Cryptocurrencies like Bitcoin and Ethereum have fostered a reputation among investors for being an increasingly viable asset to have in your portfolio. The majority of Americans, for example, associate digital assets like these as a next-generation precious metal, so where does this place the XRP Cryptocurrency in today's market.
While this opens it up as a lucrative avenue for investment, assets like Bitcoin have yet to really scale up in a way for it to operate as the dynamic digital cash that its white paper set out. As of right now, there are only a select few blockchain solutions out there that have the ability to scale for a large number of users.
One of these is Ripple, and it's far more than just a concept for cross-border transactions. As of the beginning of 2019, Ripple was used by over 200 customers since its inception. With so many customers, what is it exactly? Let's dig into the fundamentals of Ripple and what sets it apart.
While taking place one a daily basis (often every second), making international payments is a frequently occurring, but expensive solution. All we need to do is look at some of the fees that a chalked up between banks like cross-border taxes, landing fees and correspondent bank fees.
This is where the concept behind Ripple emerged. The brainchild of Jed McCaleb, and built by Arthur Britto and David Schwartz. This trio had also managed to bring in the developer - Ryan Fugger - due to his own experience with a similar concept known as OpenCoin which would go on to become what we know now as Ripple.
So what is Ripple? It's basically a centralized currency exchange network that operates as a distributed protocol. What it provides to its potential customers, according to the team, is a "secure, instantly and nearly free global financial transactions of any size with no chargebacks."
According to the team's White Paper, Ripple uses its own gateways in order to provide a streamlined solution that is just not possible from the existing financial framework. The reason being that the more 'conventional' payments require a third party to act as an intermediary, mainly because there's no way of really 'knowing' of one party would pay back the money that the other party is sending.
This whole process proves to be a sink for resources and time. Ripple, on the other hand, makes use of Ripple gateways, which are validators and servers that already trust eachother in order to make these transactions.
For example: Agent B is requesting money from Agent A, problem is that A doesn't trust B. However, Agent A knows and trusts Agent C (Ripple Gateway), so sends C the money. Agent C, in turn, knows and trusts Agent B, completing the process by sending B the money.
This creates what Ripple's white paper refers to as a 'Chain of Trust,' which can perform faster thanks to its distributed framework.
What also makes this process even faster is the digital currency used by Ripple. Known as XRP, it's the underlying currency used by Ripple to complete cross-border payments. According to its performance in action, XRP has demonstrated impressive scalability and rapidity; managing to settle international payments in 4 seconds, with the ability to manage 1,500 transactions per second.
One of the things that set XRP apart from other cryptocurrencies is the fact that only the minority of its tokens are in common circulation. According to recent estimates, while the total token volume of XRP is 104 billion, only 40 percent of that is publically traded. The latter 60 percent, meanwhile, is held by Ripple.
There are a couple of reasons for this: first one being to mitigate the chances of market volatility, while also ensuring that there's a sufficient amount of XRP available for its users and products.
As previously, and briefly, mentioned - Ripple actually boasts an impressive number of customers for a distributed solution. With the potential to cut costs and times down for cross-border payments, Ripple actually does business with some pretty big names in the world of international finance and especially the remittance industry.
Among these are some of the major players in remittances - MoneyGram, which partnered with Ripple and makes use of xVia and xRapid payment solutions as of the beginning of 2018. And Western Union, which has been conducting payment tests with xRapid, which is Ripples latest product, in February 2018.
So far, Ripple has two payment solution products that are in common use by its consumers: xCurrent and xVia. xRapid, meanwhile, is the odd one out; as it undergoes continued testing by partnered companies.
While the number of clients making use of Ripple is one that has grown exceptionally over the last couple of years, its latest CEO - Brad Garlinghouse - has his sights set on replacing SWIFT as the go-to payment solution for big business.