this are the main channels to follow:
Ripple is likely to provide valuable solutions to many banks and financial institutions by allowing them to execute cross-border payments faster, at a cheaper cost and with ease. The crypto industry is expecting a very successful future for the Ripple System, and so are we.