Ripple & XRP: The Internet Of Money by ChangeHero

Not many blockchain projects can boast a goal as ambitious as revolutionizing the entire financial sector — but Ripple can. Not every currency has seven years under its belt and currently third-largest market capitalization — but XRP has. Both Ripple and XRP are incredibly intriguing and worthy of attention, and not only because of their scale and size. In this article, we are going to tell you about more reasons to watch these two closely.

Long before Ripple, there was Ripplepay, developed by Ryan Fugger — a peer-to-peer payment platform where users were able to issue credit, a system of debt money. This idea later will take the form of On-Demand Liquidity, an integral part of RTXP — Ripple Transaction Protocol. Ryan would later help Jed McCaleb and Chris Larsen found OpenCoin and launch Ripple in 2012.

In the big picture, Ripple’s mission is to make blockchain to value the same thing as the Internet is to information today — a means of fast, reliable and transparent transfer. Their stance is to help centralized parties like banks and governments adopt blockchain solutions. Ripple Labs have seen some success, with a few banks and major institutions, like MoneyGram, American Express, PNC, Santander, SBI Remit and BeeTech, putting their products into use.

Even with the advent of the Internet and fintech, the banking system remains largely the same as it was dozens of years ago. Global remittance is steadily increasing, therefore, the demand for the facilitation of the process of sending money overseas should obviously be there. However, remittance is largely hindered by existing regulations regarding AML and compliance procedures, so much so that many banks offer wire transfers only. This is why Ripple Labs have come up with a solution.

The largest and most ambitious project of Ripple Labs is RippleNet — global exchange network, one of the main purposes of which is instant cross-border payments and exchanges. The technology that allows RippleNet to be used for it is built on top of a public ledger database called XRP Ledger. The network is designed to be used by banks and financial institutions, with XRPL’s native currency, XRP, acting as a bridge between borders and currencies.

XRP - Ripple - ChangeHero
Source: Ripple

Let’s say you’re making a remittance with one of the RippleNet participants, like American Express or InstaReM. They accept the sum you wish to transfer at the gateway, convert it into equivalent sum in XRP and transfer it over the blockchain as an IOU. At the destination gateway, the XRP is converted into fiat currency supported by that gateway, and the recipient gets the money you sent. On the surface level, the start and the end result of the operation are the same as a usual money transfer, but this transaction also requires way less time and fees.

Not only money transfer operators can make use of this system, but bigger financial institutions as well. The major hurdle at the moment seems to be the regulations, but with Ripple Labs’ Unique Nodes List and their general stance on keeping the ecosystem in check, this can be eventually overcome.

XRPL is open-source and not centralized. The ledger works using RPCA — Ripple Protocol Consensus Algorithm — with the help of validator nodes. For each transaction, the network creates a poll, in which nodes participate. If the necessary majority approves the transaction, the consensus is reached and it is carried out. The name “Ripple” comes from the idea of the algorithm checking transactions by using expanding levels of trust — like ripples on water. To quote Rome Reginelli, Documentation Engineer at Ripple: “…insight at the core of the XRP Ledger’s design is that a little bit of trust goes a long way”. This unique mechanism helps sustain the decentralized network and makes the confirmation faster than on any other major blockchain, let alone centralized financial network.

Instead of money, the ledger keeps track of debt or IOUs, and since transferring information about debt is faster than transferring actual value, the transactions are made within seconds. XRP in this process acts as a source of On-Demand Liquidity. Another feature of the coin is that it does not discriminate between one currency and another, being universal. But how is value in this system converted to IOU and back? This is where gateways come in. Each currency has one, and by using a certain gateway, the user grants their funds and trust to it.

At the moment of writing, XRP is capped at $8,921,479,365 and is sold for $0.205 according to CoinMarketCap.

Despite the claims that XRPL is independent from Ripple Labs, market players are concerned that its original developers have too much potential influence on the coin. Out of the existing supply of almost 100 billion XRP, most of it belongs to Ripple Labs. Besides, theoretically, there is nothing stopping Ripple Labs from introducing, even more, XRP to the market — except for the community’s trust. Finally, Ripple Labs keeps a so-called Unique Node List — basically, a list of trusted validators. With a list like that, it could be possible to force changes to the network bypassing the community, which is what decentralization is supposed to oppose.

Ripple is all about transfer solutions and has a wide spectrum of applications. Previously split into three different products: xCurrent, xRapid and xVia — Ripple has been merged into one. Now it encompasses solutions that do not necessarily rely on XRPL and XRP. For example, a solution, previously known as xCurrent, can be used for p2p messaging, encrypted validation and inter-ledger operations. These features are indeed being used or tested by financial institutions.

XRP, however, is used exclusively for transactions, by design. Sure, On-Demand Liquidity is a great concept, but not a lot of institutions are willing to risk and introduce it to their operational process yet. The reason for that is XRP’s value is based on its utility, but since at the moment the network is seldom used at the global scale, there is little use — hence, value — to XRP as well. Unless this cycle is broken, the prognosis is not too bright. As for the market, some experts claim that since the crypto industry is too young, the conventional market prognosis principles are not applicable here, so fluctuations do not necessarily spell doom for the coin. Some also say that XRP might have a bright future.

For now, there are not a lot of announcements of some grandiose projects to be launched in the future for RippleNet or XRPL and the community seems to be focusing on the implementation of their networks.

The partnership with Moneygram, who proves to be diligent partners to Ripple, gives the apologists hope that XRP will reach wider adoption in the future and the expansion of the network. More and more ODL-using channels emerge in Ripple’s growing partner list.

Regarding XRP, like we already quoted, the price dynamics for crypto should not be judged on the same terms as with traditional markets, so the coin has all the chances to shoot up in price. The point of XRP is to be used and valued for utility rather than be seen as another commodity. For the crypto to be adopted, users have to embrace its practical use rather than try to make a profit from it.

Though Ripple has seen considerable success in merging blockchain and traditional financial institutions, it is evident that the complete potential of it is not being put to use, at least at the moment. If these prospects come to be, banks could be revolutionized with the help of blockchain technologies, meaning transformation for the entire financial sector. The dream of transferring money as fast (and cheap!) as sending a message on the Internet would no longer be a dream.

Did you know that you can exchange XRP on ChangeHero without any account? Give it a shot here.

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Ripple & XRP: The Internet Of Money
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Ripple & XRP: The Internet Of Money
Ripple is a blockchain that facilitates transferring value across the borders with ease. It succeeded in bridging the traditional banks with blockchain.
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