The latest ripple cryptocurrency news is PNC will use Ripple’s ledger-based software. PNC is one of the largest banks in the US financial market with over 2400 branches located in 19 states. But what is Ripple? Is it another cryptocurrency like Bitcoin? There is not a clear answer to this question. But often time, people lump it into the same category.
What is Ripple?
Ripple is a real-time gross settlement system(RTGS), currency exchange, and remittance network. It originally came into the market in 2012. In one sense, the ripple is both a platform and a currency. Currency, since the platform, has its own currency known as XRP but also allows others to use the platform to make their own via RippleNet. The platform is an open source protocol which allows fast and cheap transactions.
What is RippleNet?
RippleNet is a network of organizational payment providers, for example, banks and money services business. These financial establishments use solutions developed by Ripple to provide a frictionless experience to send money globally. Within this network, you can exchange any type of currency including bitcoin, fiat money, gold, and even airline miles. The platform charged a minimal internal transaction commission of $0.00001.
What are the different parts of Ripple’s tech?
Ripple’s tech is divided into several parts which include xCurrent, xVia, xRapid, and the cryptotoken XRP. We will describe one by one here.
xCurrent is a platform which is used by banks and other financial bodies to settle cross-border payments. The platform uses a messaging protocol that extracts the information necessary to arrange payments which it communicates to the banks that are essentially involved with the entire transactions. The participating banks are the initiating bank, its correspondent bank in the beneficiary’s country, and the beneficiary’s bank. Upon completion of the pre-transaction validation of the accounts and balances, cryptographic signatures are generated that verify the funds are available and the parties are ready to make the transaction. At this point, the funds are then released simultaneously to all the participants.
xCurrent uses a distributed ledger called Interledger which is developed by Ripple but now managed by the world wide web consortium. It is a non-profit group that maintains the international standards for the world wide web.
XCurrent is the most used solution of Ripple’s platform and currently, over 100 financial institutions have signed up with this. Many of these institutions have completed the testing phase and now using xCurrent for live transactions. xCurrent is very functional for cross-border payments where the trading pair liquid. for example, moving money from euros to dollars or dollar-yen payments.
xRapid platform is viable when the trading pair is not liquid money. This system relies on Ripple’s token XRP to facilitate liquidity. It does this by converting the originating funds into XRP, and from there into the beneficiary funds. This allows the originating bank need not to have funds deposited at an account in a corresponding bank in the beneficiary’s country or to rely on another financial institution or liquidity provider to supply the beneficiary bank with the correct amount of local currency.
At present, international payment providers Western Union and Moneygram are experimenting with the xRapid platform, and Mexican money transfer firm Cuallix is using it in their operation.
One major hindrance to xRapid’s growth is XRP’s liquidity. XRP is to be on the list on exchanges around the world with a reasonable level of trading volume. So that people can use it to buy any currency or convert XRP to any local currency.
xVia is a user interface. Its design makes xCurrent and xRapid easier to use. Via application program interface or API integration, it provides a connection to financial institutions using Ripple’s products as well as payment tracking and invoice generation.
XRP is Ripple network’s token. The main function of XRP is to act as a mediator for cryptocurrencies and fiat exchanges. The best way to explain the role of XRP is a joker. Let us explain the role. If you want to exchange dollar to euro or vice versa, to minimize the commission you need to exchange dollar with dollar and euro with euro. But it is not possible in a real sense. And here comes XRP. You can use it as a middle currency to exchange one currency with another.
For example, let’s say a hypothetical company A in Bangladesh purchases raw material from Company B in China. One of the parts of the Ripple tech is Xrapid. XRapid system would use company’s A’s take to buy XRP, and then convert that into Yuan which it then would deliver to the beneficiary bank in China. In this process, the transaction commission is only 0.00001 XRP. After the transaction, the amount 0.00001 XRP would disappear from the Ripple platform. It has such a design that can prevent spammer attacks.
What XRP is used for?
The use of XRP is not dependent on the Ripple’s network. Many small investors perceive that they need to buy XRP to transfer dollars, euros etc. But interestingly, banks do not need XRP to transfer one currency to the other.
