About Ripple (XRP) & Its Functionality
Ripple is the open payment network for digital currency as well as holding company. Ripple is privately held as the cashflow company that aims to create a global network of financial institutions and banks to use ripple software to lower the cost of international payments. Ripple calls this global network software as “THE INTERNET OF VALUE”.
The XRP ledger is an open-source network created by Ripple. It was created to solve the major point of fraction in international payment. XRP can be used by the banks to control the liquidity on-demand in real-time and paying providers to expand into new markets provides faster payments, settlements and lower foreign exchange costs. When you think about it, the state of the global payment industry is widely behind. You can easily download the entire article or a video game on your phone in the middle of the forest. Yet sending a few digital currencies to your grandma in the USA requires fee and processing time.
The technology for easy global payment already exists. But, Why is the global payment industry so far behind? Well, it would be stress to assume that the Financial institution like bank collectively makes trillions of dollars from payment fees are not racing to innovate the additional system which can cut off the huge payment fee as it puts a lot of money in their pocket.
Financial Institutions Now Use Ripple XRP
The Financial industry rather innovates and promote something that is irrelevant for the average person. Financial products such as collateral debts obligation (CDO), which you might be familiar with since 2009, housing bubble crash or quantitative easing (QE). That’s what is happening currently, QE allows the government to buy back debt and relieve tons of money into circulation to stimulate economic growth. But at the same time, it generates a huge national debt. Consequences for the average person might be devastating.
Ripple Wants a Piece of the Global Payment System
However, unlike bitcoin, Ripple aims to works with the current financial world, the equivalent of roughly $155 Trillion moves across the board every year. For the sake of example, let’s assume that everyone used Paypal which charges 3% fees for every single transaction, this would be way too much for paying fees. But we are all probably familiar with Paypal taking cut of every payment at some point or another. This means that about $5 Trillion of global payment fees would go to Paypal. To add some muscle to injuries, those payments would like to take some time to process. That’s where Ripple comes in, Ripple was officially announced in 2012.
Ripple is a ready to revenue-producing company with over 100 Financial institutions and banks on its Blockchain network including giants like JP Morgan and Bank of America.
Function of Ripple
In order to understand how ripple functions, it is important to know about RTGS and RTXP. For example, when you send money via Bitcoin, the value is set in real-time, that’s what we mean by the Real-Time Gross Settlement system. Ripple uses what is calls “Gateways” which is best described as global ledger made up of something similar to a private blockchain. This is essentially a digital portal that government, company and financial institutions use to join ripple network, this is called a ripple transaction protocol OR RTXP formally known as Ripple net. This is Ripple’s pride and joy.
Once a government or company or financial institution joins RTXP it can transact with another gateway at a much faster speed at fraction of the cost. RTXP also makes it possible for payment from any fiat currency or cryptocurrency. Ripple essentially made something for any type of entity that regulates the large amount of money across the border. For example, a company such as Apple and Amazon are already spending Billions across the board. It’s important to note that the Ripple network also functions as a currency exchange between all types of fiat currency. However, in order to do this, it has to be able to guarantee the liquidity, that’s where XRP comes in. XRP is a digital coin that is built for providing the source of liquidity to payment providers, market makers and banks.
Everything You Need To Know About Ripple
While the ripple system makes sense for logical operations, it doesn’t let pass to average consumers. XRP doesn’t provide the average consumers much of a benefit. So ripple likely isn’t going to change how you personally receive and send money anytime soon. But it is looking to revolutionize how money moves across the border on a large scale through banks and other financial institutions. Ripple has shown that it can handle a tremendous amount of transactions per second even when you compare to its following mate cryptos like BTC and ETH.
BTC handles about 7 transactions per second and Ethereum handles about 14 transactions, whereas XRP ledger can handle about 1500 transactions per second.
Is Ripple (XRP) Centralized?
Yes, research says Ripple XRP is centralized and terribly flawed. Now let’s get into Ripple supply structure, a key element to know about is the amount of Ripple in existence. All XRP has already been created with a total supply of 100 Billion. There are currently around 39 Billion XRP in regulation with the rest held by the Ripple labs. Ripple is kind of centralized, given the fact that Ripple labs hold around 61 Billion XRP tokens. This is the reason that Ripple is centralized.
However, Brad- the CEO of Ripple views differently, Brad stated “Ripple is not centralized. To be clear if Ripple disappeared today XRP would continue to function. To me, that’s the most important measure of whether something is decentralized.”
In May 2017, Ripple released its decentralization strategy. Ripple announced the plan to diversify the validators on the XRP ledger and expand them to 55 validator nodes. In July 2017, Ripple also shared their 3rd party validating nodes while removing one ripple operating node to every two third party nodes until there is no single entity that operates the majority of the trusted nodes on XRP ledger.
Well, the more accurate way to describe that ripple is centralized or not. You have got a holding company that holds more than half of the XRP token which likely prioritizes the accusation of the new parties on the Ripple network. Being centralized is not necessarily a bad thing but it does harm the main point of cryptocurrency, which is decentralization.
Why you should invest in XRP?
So now the question is should you invest in XRP? Ripple project might be very impressed with the great potential, however, if most financial institutions and banks will utilize ripple open network, it does not mean that they will have to use XRP tokens, they may easily replace XRP with other tokens.
Well, organizations like Moneygram have announced that they are going to use Ripple network and if other giants get into the Ripple network then it’s a heaven to invest in.