The emergence and later tremendous popularity and growth of Bitcoin paved the way for the evolution of a number of other cryptocurrencies. These are collectively referred to as altcoins for want of a better term. Some of the most popular ones among these are Ethereum, Ripple, and Litecoin. Out of these, it is Ripple that has gained maximum traction in the financial world. It is a real-time gross settlement payment system (RTGS) that was founded in 2012. Ripple has its own currency XRP that has become very popular cryptocurrency in present times.
In just 6 years, Ripple protocol has become very popular among banks and financial institutions around the world as a very fast and cost effective system of payment to make international payments. Today, top 50 banks across the world are using this platform and its technology for settlement of payments. The main reason behind this popularity of Ripple lies in its blockchain technology that makes it so powerful.
How Ripple works?
The present system of sending money from one bank to another internationally is time consuming and cumbersome. Despite being called RTGS, both sender and the recipient are aware that money is not sent across their accounts instantly. It takes hours before the recipient sees the money in his account. But with the help of payment protocol of Ripple, this task of sending the money across two banks becomes easy and very efficient.
Ripple receives the message, stores it, and initiates the transaction. It does pre validation of the two accounts to make sure they are genuine and correct. Interledger Protocol oversees the coordination of fun movement across three banks. The money is held by Ripple across three ledgers. It also makes sure that the money is not sent twice accidentally. Later on, the money is released from all three ledgers. All this takes just a few seconds, not even minutes and the transaction is complete. Afterwards, text messages are sent to all concerned parties to confirm the transaction. This is a much more secure and efficient system of international payment than the regular transfer of funds across banks.
Ripple works on an independent platform separate from Bitcoin and Ethereum blockchain system
One reason why Ripple is moving ahead on the popularity charts is because of its blockchain technology that is unique and different from the blockchain technologies of Bitcoin and Ethereum. XRP is the currency in Ripple and it mainly focuses upon payments whereas focus of Bitcoin is on store valuation while Ethereum focuses upon smart contracts. The reliability of Ripple and the trust shown in this payment protocol by international banks has also helped its currency XRP a great deal. It is not a surprise then that XRP is the third most valuable cryptocurrency in the world today after Bitcoin and Ethereum.
There is another reason why XRP has become the preferred choice of those fond of digital currencies. With its own payment system in place, it takes transactions in XRP just 3.5 seconds to reach from one part of the globe to another. If you compare it with Bitcoin, you would feel that it is a centuries old system as transactions in Bitcoins takes nearly 4 hours to complete.
The purpose behind Ripple
According to OpenCoin, the company behind Ripple, the idea of this payment protocol was a result of the delays in the transfer of payments across banks in different countries. People were disappointed by the speed with which international bank transfers worked and they wanted a faster and more efficient answer. It obliterates the need for higher transaction fees and inordinate delays in money transfer across nations. Ripple has its own digital currency XRP and it aims to do for money what internet has done to the world of information.
Aims to become to finance what email is to internet
According to the CEO of Ripple, the payment system across the banks internationally today is what email used to be in the decade of the 80’s. Different email evolved in those times and wanted people to use their systems but they created hindrances when people across systems tried to interact with each other. ‘Ripple’ desires to stop this discrimination by connecting different payment systems being used by different banks around the world. The company feels it is not easy and that other companies holding monopolies over payment systems might resist easy flow of money. However, it is optimistic about the success of Ripple and its acceptance by banks and financial institutions in near future.
There is no rivalry between Ripple and Bitcoin
As Ripple boasts of its own digital currency XRP that works just like the more popular cryptocurrency Bitcoin, there are many investors who feel that it is a rival to Bitcoin. However, as Ripple serves a bigger purpose of flow of information and money, it does not consider itself as a rival of Bitcoin. In fact, it is a payment system where all currencies, including Bitcoin, can be easily transferred between individuals and corporations. To dispel misconceptions of a rivalry, Ripple managers are developing payment gateways especially for the users of Bitcoins so as to make this cryptocurrency an integral part of the mainstream financial world.
Ripple likes to position itself as not a competitor but a system that compliments Bitcoins. This is why the company has a special page titled Ripple for Bitcoin on its website to make people more aware of this payment system.
As Ripple is a decentralized payment system, it does not depend upon a single company to secure the transactions and its database. Also, there is no single currency for conversions and transfers. Consequently, there is no waiting time and no approvals from a mediating third party. There is no point of failure in the network of Ripple which makes it very fast and super efficient. This is a big advantage that instills confidence in the minds of all those who are using Ripple to transfer their funds internationally.
Ripple is not free to use but it charges very little transaction fees if one compares it with other payment gateways like PayPal or even credit and debit cards. Many people are pleasantly surprised when told that they would be charged 1/1000th of a cent per transaction when using Ripple payment system. Even this amount is not collected but destroyed by the system after every transaction. The sole purpose to introduce this ridiculously small transaction fee is to make sure that the system is not hijacked by an individual or organization to carry out millions of transfers.
Any bank or financial institution can easily switch to Ripple any time it so desires. It is just a technology to facilitate payment transfers and it does not intend to dominate or usurp other digital currencies. There is even no requirement to covert a local currency into XRP to be able to use Ripple. The payment protocol sits atop existing financial infrastructure and complies with the risk and privacy regulations of all financial organizations.
In 2016 end, ripple pumped in $55million dollars into the system for its growth and support. Today, it is the largest blockchain project of the world being used by giant multinationals and corporations around the world.