What is Ripple?
Ripple describes itself as a payment solutions company. Its primary focus is cross-border payments through cryptocurrency liquidity. The company facilitates international money transfers using RippleNet, which comprises a global network of settlement providers and banks. Traditional banks have been at loggerheads with crypto developers since Bitcoin launched. Ripple Labs, instead, chose to work with banks instead of disrupting their technology. The company is also building a standard for central bank currencies that meet the required security standards.
Although Bitcoin and Ethereum looked successful initially, they had significant challenges, such as high carbon emissions and inflated transaction costs. Ripple Labs solved these problems by creating an affordable, low-energy requirement network. Its network can complete a transaction in a record three to five seconds at an insignificant cost of only 0.00001 XRP. Popular blockchain Ethereum considered one of the fastest, can only complete payment verification in an average of 10 minutes, but this could sometimes stretch up to a few hours. Ripple edges higher than traditional banking SWIFT infrastructure by processing up to 1,500 cross-border payments every second. Its banking counterpart can only manage 1,000 at most, despite being insanely expensive.
The network successfully executes its functions through three main products that are part of it:
Through this infrastructure, banks can convert their traditional banking settlement message format to an open and neutral protocol for real-time cross-border money transfer with end-to-end tracking. Banks can install it within their existing systems using an API and immediately lower their money transfer costs.
One of the challenges of large international transfers is liquidity shortages. To solve this issue, money remittance agents usually set up pre-funded accounts in the local currency of all their emerging markets, which is generally expensive. xRapid solves this hurdle by providing on-demand liquidity through XRP so that any institution can instantly send money across borders without having to first hold back up assets. It, therefore, acts as an exchange. With this solution, RippleNet stands out from competing products as one of the most scalable, efficient, and affordable worldwide payment settlement networks.
xVia is a simple protocol requiring no software installation. It enables users to instantly complete payments for invoices across the world with high levels of transparency. It’s mainly designed for large corporations that make large payments internationally
What is XRP?
XRP, is the native token for the Ripple network and its entire ecosystem. Its principal function is facilitating money settlement of different currencies on the network. Like any other crypto, speculators buy and hold it for profit. The name is derived from Ripple’s xRapid, where it was mainly used for exchange. Smaller units of the crypto are called drops and represent a millionth of a coin.
There were 100 billion tokens created at inception. Unlike blockchains such as Bitcoin and Ethereum, all coins were pre-mined before launching the project. Ripple’s share, 45 billion tokens, was deposited in an escrow account, while the remaining 55 billion were set aside for distribution across users. The maximum number was set at 100 billion and no allowance was left for increasing them in the future, making this the maximum supply. Since all coins were predetermined at the start of the project, there is no mining, hence no proof of work consensus mechanism. Instead, the token functions through the XRP ledger, which uses a proof of consensus algorithm designed to make settlement fast, cheap, and efficient.
XRP bridges different currencies through the I-OWE-YOU (IOU) system to ensure you can send money in any format, including crypto and fiat. The creators of XRP aim to replace USD as the primary exchange currency one day. Converting fiat money to XRP before sending it speeds up transactions.
How Ripple benefits banks
The network introduces banks to a new era of speedy and affordable money remittance. Banks can now facilitate payments for fiat and cryptocurrency clients without needing additional expensive infrastructure. The company makes the dream of a top-notch banking customer experience come true through its technology. While banks may lose out on the high charges of sending money across borders, they will save considerable amounts that used to go towards system maintenance, security, and technology costs of traditional cross-border settlement methods. The platform also offers central and commercial banks a chance to create and launch their own digital token without creating an independent blockchain. The technology has a plug-and-play platform for third-party crypto projects.
How Ripple improves upon other similar products
This crypto functions differently from existing blockchain networks. For example, Bitcoin was mainly developed to facilitate payments without interference from any central authority. This could only be made possible by a fully decentralized system. XRP isn’t as decentralized as most digital coins because it’s more focused on speed rather than eliminating central authorities. This is actually one of the main reasons it appealed to banks. To complete a payment, the network only requires 25 validators, out of a total of over 150, to agree on the network status. This makes verifying transactions faster. Completely decentralized networks, on the other hand, are slower because verification is done by millions of validators across the world. These independent nodes are run by banks, financial institutions, and tech companies interested in the project. Since there are no miners to be paid, payment costs are minimal.
What banks use Ripple? Full List
RippleNet has won the trust of different banks across the world already. Some are already using it, while the rest are either doing pilot tests or just waiting for the SEC’s case to be dismissed before they can fully adopt the technology. Here are some of the top banks already using Ripple’s banking system.
1. PNC Bank
PNC, one of the US’s top ten banks, partnered with Ripple in 2016. It was the first US financial institution to go live with XRP. The service was initially availed to corporate customers of the bank’s Treasury Management Unit for a trial. All customers with access to this automatically qualified for instant international payments against invoices. The bank boasts at least $60 billion in client deposits and at least seven million customers. The Pittsburgh headquartered bank has found a market in at least 19 US states. As of September 2018, the bank announced it was starting to use RippleNet’s xCurrent to enhance payment processing speed.
