Let’s get started by clearing out the misconception in the minds of the people. Many think that Ripple is a cryptocurrency just like Bitcoin. Well, the first thing you must know is that Ripple is platform apart from being a cryptocurrency. The Ripple platform is an open-source protocol which was basically developed to allow fast and inexpensive transactions. As far as its coin is concerned, it is pretty different from Bitcoin.
Ripple was primarily created to solve a fundamental problem in the international monetary system. In other words, this platform and currency were designed with an ambition that it can rule all the international transactions worldwide. Ripple came up with this aim because transactions across national borders lead to hefty fees to be paid to the banks. However, it’s only a matter of time, which can tell us how far this platform and currency can get.
What is Ripple?
Ripple is an open-source protocol mainly used in banking and finance as a distributed peer-to-peer payment system. An interesting characteristic of Ripple technology is that it’s currency independent. That is, a transaction made using the Ripple network can be processed in any currency of the user’s choice.
Introduction to RippleNet
RippleNet (Ripple Network) is a network of institutional payment providers such as banks and other money services businesses that use solutions designed by Ripple to provide a smooth experience to send and receive money throughout the world.
What is Ripple trying to solve?
Consider the following example.
Let’s say there are three persons, Bob, Millie, and Robert. Bob lives in New York and has an iPhone that is not much useful to him. However, he needs a football, which he does not have. Secondly, Millie, who lives in Canada, has a football which is she doesn’t need. But, she requires a pair of shoes which she doesn’t have. Finally, there is Robert who lives in London and has a pair of women’s shoes, which he does not need. But, he is in need of an iPhone.
In the above system, it is almost impossible for all three parties to find each other and make the exchanges.
But, in the world of Ripple, they could claim the stuff they’re interested in buying or selling, because the system will look for the shortest and the cheapest combination to make the deal.
Furthermore, the platform allows users to make payments in any currency with a very minimal transaction cost of around $0.00001.
Understanding the technology behind Ripple
Ripple is quite a unique technology. Ripple has a special role in the world of blockchain. Unlike other projects that try eliminating the use of traditional banking system in their technology, Ripple mutually tries to corporate with them.
And until now, the RippleLabs, the organization behind Ripple, has introduced several products such as xCurrent, xRapid and xVia which can be used by networks (banks) to process transactions globally. Moreover, the XRP token serves as a bridge currency in the Ripple network as it is used to process these transactions.
In simple terms, the input currency is exchanged into XRP and transmitted over the Ripple network prior to the transaction. Once the amount reaches the recipient, it is exchanged back into the output currency (decided by the recipient). Hence, this easily facilitates transactions between two different currencies. Currently, XPR is the only coin being used in RippleNet. Nonetheless, it is possible for banks to come up with their own coins and use them in the network.
What is XRP?
XRP is a cryptocurrency or a token which is primarily used for representing the transfer of value across the RippleNet. It acts as a mediator for both – cryptocurrencies and fiat currencies. In simple terms, XRP plays the role of a ‘Joker.’ For example, if you want to exchange dollars to euros, XRP can become the dollar with the dollars, and euro with the euros.
XRP significantly minimizes the commission as well. And as mentioned, the transaction cost on Ripple is just $0.00001.
Did you know? After a transaction in the network is complete, the commission amount of $0.00001 ‘disappears’ from the platform and cannot be replenished. So, after every transaction, the world loses $0.00001 forever.
Currently, Ripple (XRP) is trading at $0.29. The market cap of Ripple is $12,802,551,768 and has a 24-hour trading volume of $974,212,097. Out of the maximum supply of 100,000,000,000, the current circulating supply is 42,872,646,068 XRP.
Investing in Ripple: The Pros and Cons
Ripple is an official platform which has gained trust from several banks. It is different from other platforms, as it does not operate based on blockchain technology.
There is no inflation in Ripple. All the XRPs are mined and already exist.
This technology was designed specifically so that the banks make use of it. Thus, the more the banks use it as their common transaction platform, the higher becomes the value of Ripple.
The whole idea cryptocurrencies were to decentralize the payment system. But, Ripple is highly centralized. Moreover, as the tokens are already mined, the Ripple developers can determine when and how much of Ripple to release. So, the entire control is with them. Hence, basically, it is like investing in a bank.
Ripple is like a game of monopoly because, in addition to centralization, Ripple Labs own 61 per cent of the XRP coins.
Though Ripple is an open-source protocol, it has high chances of getting hacked once the code is accessible to the hackers.
Ripple in the Real World
Spanish bank Santander, Western Union, American Express, and UniCredit are some of the largest RippleLabs’ customers. Additionally, there are other financial services as well who use Ripple technology for making internal transactions.
Presently, many banks are using the Ripple network to process global transactions. By this, they are saving up to 70% of the usual transaction costs.
Furthermore, to meet the complex needs of financial institutions, many companies and banks are utilizing products developed by RippleLabs such as xCurrent and xRapid.
Hence, this is how Ripple technology is getting closer to its goal every step of the way.