Everything Investors Need to Know about Ripple


The key thing to understand about Ripple is that it’s a currency (XRP) as well as an exchange platform. It functions as a remittance network, as well as a real-time gross settlement system.  Developers initially released the platform as an iteration of Ripplepay. It was conceived as a cryptocurrency whose value was attained through consensus and not by mining, as is the case with Bitcoin.

How is Ripple different from Bitcoin?

Contrary to what many have come to believe, it’s not another version of Bitcoin.  Instead, it differs from it in many aspects.

First, Ripple, unlike Bitcoin, is not Blockchain based. However,  like Bitcoin, its network uses a consensus mechanism.  The central technology that drives Ripple is a HashTree. This technology summarizes all the transaction data into one single value comparable across the validating servers of the network. Moreover, unlike Bitcoin, Ripple doesn’t depend on the enormous computing power and energy that is expanded in Bitcoin transactions. Instead, this exchange makes use of a common ledger on a shared public database. This ledger is maintained by the above-described web of independently validating servers. This network is constantly busy conducting comparisons of its transaction records. Furthermore, it uses a consensus process between the servers that ensures the integrity of the transactions. There is no limitation as to whom the validating server can belong to. It includes a wide range of sources, from individual systems to financial institutions like banks.

Timeline from Birth of Ripple through 2018

  • 2004: The platform is the brainchild of Ryan Fugger, who conceived the idea while working in Vancouver on an exchange trading system. The motivation behind Ripple was to create a decentralized platform. This platform enabled its individual members and communities to create their own money.
  • 2005: The company completed the first version of the system and made it accessible on RipplePay.com
  • 2011: Jed McCaleb began the development of his own digital asset. The idea was that consensus will establish the value of the currency rather than mining, as happened in Bitcoin’s case.
  • 2012: Fugger handed the control of the exchange over to Jed McCaleb and his partner Chris Larsen. He recreated their organization, naming it Opencoin.
  • 2013: OpenCoin secured $2.5 million funds from various angel investors. Opencoin then acquired SimpleHoney as a step in its strategy to promote digital currencies among the public. Opencoin rebranded itself to Ripple Labs. Inc, and officially declared Ripple Code open source. This enabled community members to participate within the network.
  • 2014: Ripple incorporated Litecoin to become the 2nd largest cryptocurrency in the world. The German bank Fidor adopted the Ripple protocol for their international transactions.
  • 2015: The US Government fined the exchange $700,000 for violating bank secrecy protocols. However, Ripple are still adopted by more banks, from Royal Bank of Canada to National Bank of Abu Dhabi. The company rebrands to Ripple
  • 2016: The platform attains a virtual currency license, enabling it to operate in New York state.
  • 2017: Ripple is recognized as the only payment system comprised of digital currency that is used by major banks of the World.
  • 2018: The company overtakes Ethereum and attains the 2nd spot in the market cap system.

The Ripple Network

As seen from the timeline, Ripple is one of the only cryptocurrency based payment systems that is officially being adopted in money-service institutions and banks. These financial institutions are present on a network known as Ripple Net that utilizes solutions provided by Ripple.  The exchange was primarily created for enterprises. Therefore, more and more financial institutions are coming on board to enjoy the facility of transacting large sums of money rapidly.

Rate of Transactions

Ripple has processed more than 35 million transactions without a problem since its release. This is undeniable proof of its stability. Currently, it can handle 1500 tps (transactions per second). On top of that, they are scaling it to reach the visa levels of 50,000 tps. In contrast, Ethereum can handle 15tps and Bitcoin can handle a relatively lower amount of 3-6 tps without including its scaling layers.

XRP Token

The Ripple platform has its own cryptocurrency called XRP. However,  the platform enables others to create their own using the RippleNet. Since the beginning, the platform issued around 100 billion XRP tokens. They claim to keep the amount at this limit.

XRP finds its application as a token across the RippleNet. It functions as a mediator for the exchange of both cryptocurrency and fiat money. XRP is fungible with all types of currencies. Therefore, it allows the settlement of any payment within 3.5 seconds. Furthermore, it makes the assets available and spendable by the members.

The fascinating feature of XRP is that it does depend on the Ripple Network. However, it is not mandatory for financial institutions to use XRP for transacting their Dollars, Pounds, Euros, etc.

Banks Supporting Ripple

  • Axis Bank
  • Santander
  • NBAD
  • UBS
  • Union Credit
  • Westpac
  • Yes Bank

Benefits of Ripple

  • Low commission exchange of Currency: In general situations, many currencies can’t facilitate direct conversion from one to the other. Therefore, to convert currency A to B, Global banks usually convert A to USD and then USD to B. Ripple, as a mediator is considerably cheaper than other currency mediators like USD.
  • Fast Global Transactions:  International transactions through a bank take a few days, and using Bitcoin takes an hour or more. However, international transactions through Ripple take an average time of 4 sec.
  • Independent Payment Ecosystem: This platform enables its users to issue their own currency for conducting a cheap and fast transaction.
  • Trustworthy: Since many global banks adopted Ripple, it established itself as a reliable, official organization.
  • Inflation resistant: Mining of the tokens already took place and exist in the system. Therefore, they are less susceptible to the influence of inflation.
  • Lesser Regulation Checks: Ripple finds its primary use in banks and other major financial systems. Therefore, it is subject to minor regulation checks as compared to other digital assets.
  • Unified Minimal Commission: The platform allows its users to exchange it into any other type of currency or a valuable asset like Gold, all sharing a unified minimal commission.

Final Words

With so many benefits, investors may find Ripple a lucrative option for investing their funds. However, no investment is 100% risk-free. And this exchange is no different. Contrary to the dream with which it started, this exchange is based on a centralized platform. On this platform, the developers decide if they want to release the tokens and how much.

Moreover, since the company hold over 61% of the tokens, it makes the system a monopoly. Even though the code is open-source, its accessibility makes it susceptible to hacking.

The trust which the Ripple platform has garnered is absent in the case of the XRP token. It is probably because most of the banks that adopted the main platform, did not adopt the XRP token.  Therefore, investors and other interested potential stakeholders must weigh the pros and cons before investing in XRP.

 

 

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