In this guide on what is Ripple, we are going to look at different elements that make up the Ripple protocol including its native currency XRP and its purpose.
It’s important to note that Ripple is both a platform and a currency. It was originally released in 2012 as an iteration of Ripplepay.
With that said, Ripple is a real-time gross settlement system (RTGS), remittance network and a currency exchange. It’s also an open protocol that is designed to allow fast and cheap transactions.
The platform has several products that are designed to make money transfer easy and efficient. We are going to have a look at each one of them.
What is Ripple: XRP
XRP is Ripple’s native token. Currently, it’s the second largest cryptocurrency by market cap according to coinmarketcap.com. Unlike many other crypto coins that are mined, XRP tokens were all pre-mined in 2015 where 100 billion XRP tokens were issued. The creators decided to keep 20 billion of them and gave the rest to the company.
XRP runs on a blockchain known as XRP Ledger. Unlike other cryptocurrencies that rely on proof of work or proof-of-stake, transactions on the platform are validated by trusted nodes that are authorized by Ripple.
What is Ripple: xVia
What is Ripple: xCurrent
It communicates this message to the banks and other financial institutions that are involved. When pre-transaction validation of the accounts and balances is complete, the involved parties put a lock on the funds.
The next step involves cryptographic signatures being generated to verify the funds are available and that the involved parties are ready to make the transaction. Simultaneously the funds are released to all the participants.
The platform uses a distributed ledger known as inter ledger. , but it’s currently managed by the World Wide Web Consortium – a not for profit group which maintains the international standards for the world wide web.
However, the platform works well for cross-border payments where the pair being traded is liquid. For example, moving money from dollars to euros and vice versa.
What is Ripple: xRapid
For payments that are less liquid, they are likely to use
It saves the originating bank from the burden of having funds parked at an account in a corresponding bank in the beneficiary’s country. It also saves the bank from the hassle of having to depend on another institution (liquidity provider) so that it can be supplied with the correct amount in local currency. It’s a process that adds a lot of costs.
Let’s imagine company C which is Japan purchases raw materials from company D in Canada; the transaction will look something like this:
Automatically, the algorithm will choose the Yen/XRP market with the best price offer and then the XRP/CAD market marker with the best price.
This way company C’s bank in Japan would not need to hold CAD at an account with a correspondent bank in Canada. Nor would the bank feel the need to find a liquidity provider who would be willing to do the currency exchange.
Given the benefit that the platform offers, it has captured the attention of several institutions. So far the likes of Western Union and MoneyGram are experimenting with the platform. Also, Cuallix, a Mexican money transfer firm is already using it.
However, the only barrier to the growth of the platform is the liquidity of XRP. For
Also, its reliability will depend on that of XRP market makers who are currently very few. Also, for these market makers to organically grow, the demand for
What is Ripple: RippleNet
This guide that explains what is Ripple wouldn’t be complete without mentioning RippleNet. It’s a term that doesn’t necessarily refer to any particular Ripple product rather the network of banks and other financial products using Ripple products, which we have taken a look at above.