Ripple company issued 100 billion XRP tokens so far. And the company announced that there will be no XRP token issue in the future. But there is no barrier to issuing more tokens. Ripple can handle 1500 transactions per second(tps) through and since its release, it processed 35 million transactions without issue. In contrast, Bitcoin can handle 3-6 tps.
Ripple’s token, XRP, is somewhat different from other cryptocurrencies, for example, Bitcoin, Ethereum, Litecoin. It kicks off its operation with ICO or initial coin operation much like the way a company issues stocks in the share market. At its inception, it issued 100 billion XRP coins and this is its market cap.
Is Ripple a secure investment?
It is axiomatic that there is no such thing as a 100% safe investment. Each decision carries its own risk. Below are some pros and cons of Ripple investment:
- Ripple is an official organization which has its base on the trust of many banks including American express. It is not another blockchain startup from a mysterious company.
- There is no chance of inflation since they mined all the tokens initially and already exist
- Since its inception, Ripple has signed up 100 banks and more banks are showing their interests. The more banks use Ripple as their transaction platform, the higher the value of XRP will be. There is a good possibility that one day all the banks will decide to use XRP as a single bank currency instead of processing redundant currency exchange. It that happen in reality, it will make a nice fortune for people who invested early in Ripple.
- The main drawback of the Ripple platform is that the authority controls it centrally. But the main idea behind cryptocurrency is to avoid centralized control. The Ripple developers have full control over when and how much XRP to release or not to release at all. So, it is most akin to investing in a bank.
- Apart from centralization, today it is pretty much a monopoly since Ripple labs own 61 percent of the coins.
- It is open source means the code is accessible to everyone. So, there is a good chance that many people will attempt to hack it and who knows some of them even might succeed.
Ripple’s Future and what is the basis of these predictions?
Here is some experts opinion regarding Ripple’s future along with their thoughtful arguments.
Roman Guelfi-Gibbs, the CEO and Lead Systems Designer for Pinnacle Brilliance Systems Inc believes that Ripple certainly posses the potential to move up a notch in 2018. But he thinks that it will be more likely in 2019.
He pointed out that as more projects have code using XRP’s algorithm. Ethereum likely to take a backseat to the next big coin/token. He is quite optimistic that the year 2019 will be the year when XRP will take the place of ETH. But in crypto markets, anything can happen.
But Shidan Gouran, president of Global Blockchain Technologies is not much optimistic regarding Ripple. According to his view, Ripple is unlikely to go up by one or two notches in the cryptocurrency world in 2018. He pointed out three reasons why Ripple will not make good progress.
Reasons For Using Ripple
The first reason is the sheer volume in terms of market cap that separates each of three cryptocurrencies in the top positions. Currently, Bitcoin is at over $191 billion, Ethereum is at over $84 billion, and Ripple is at over $35 billion. To displace Ethereum, Ripple needs to overcome a staggering deficit of about $49 billion which is more than double Iceland’s entire national GDP.
The second reason is people use Ripple primarily for the trade of assets and not for day-to-day spending. As consume will be more knowledgeable about cryptocurrency in 2018 and beyond. The interest of common people will be more on cryptocurrencies that they can use as currencies to purchase common commodities and not just for investment transactions.
The third and final reason is that you cannot buy Ripple with fiat currencies. One must purchase cryptocurrencies. For example, Bitcoin or Ethereum to purchase XRP, this would fuel the demand for Bitcoin and Ethereum. And it will only strengthen their positions as the top two cryptocurrencies on the market.
There are many Ripple detractors that insist that XRP does not even qualify as a cryptocurrency since Ripple has control over 60% of XRP tokens. Also, they process the transactions with validators. They have authorization from Ripple. So, there is a suspicion that if Ripple disappeared tomorrow, would XRP continue to trade on the exchange?
The token will trade on exchanges and could have value if users decided to use it as a currency bridge or as a payment token. The ripple also repeatedly stated its commitment to making XRP as the bridge-currency for cross-border transfer in the years to come. And finally, the company’s wealth is tying up with the token’s value. So, XRP will persist in the financial transactions.