Most people know about Bitcoin well, but the cryptocurrency family extends much further than that. Among other cryptocurrencies, or “altcoins” that are making waves in the market is Ripple.
This article examines Ripple in detail and explains the key aspects of this cryptocurrency and the platform in general – what challenges it seeks to address and problems it seeks to solve. Let’s start with understanding “What is Ripple?”
What is Ripple?
Ripple is a San Francisco, US-based start-up that has designed a payment system based on the blockchain. It is a payment protocol that works in a similar way to a payment system, a remittance network and a fiat currency exchange.
Ripple allows customers to integrate the protocol into their own systems. The National Bank of Abu Dhabi has recently begun to use the Ripple technology for some of its transactions, particularly for cross-border transactions. It allows its customers to transfer funds in real time.
Ripple uses a blockchain similar to Bitcoin, and the cryptocurrency of this platform is also called Ripple and is denoted as XRP.
In terms of market capitalization, Ripple is the third largest cryptocurrency – after Bitcoin and Ether.
When Ripple is coupled with other currencies, like USD (US Dollar) or EUR (Euro), the pair is denoted as XRP / USD, or XRP / EUR.
What is the Difference between Ripple and Bitcoin?
Ripple is considered to be Bitcoin’s competitor and there are certain advantages. Ripple does not rely on a single company to secure and manage its transaction database. Thus, there is no waiting for block confirmations. According to Market Mogul, there is a difference between the time to pay Bitcoin and Ripple.
The time to settle with Bitcoin increased, reaching 168 minutes on March 27, while Ripple took an average of 3.7 seconds. Money transfers between Spain and Mexico were undertaken by the BBVA, and it was discovered that Ripple needed only a few seconds, while a standard transfer would take four days to complete.
Both cryptocurrencies share many similar characteristics, and Ripple is similar to Bitcoin with some differences:
- Ripple offers a faster settlement time: as explained above.
- Ripple uses an iterative consensus process: Bitcoin uses mining.
- Currency and transaction network: Bitcoin is a decentralized cryptocurrency, while Ripple is essentially a transaction network that has XRP, a cryptocurrency, as an intermediate store of value.
Can XRP be Mined?
No, Ripple can’t be mined. Ripple started with a fixed number of XRP and does not have an integrated extension, according to the rules of the Ripple protocol. Therefore, no extraction of new parts is necessary.
The total number of XRPs created is 100 billion, but the distribution of XRP is controlled by Ripple. This has received criticism from Bitcoin price supporters who consider that Bitcoin has an advantage because there is no centralized control over its creation or distribution.
Ripple responded by announcing its intention to freeze 88% of its XRP assets, but sell one billion XRP each month. The freeze and regular flow will allow traders and investors to rely on a certain level of predictability with regard to supply.
How Ripple Really Works?
Ripple emphasizes their role in the “global settlement network,” which simply allows financial parties, such as banks, to reduce their transaction costs. At the same time, Ripple also offers an improved service with direct and instant transactions for global payments.
Payments are cryptographically secure and have been designed to fit into a bank’s existing infrastructure. Ripple highlights the following as its four main characteristics:
- Distribution: banks can deal directly with each other without intermediate contact;
- Security: confidentiality of the transaction;
- Evolution: high levels of treatment;
- Interoperability: ability to connect several networks with each other.
The Ripple network essentially makes it possible to complete payments faster – almost instantly – cheaper, more secure and with direct access. It is therefore not surprising that Ripple is increasingly being used by the banking sector, which has not capitalized as much on new technologies as on other sectors of the industry.
Ripple Uses Blockchain Technology
Ripple utilizes the blockchain protocol to processe payments. Ripple uses a “general sharing book to process transactions that allows it to work across borders and with any payment size.”
Ripple XRP currency helps to facilitate transactions between two parties, in the event that no direct exchange is possible. XRP has no counterparty risk because it does not depend on a third party.
Who Invented Ripple?
It is believed that Ripple was founded by Ryan Fugger, but has undergone great development since its initial creation.
Ripple’s growth began in 2004, when Ryan Fugger created RipplePay. In 2011, the system was redesigned, making it faster and much more energy efficient than Bitcoin. In 2012, OpenCoin, Inc. was formed.
Shortly afterwards, the Ripple Transaction Protocol (RTXP) was developed based on Fugger’s concepts. The protocol reduces fees and waiting times in the traditional banking system.
Since 2012, Ripple has also focused on expanding into the banking market.
