We live in the digital era, when with the spread of the Internet and connected to it devices, information has become totally shareable and accessible from anywhere. And not only the information — a lot of things became much easier to manage. But you can’t say the same about operations with money — especially, about money transfers. Situation hasn’t improved much. Everyone who has tried at least once to send money abroad or to receive them, knows that not only it takes a lot of time and charges a high fee, but also there is a risk that some mistake will happen and you will wait much longer or won’t get your money at all — not always banks are able to solve such problems. Simply put, every time you send money or somebody sends them to you — you are not sure that they will quickly and securely reach their destination.
Despite the development of online payments systems (such as PayPal) and networks that aim to help financial institutions to transmit information about money transfers (SWIFT, for example), sending even a little sum abroad is still time-consuming and costly. It is a huge problem for people, who are working abroad and send money home on a regular basis, or for freelancers whose employers are based abroad. And everyone can face those difficulties when he or she urgently needs money during vacation abroad.
It is the fact: the payment infrastructure hasn’t changed a lot — even with the Internet, artificial intelligence, blockchain and many other revolutionary inventions. But globalization progresses with accelerating speed, and free interexchange of money is the essential part of the completely new world, building of which is happening right now.
And, as you probably have understood from the title, today we are going to talk about the solution that solves the problem of interoperability in financial industry, making money transfers easy, fast and secure and diminishing borders between different forms of currencies and assets — Ripple.
Ripple, that beated Ethereum and became the second-largest cryptocurrency at the end of 2017.
Ripple, that partners with American Express and Santander and has announced its partnership with MoneyGram.
Ripple, that is called “the next Bitcoin” by some experts.
There is an opinion that it takes up to six months to fully understand Ripple. Well, let’s try to understand at least the basics of this revolutionary product and see what differs Ripple company and XRP coins from other blockchain-based projects and cryptocurrency.
First we must clarify, that there is a Ripple payment network and Ripple cryptocurrency (named XRP) — many people have heard about Ripple coins, but don’t know what project is behind. XRP tokens are just tools in the Ripple payment network that is a solution we’ve waited for long — a way to integrate digital currencies and assets into real world. Ripple payment network connects banks, financial institutions, payment providers, digital asset exchanges to interchange money all over the world seamlessly. It allows to transfer any form of currency or digital asset with minimized costs.
Ripple was designed not as currency, nor as consumer-oriented product. Ripple is a real-time payment protocol. Company has issued its own digital coins, but the main Ripple product is peer-to-peer payment network, which predecessor, Ripplepay, was launched in 2004, far before the invention of the blockchain. Ripple company, understanding the difficulties of money transfers, began to look for solution — Blockchain was the missing part to make this concept real. XRP tokens weren’t designed to become cryptocurrency the way Bitcoin was. Ripple coins (“the settlement tokens”, as company calls it) are used in banks and financials institutions, when they make transactions. XRP tokens can be transferred real-time across the world instantly and safely, reducing costs associated with international money transfers.
David Schwartz, Ripple’s chief cryptographer, explains the main aim of Ripple like that:
“Payment systems today are where email was in the early ’80s. Every provider built their own system for their customers and if people used different systems they couldn’t easily interact with each other. Ripple is designed to connect different payment systems together.”
Ripple coins have few crucial differences from Bitcoin. Firstly, Ripple is based on private, centralized blockchain, while Blockchain is completely opposite — it is based on public, decentralized blockchain. Secondly, they are designed to be much faster than Bitcoin: while Bitcoin can perform maximum 7 transactions a second, Ripple can handle 100. Also Ripple is non-mineable currency. Founders have issued all tokens that were possible to issue, and no more can be added.
100 billion XRP tokens were released, with 60% of them still owned by the company. It is the fact that is most often pointed out by opponents of Ripple as a weak side. But it is a two-edged sword. It means that company is able to influence the market, but is it necessarily bad? In case of any fluctuations or crisis on the market, Ripple can stabilize it. Decentralized uncontrolled market is a beast that can’t be calmed by anyone. Centralized system doesn’t always mean bad. We all have heard about “Bitcoin whales”, that have enough power to control the price of currency, while it formally stays decentralized and unregulated. Many projects and cryptocurrencies, that position themselves as decentralized and non-regulated, are not truly decentralized, nor they are non-regulated.
Ripple doesn’t have an aim to replace fiat money, which are backed by government. It aims to make transfer of money or any kind of asset instant and easy. Bank transfers not only involve high fees, but also require a lot time to be performed. Average time of Ripple transaction — 4 seconds. All transactions are recorded in the ledger, which is supported by a team of validators and engineers. Ripple has already launched several workable products, among them xRapid, that automates cross-border money transfer and minimizes liquidity costs, and xCurrent, that makes it possible for banks to perform cross-border payments instantly with end-to-end tracking.
Rather than trying to disrupt bank system and refuse from using traditional money, which is unlikely to happen in the near future, Ripple tries to make people’s life easier right now, using the privileges that are given to us by blockchain. With Ripple any kind of currency can be sent instantly, with almost no charge and on the international level. It makes money transfer easier, faster and more reliable, helping thousands of people around the globe now, not in some indefinite future.
