What’s next for XRP?
- is the company behind XRP.
- XRP transactions are confirmed in seconds.
- Many banks have adopted the XRP payment system.
- The Ripple Network uses a unique distributed consensus mechanism to validate transactions.
The story of Ripple
Ripple originally started in 2012, but the idea behind it emerged in 2004. A year later, Ryan Fugger launched a website called RipplePay. It provided a secure online payment option for communities, but it never got the widespread adoption that it needed. Later in 2011, Fugger was approached by two people, Chris Larsen and Jared McCaleb, to replace RipplePay with a digital payment system where the community consensus verified transactions instead of miners.
Chris Larsen was the angel investor and managing director. He was also a privacy activist, one of the richest people in the cryptocurrency world, and is constantly seen as a co-founder of various startups in the financial services space. On the other hand, Jared McCaleb is one of the most famous programmers as well as entrepreneurs, as he has also co-founded various crypto startups over the course of his career, including eDonkey, Overnet, Stellar and Mt. Gox.
This resulted in the Ripple transaction log in 2012. It is designed to enable quick and direct money transfers between two parties in fiat currencies. However, it didn’t require the waiting times or even the transaction fees of the traditional money transfer services available at the time. In order to provide a higher level of liquidity, the protocol for creating a new token would be called XRP. 2014 was also a big year as several banks started using Ripple during their tests.
Ripple explained
Ripple is both a platform and a currency. The platform itself is an open source protocol specifically designed to incentivize fast, inexpensive transactions. This platform has its own currency known as XRP, so almost anyone can use the platform to create their own currency via RippleNet.
Ripple is the network and XRP is the coin in the network. The company is based in America and was founded in 2012 when it was originally known as Opencoin and didn’t change its name until it developed the Ripple Transaction Protocol in 2015.
The concept of this platform was promoted because the team behind it wanted to streamline international transactions between banks.
Platforms known as xRapid, xCurrent and xVia have been developed for this purpose.
Remember that XRP cannot be mined and all coins were originally created at the beginning of Ripple. They then release coins into the market at regular intervals. This means that one of the easiest ways to get XRP is to buy it from an online exchange or broker.
While many other blockchain technologies are secured by a decentralized network of miners, Ripple is secured by a network of validation servers with an internal ledger that guarantees the transaction based on consensus.
Transactions on Ripple are limited to XRP, and the platform supports fiat currencies like euros, dollars, pounds, etc. The platform even supports other cryptocurrencies like bitcoin and is the primary payment processor and currency exchange.
XRP token explained
As mentioned earlier, the XRP token is the token that is used on the Ripple network to facilitate the transfer of funds between different countries. Existing billing systems will use US dollars as their common currency, which will incur exchange fees and take a long time.
However, if we convert the value of the transfer to XRP instead of USD, there are no exchange fees and payment processing is reduced to seconds.
Let us consider this with another example.
On the downside
- XRP is widely used in many banks.
- The strength of the system is determined by its ability to serve the market and is therefore scalable as it can process more than 1500 transactions per minute.
- It is based on open source technology that allows functions to be distributed and customized to meet user needs.
Imagine you want to transfer funds from Bank A in Europe to Bank B in America. Instead of transferring and converting EURO to DOLLAR and waiting a few days, the bank can convert the currency to XRP, send it to the bank in America and then that bank can convert the currency from XRP to dollars.
XRP is the token that is used to represent the transfer of value over the Ripple network. Ripple created 100 billion XRP coins when it was created.
Now what you need to keep in mind is that XRP was not originally designed as a currency or a payment method. However, there are merchants who accept payments online in the form of XRP tokens. You can buy different things online; It’s as simple as that. However, XRP is primarily intended to be used for transferring other currencies over the Ripple network.
The Ripple Protocol Consensus Algorithm (RPCA) explained
First and foremost, you have to understand that Ripple does not have its own blockchain. To check the transactions and make sure everything is ok, it uses the Ripple Protocol Consensus Algorithm.
It is applied every few seconds by all nodes to keep the network correct and consistent. As soon as the consensus is reached, the current ledger is considered closed and thus becomes the last closed ledger.
Ripple’s answer to a longstanding problem
We live in a time where we have constant and instant connectivity; However, for global money transfers, especially cross-border transactions, banks or payment processors will usually charge high fees and it will take days for payments to be fully processed.