What Does Ripple’s Future Look Like?
Quite simply, it looks brilliant. Ripple’s network is much faster in payment processing and is the subject of multiple partnerships with global companies:
- 60 institutions around the world, including such well-known companies as UBS, RBC, UniCredit and Santander.
- 40% of Japanese banks will be connected to Ripple.
- RBS and BAML will use Ripple for retail and commercial services in 2018.
- The National Bank of Abu Dhabi uses Ripple for international transactions (as mentioned above).
Of course, Ripple is not as popular as its famous counterpart Bitcoin. However, Ripple is slated to be a top candidate for market leader. It is because it solves real world problems that has far reaching consequences for the global payments system.
Which Banks Use the Ripple Protocol?
RippleNet currently has 11 of the 100 largest banks and financial institutions in the world in terms of total customer assets. These financial institutions are at various stages of commercial deployment of the Ripple payment solution and this number continues to grow month after month.
Here are some of them:
- MUFG – the fifth largest bank in the world with assets of $2.6 trillion – was one of the first clients to join RippleNet.
- Crédit Agricole – the 11th largest bank in the world (and the third largest in Europe) with $1.82 trillion in assets – is also responsible for processing real remittances for its employees between France and Switzerland.
Four other RippleNet members also rank in the top 20 global banks, including:
- Bank of America
- Crédit Agricole
- Mizuho Financial Group
The largest financial institutions therefore see a lot of value of RippleNet. The network offers their customers an improved payment service that allows them to gain market share and free up capital for other investments and activities that demand liquidity.
Of the remaining 100 largest banks, according to assets worldwide, eight others are also members of RippleNet, including :
- Standard Chartered
- Western Union
Three banks in India, the United Arab Emirates and Singapore have also adopted RippleNet as a means of sending cross-border funds.
These banks have announced their decision to adopt Ripple’s block chain-based payment platform, RippleNet, as a means of conducting transactions abroad.
These three banks are:
- Axis Bank
- Standard Chartered
Axis Bank in India and Standard Chartered in Singapore will use RippleNet to use the “$15 billion trade route” between India and Singapore. Axis Bank will also operate the foreign payment market between Rakbank in the United Arab Emirates and India, a channel through which $12.6 billion is processed each year.
Ripple’s blockchain platform reduces the time and money associated with sending payments from one country to another.
The National Bank of Abu Dhabi has also announced its intention to adopt the Ripple protocol for all foreign transactions.
The National Bank of Abu Dhabi reportedly integrated the Ripple protocol into its existing infrastructure. As a result, the bank’s regional customers will be able to transfer funds to the beneficiaries’ accounts instantly. All their transactions will take place in real time. The fact that the United Arab Emirates is one of the world’s leading remittance sending countries, suggests that Ripple technology will be widely used as part of this partnership.
Several major banks have therefore started test programs and integrated Ripple into pilot projects.
At the moment, major banks that use or test Ripple, such as UBS, UniCredit, SAP or Western Union, use it only to make transfers between their own subsidiaries in different countries.
Finally, American Express and Santander announced that they would use RippleNet to process international payments.
The San Francisco-based start-up helps financial institutions process international payments using blockchain and collaborates with more than 100 companies, including
- Andreessen Horowitz
- Google Ventures
As well as banks such as:
- Standard Chartered
- Banco Santander
- American Express
Ripple cryptocurrency continues to expand with new collaborations around the world with banks but also with payment providers:
- Itaú Unibanco, the largest private bank in Brazil and the largest bank in Latin America in terms of market capitalization
- IndusInd, a private sector bank in India
- Zip Remit, a money transfer service based in Canada with roots in East Africa
- Beetech, the only provider of an online exchange and remittance platform that has received approval from the Brazilian Central Bank
- LianLian International of China, a payment service
InstaRem uses the Ripple product called XCurrent. It allows banks to instantly settle cross-border payments with end-to-end monitoring. By using XCurrent, banks actually send each other a real-time message to confirm payment details before initiating the transaction and confirming delivery.
Ripple is fast gaining a reputation within the banking industry as a strong contender to the traditional payment processing system – SWIFT. Currently, cross-border payments using SWIFT take on an average 5 days to complete. Whereas, the Ripple network allows for almost real time completion of transactions.
In a fast moving world, where customer expectations are high, it is obvious that banks will realize the value that the Ripple protocol offers. This bodes well for global payments that will surely gain value from the lightning fast ecosystem of Ripple.
Share this post :