Both a currency (Ripple XRP) and a platform, but originally created as a day-to-day payment system, Ripple is an open-source protocol aimed at enabling swift, cost-effective financial trading transactions.
As well as having a currency, Ripple XRP, Ripple allows anyone to create their own via RippleNet. This network of banks and other institutions uses Ripple to create a frictionless experience for the sending of money worldwide.
Ripple has earned the trust of many banks, too, making it more than just another blockchain start-up.
Payments can be made in any currency including Bitcoin. But Ripple differs from Ethereum or Bitcoin in that it has no blockchain. Instead, it verifies transactions using its own patented technology, the Ripple Protocol Consensus Algorithm (RPCA).
One of Ripple’s most recent products, which developers are still working on, is XRapid, a liquidity solution for banks. This uses Ripple’s XRP as a bridge currency. It eliminates delays in global payments while also significantly reducing their cost, making cross-border payments cost-effective and immediate.
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What can Ripple XRP be used for?
The platform can be used for all of the following:
- Speedy international transactions
And we mean speedy, with an average transaction time of just four seconds. This compares with several days for most regular banking systems and a minimum of an hour for Bitcoin transactions.
- Low-commission currency exchange
Many currencies can’t be converted directly into one another, meaning banks use the American dollar as a mediator. (And there are two transactions each time this happens.) Ripple also acts as a mediator, but more cheaply.
The user can complete swift, inexpensive transactions in their own currency. For example, collectors can create a currency to view and purchase, say, action figures or vintage vinyl records.
What are the benefits of Ripple?
Cheap and quick
Ripple offers fast, cost-effective transactions, precisely because it was originally designed as a daily payment system.
Few regulatory checks
As an official organisation whose main aim is to be used by the banks, Ripple does not have to undergo multiple regulation checks as numerous other cryptocurrencies do. Crucially, it also has the trust of several banks, including household names like Santander. (Admittedly some banks are still at the testing stage with Ripple.)
The more banks start using it as their transaction platform of choice, the greater the value of the Ripple currency XRP will become. If at some point, all banks begin using this as a unified bank currency, rather than processing redundant currency exchanges, the early investors in Ripple will do very well.
Ripple can be converted into any currency or valuable commodity (such a gold) with a minimal, consistently applied commission.
There is no inflation because all the tokens already exist and have been mined initially.
Does Ripple have any downsides?
A high level of centralisation
Because tokens are already mined, Ripple developers can determine when and how many to release (or not). That makes investing in Ripple essentially the same as investing in a bank, yet the whole point of cryptocurrencies is to sidestep this type of centralised control. What’s more, Ripple Labs owns 61% of the coins.
Could Ripple be hacked?
Being open-source brings the benefits of speed, cost-effectiveness and flexibility. But it also means that once the code becomes accessible, it’s potentially vulnerable to hackers.
Your transactions can be frozen
Even the suggestion of frozen transactions is against fundamental cryptocurrency principles. Yet it happened when Ripple Labs founder Jed McCaleb tried to sell over a million dollars’ worth of Ripple. The transaction was reversed.
Finally, of course, as with any cryptocurrency trading or investment, despite making steady progress in 2019, nothing is ever 100% safe or guaranteed.
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