2. Standard Chartered Bank
StanChat, as they call it, is a multinational bank with a market in about 70 countries across all continents. The English bank has more than 1000 branches worldwide, employing nearly ninety thousand people. By virtue of its size and network, Standard Chartered sends a high volume of funds overseas. The London bank started using xCurrent in 2016 to speed up cross-border payments. Within two years of using RippleNet, Standard Chartered Bank gained a massive influence in the over $1 billion Indian-Singapore trade corridor. It further seeks to lower transaction costs in the future from the current $25 minimum for SWIFT MT900/910 through Ripple’s network.
3. Mitsubishi UFG
Mitsubishi UFG Inc is Japan’s biggest bank and the fifth largest in the world by total assets. It has a higher capital base than some popular consortia such as Goldman Sachs and JPMorgan Chase. The bank has previously defended RippleNet as a better alternative to SWIFT when it comes to cross-border settlements. In 2017, it became a member of RippleNet. It cited this move as one that would help it address the pain points of traditional money transfer systems, including delays and high costs of sending money. The bank believes it will offer improved customer experience and scale up its cross-border remittances by utilizing fintech such as blockchain networks.
Apart from the banks mentioned above, here is a list of other financial institutions helping XRP cement its authority in the banking sector. According to a report by the S&P Global Market Intelligence, over 40% of the top 100 banks in the world have partnered with Ripple.
|Name||Country||Total Assets (US$ B)||Status|
|1.||Industrial and Commercial Bank of China||China||4,000+||Trial|
|2.||China Construction Bank Corporation||China||3,370+||Trial|
|3.||Agricultural Bank of China||China||3,300+||Customer|
|4.||Bank of China||China||3,100+||Trial|
|5.||Mitsubishi UFJ Financial Group||Japan||3,000+||Customer|
|6.||JPMorgan Chase & Co.||USA||2,800+||Trial|
|7.||HSBC Holdings PLC||UK||2,600+||Customer|
|8.||Bank of America||USA||2,400+||Committee Member|
|12.||Japan Post Bank||Japan||1,990+||Customer|
|13.||Wells Fargo & Co.||USA||1,890+||Trial|
|14.||Sumitomo Mitsui Financial Group||Japan||1,850+||Customer|
|15.||Mizuho Financial Group||Japan||1,840+||Customer|
The Reasons Banks use Ripple and XRP
By now you already have an idea why this network won the hearts of banks across the world. Let’s look at the key strengths of the network that have made it the first blockchain-based network to be accepted by banks with zero resistance.
Cross Border Payments
All banks are in the business of money, which involves cross-border payments on behalf of their customers. Today’s consumers want fast and efficient transactions even when making payments in the furthest corner of the world. Unlike SWIFT, which takes an average of three days, Ripple offers international remittances in about three to five seconds. It’s also much cheaper than alternative instant cross-border systems like Western Union and Money Gram, which have already partnered with most financial institutions. All member banks of RippleNet can access and trade with each other with zero barriers.
Stable and Secure Back-end Infrastructure
Banks are always shopping for more secure systems as the threat of cybersecurity continues to rise. XRP is semi-decentralized through a system of 150 independent nodes that validate transactions and secure the network. Validators are not picked randomly; one must apply and wait for vetting. You only qualify when deemed trustworthy enough, meaning you must have vested interests. Since its inception, XRP has handled over 70 million successful transactions according to the information on its website. In addition, it has had zero downtimes due to system failure, indicating stability.
XRP has maintained its position among the top ten cryptocurrencies by market capitalization. With a market cap of more than $24 billion, it offers enough liquidity for banks to settle international payments, just like the USD. Banks can hold their XRP tokens and liquidate them whenever they need to. What’s more, banks don’t need to pre-fund to send money. RippleNet allows cross-border payments through xRapid without the need to buy XRP coins. It’s, however, more convenient and faster for banks to use XRP, in which case there’s enough liquidity.
Ripple has been transparent with its vision from the onset. It has focused on attracting banks, financial institutions, and finance-focused tech firms onto its network. Most developers allied to the project are also concentrating on solutions complimenting Ripple’s existing infrastructure. The company continually recruits many banks and developers to ensure it is ahead of the market needs. In terms of acceptance, Ripple is not only a favorite among banks but has also won the approval of different governments for being environmentally friendly. It’s the first crypto network with zero carbon footprint.
Final Verdict - The Future of Ripple
If you have read this article up to this point, you agree that Ripple has a great future in the money remittance business. It has already cemented its authority by partnering with money banking giants like Bank of America, American Express, Japan’s Mitsubishi Bank, and Standard Chartered. Ripple has had a strong influence among banks, unlike any other crypto. Smaller banks mostly copy what the leading ones are doing. Governments also don’t make decisions independently but rather involve key stakeholders, in this case, top-tier banks. That means Ripple has already crossed the acceptability stage. It’s only a matter of time before all other institutions join the Ripple network and make it their official cross-border settlement partner. The only thing holding the company from being aggressive is the lawsuit, SEC vs. Ripple. If the ruling favors Ripple, the company will be free to stretch its limits and rightfully displace SWIFT as the world’s most trusted money transfer system.
XRP is the native token for the Ripple network and its entire ecosystem. Ripple is the payment solutions company behind XRP. Its primary focus is cross-border payments through cryptocurrency liquidity.
Ripple introduces banks into a new era of speedy and affordable money remittance. Banks can now facilitate payments for fiat and cryptocurrency clients without needing additional expensive infrastructure.
You can only use Ripple to send money by being an account holder in banks that offer their customers access to XRP money remittance system. For example, PNC allows corporate customers to receive or make instant payments of their international invoices via XRP
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