The main reason cross-border transactions are slow is because they use the practice associated with Nostro or Vostro accounts. This means that instead of the agent or gateway model, a domestic bank has an account with another foreign bank, this is called a nostro, and the foreign bank will have an account with the domestic bank; this is known as Vostro. These accounts are used for transactions in the two currencies and matched before the transactions can be approved.
This makes the whole process extremely expensive and time consuming as the bank has to input the equation to facilitate and validate the reconciliation process.
Ripple as a company has a reputation for working with banks for years, and the idea behind this is that Ripple, the company itself, wants to convince banks to use Ripple-based crypto technology to make traditional banking transactions much faster and much cheaper.
This is one of the driving forces behind XRapid and the reason why many banks in Ripple’s history have accepted it and why many experts predict that their acceptance will be more widespread in the future.
By using Ripple’s payment system known as XRapid, XRP provides the liquidity required for institutions to instantly transfer funds across borders without paying transaction fees.
As a result, Ripple has even managed to work with many large institutions, including SBI Group, Santander (MC 🙂 and PNC Bank. XRapid is the liquidity solution for banks using Ripple’s XRP as a bridge currency.
The original currency is exchanged for XRP, which provides the necessary liquidity to drive the final payments. The XRP can be exchanged for the target currency at the second digital asset exchange within seconds.
RippleNet explains
RippleNet is a network of institutional payment providers that usually includes banks that use solutions developed by Ripple to offer a fast and efficient way to send money worldwide. RippleNet is a single, global payments network that can send and receive payments using Ripple’s distributed financial technology, which provides real-time messaging, clearing, and overall transaction processing.
Advantages and disadvantages of Ripple
When it comes to the professionals, Ripple is an official organization that has won the trust of a large number of banks, has no inflation, and all tokens are mined first and already exist. The more banks use it as a transaction platform, the higher the value of XRP increases.
As for the cons, it is highly centralized and has a monopoly as Ripple Labs has a high percentage of the coins. It’s open source too, and once the code is available there is a high chance that someone will try to compromise it.
The lawsuit
We can’t talk about the future of XRP without discussing the lawsuit. In December 2020, the US Securities and Exchange Commission sued Ripple, alleging that its CEO Brad Garlinghouse and Chairman Chris Larsen sold over $ 1 billion in XRP, advertised the token, and paid third parties to endorse the cryptocurrency.
However, Ripple categorically denied the allegations against the company and its executives. Keep in mind that the complaint also argues that the XRP digital currency was used as a medium of exchange for cross-border transactions in Ripple’s software products and evaded SEC regulation for a total of seven years.
The future of XRP
Ripple was designed at its core for speed and the lowest fees of any crypto asset, and these are the attributes that make it an attractive option for banks, which are Ripple’s primary customers.
XRP intends to move large amounts of money quickly and inexpensively.
Because of this, Ripple may eventually become a replacement for other huge money transfer platforms like SWIFT, one of the current banking standards for wire transfers, and it has slower speeds and much higher fees.
Ripple also has the potential to disrupt traditional cross-border payments like MoneyGram. Since Ripple has a high potential to become the new standard in many industries, it has one of the highest price potentials of all crypto assets. Keep in mind that both short and long term prices for any cryptocurrency can be difficult to predict. However, Ripple has a high chance of an uptrend as more and more banks adopt its remittance method.
In November, if we analyze 2020, the value of XRP rose, with the coin becoming the third largest cryptocurrency. However, it currently ranks 7th.
It started at $ 0.20 in 2020 and rose to $ 0.34 over the course of February. It fell to $ 0.11 a coin on March 13, then rose again to $ 0.20 in the following months. In September and October 2020, the price rose again to $ 0.25. XRP is now valued at $ 0.42 at the time of writing, February 26, 2021, which is a huge increase compared to previous numbers.
Remember that the price of XRP rose 50% to hit $ 0.77 and then fell to $ 0.42.
The XRP currency has its ups and downs and we cannot really predict the price. However, the team behind the project is aiming for many developments throughout 2021. Experts believe the company behind the project can partner with various financial institutions and possibly even hit the $ 2 mark if everything is done efficiently.
In a perfect case scenario, if XRP gains more mainstream attention and adoption by 2023, it could potentially hit the $ 3 mark as well. However, this is also heavily dependent on the development of the company’s legal issues.
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