Ripple is an American start-up that specializes in helping banks and payment providers. It helps these organizations to organize processes more efficiently by means of their own technology.
What is Ripple and how does it work?
- What is Ripple?
- How does Ripple work?
- How is Ripple different from bitcoin?
- Where can you use Ripple?
- What's next for Ripple?
Ripple's goal is to be a global clearing network, a platform that allows anyone to transfer money in any currency to any currency in seconds. This is an ambitious goal to eliminate the use of older systems such as Western Union or SWIFT.
How does Ripple work?
Consider this scenario: Alice and Bob need to send money to each other. Alice uses Jamaican dollars (JMD) to conduct her business, while Bob operates Bangladeshi taka (BDT).
While it may not be obvious to end users, the process behind sending Bob's money involves converting the JMD to a common currency such as USD, then transferring the money between Alice and Bob's bank. Finally, the USD is converted back to BDT in Bob's bank. This adds a lot of cost to any exchange and wastes a lot of time. The Ripple network and currency aims to solve this problem.
The alternative that Ripple proposes is to use XRP as a common currency that underlies all money transfers between different currencies (USD is currently the most common currency). Not only are transaction fees much lower to convert from a currency to XRP and back, but transfers take up to 4 seconds to execute and verify.
Quite a few global banks have already started embracing Ripple because it saves them a lot of money in the long run by avoiding exchange rate fees.
How is Ripple different from bitcoin?
The Ripple coin and the Ripple network were built with slightly different purposes in mind, and it is worth considering whether they offer any advantages over bitcoin.
Fast and cheap: Ripple transaction processing takes just four seconds as it is significantly less active compared to bitcoin. This has the added bonus of cheaper transaction fees, while the price for bitcoin transactions has been rising lately as more people use Bitcoin.
Mining free: All 100 billion XRP that can be used on the platform already exist. While not all of them are on the market - a few are released every month to prevent flooding - there is no use of mining because there are nothing of value can be added, unlike more traditional cryptocurrencies.
Bank Acceptance: The Ripple platform and coin accepted by banks gives the process legitimacy and, at least from the buyer's point of view, can be a bit more reassuring. This is not the case with bitcoin and other currencies as they are seen as competition by the banks.
Where can you use Ripple?
XRP is not nearly as accepted as coins like bitcoin, litecoin or ether. It was never the goal to use Ripple as a payment method. Instead, the goal has always been to use XRP to lubricate the wheels, to make fiat money transfers easier, faster and safer.
However, there are still a number of merchants that accept Ripple. you can here find a list on the XRP forums.
What's next for Ripple?
The company behind Ripple plans to prioritize the lack of decentralization that the platform is currently suffering from. By adding more trusted validator nodes, the company plans to shake off the image that it is just another central bank controlling the Ripple currency.
With that said, the future of Ripple seems to depend entirely on the adoption of the platform by banks, which is where the focus of the people behind Ripple should probably be. As more banks join the network, the price of XRP will no doubt continue to rise, driving more people to the coin and encouraging banks to join the platform.