XRP is an interesting currency, even when it comes to digital coin standards. Initially, it was a platform for making secure online payments, but with the development of blockchain technology, XRP began to gain in value. So what exactly is Ripple right now?
Ripple was created in 2012, but the idea for the platform originated much earlier. In 2005, Ryan Fugger launched RipplePay as a modern blockchain payment system for secure online payments. However, initially it was not widely used. In 2011, programmers Jared McCaleb and Chris Larsen asked Fugger to replace RipplePay with a digital currency system in which the consensus algorithm verified transactions rather than the so-called miners, as in the case of Bitcoin.
The work on the Ripple transaction protocol began in 2012. The protocol is designed to facilitate fast and direct money transfers in fiat currency between two parties, without any waiting time and transaction fees as is the case with traditional money transfer services. To ensure greater liquidity, the protocol also provided for the creation of a new value token known as XRP.
By 2014, what was born as an option to transfer money between individuals began to gain in popularity in banks, in the form of a system for settling money transfers in a faster and more cost-effective way than traditional technologies. In 2014, several banks and payment companies signed a contract to test the Ripple currency, and since then the platform has been establishing cooperation with over 100 institutions each year.
It should be remembered that Ripple is a private company. They have raised funds through institutional investors and venture capital, and their income model is based on professional services and creating integration with RippleNet for financial institutions.
Ripple is a reimagining of sorts of a very old idea which dates back to the Middle Ages. As there were no banks in those days, if you wanted to send money from town to town, you had to visit an agent who would help you send the money.
Mutual trust between payment agents is an essential requirement here. If the sender’s agent does not trust the recipient’s agent, he will not transfer any money. Ripple works in the same way – it connects payment agents to facilitate payments across borders. Moreover, the Ripple algorithm establishes a trusted path for transactions. If a third agent trusts both the agent of the sender and the agent of the recipient, then this third party can be an intermediary between the agents. In Ripple, agents are called “gateways,” and they’re usually banks or other entities that accept deposits to transfer money. The consent of many agents to a payment is known as a “consensus protocol”
In the age of constant and instantaneous connectivity, financial institutions are still using technologies developed in the 1970s to settle payments. For cross-border transactions taking place within a $155 trillion market, banks and payment processors charge high fees and take days to process payments. As a result, global trade and cross-border consumer payments have not developed at the same pace as technology. Reducing the fees and payment processing times by Ripple technology could result in an explosion of globalisation and cross-border collaboration, especially for small transactions that were previously unfeasible because of fees and exchange rates.
Why are standard transactions so slow compared to Ripple? The most important of these inefficiencies is the practice of nostro/vostro accounts. Instead of using the agent/gateway model described above, a domestic bank will have an account at another foreign bank (nostro), and the foreign bank will have an account at the domestic bank (vostro). These accounts are used to carry out transactions in two currencies and must be reconciled before the transaction can be authorised. Often, a third correspondent-bank enters the equation to facilitate and verify the reconciliation process.
The indirect nature of nostro/vostro account reconciliation makes it costly and time-consuming. Moreover, there are no established standards for cross-border transactions. Each bank must follow its home country’s regulations, and each bank has different processes for verifying incoming foreign transactions. That is why this technology is so outdated and slow compared to XRP.
So is the Ripple platform and cryptocurrency the same thing? Not necessarily, although these are related terms. RippleNet is a network of institutional payment providers, such as banks and money service companies, that use solutions developed by Ripple to ensure the smooth transfer of money worldwide.
In the Ripple system, money is not actually sent from one place to another, but only the promise of its payment. It does it by means of interconnected gateways. These gateways (validators/servers) are typically financial institutions such as Bitstamp and TheRockTrading. The Ripple network is a relatively large network where not everyone using Ripple knows and trusts one another. To get around this problem, Ripple uses chains of trusts to interconnect Ripple gateways which trust each other.
The Ripple gateways send the payment information to each other using https: the same protocol that banks use for secure online credit card payments. Up to 4 seconds after a payment is made, the Ripple network triggers the gateways involved in the transaction to update their ledgers.
Each transaction requires a fee of 0.00001 XRP and may increase upon a higher than usual load. Who are the beneficiaries of these transaction fees? These tokens are in fact destroyed, and so the beneficiaries are all the XRP token holders who gain as a result of a decrease in token supply.
XRP is a token used in the Ripple network to facilitate the transfer of money between different currencies. Existing settlement systems use the US dollar as a common currency for exchange. This involves currency exchange fees and takes time – it often takes up to three days to process bank transfers between accounts in different countries.
By converting the transfer value first to XRP rather than USD, the exchange fees are eliminated and payment processing is reduced to mere seconds. XRP is also a token used for representing the transfer of value across the Ripple Network. Unlike Bitcoin, in which new coins are created (up to a maximum level) as rewards for participants offering the processing power to maintain the blockchain network, Ripple has already created 100 billion XRP coins.
The primary use of XRP is the transfer of other currencies or real goods such as gold or oil through the Ripple network. Each time an organisation transferring money (or assets), such as a bank, uses the network to make transfers and settlements, the cost is deducted in a small amount of XRP, which gives XRP their value.
The coin was launched on the market in 2012, and its approximate price was USD 0.005. Its value was unchanged until 2017, when the entire cryptocurrency industry experienced a staggering boom.
The first price peak took place in May 2017, when the XRP rose to USD 0.36 per coin, followed by the opening of the Ripple office in Mumbai. Prices have stabilised in the range of USD 0.20 over the following six months. The second peak took place in January 2018, when XRP reached its highest ever level of USD 3.84. However, the price then started to fall gradually and by September it fell to USD 0.29.
In 2019, the coin did not record any significant breakthroughs, remaining stable at the level between USD 0.2 and 0.5. After reaching its lowest level in December at USD 0.17, the price of the third-largest cryptocurrency rose to USD 0.33 within eight weeks, an increase of almost 100%. Now that XRP costs about USD 0.30, analysts have divided themselves into two sections. Some are certain that XRP is more likely to grow, while others claim that it may fall again sharply.
What is the opinion of the Crypto-ATM team? Due to the prevailing pandemic, attention is focused on fast and safe ways of foreign transactions, which will compensate the stagnation in tourist traffic. This may be the right time to buy Ripple from a cryptocurrency exchange without having to register.
Whatever the future holds, one thing is certain – the creators of Ripple had a much better idea about cross-border transactions than most banks and financial institutions.