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What is Ripple?
Banking technology seems to be moving forward at a snail’s pace compared to other fields. In an age where almost anything is just a few clicks away, money transfers still take days, and exchanging between currencies is even more of a headache. Ripple (XRP) aims to fix that by main transfers nearly instant between any currency pair. Their ultimate goal: build a fast, secure, user-friendly system that has all the benefits of a decentralized blockchain, but make it palatable to conservative financial institutions.
The centralization and direct accountability that have drawn many banks towards this technology, though, have also caused concern among the crypto community. While the technology is perfectly sound, the developers have made no secret of the fact that they are creating an enterprise-focused product. It will probably be great for banking and will make money move a lot faster, but it probably won’t live up to the stereotypical crypto ideal of a decentralized system.
How does Ripple work?
The core technology is the same as any other crypto: any transaction sent from Person A to Person B is broadcast to the network for confirmation. Computers around the world check to make sure the transaction syncs up with their copy of the ledger and validate it. Once the transaction is validated, it is added to the permanent, unchangeable copy of the ledger shared by all the nodes.
Some parts of Ripple stray from the norm, though. One of the most unique features is the lack of mining. All 100 billion XRP were mined at the very beginning, and no more will be created. This means no miners—so who will do all the work to keep the network going? Most likely, it will be major financial institutions that are actually using it.
Currently, Ripple has three main products: xCurrent, xRapid, and xVia. They all accomplish the same basic task of Bank A sending money to Bank B, but in slightly different ways.
xCurrent allows banks to send, track, and communicate about cross-border payments—though no XRP is actually used in this process. xRapid is similar, but it focuses more on enabling companies to send payments to developing economies without having to set up bank accounts full of local currency first. Essentially, money is sent, exchanged for XRP, then sold for local currency and deposited. Finally, xVia can be thought of as Ripple’s API—an easy way for a company to hook up to it. Though it has not been released yet, this seems as if it will enable any app, company, or (possibly) individual to accept and make payments on the network.
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In February 2018, Santander Group announced a major upcoming app to facilitate fast cross-border transactions using xCurrent.
Also in February, the Saudi Arabian monetary authority signed an agreement to explore using Ripple in Saudi banks.
Ripple is actually older than Bitcoin. RipplePay.com, created by Ryan Fugger in 2004, was a decentralized payments system (not a blockchain) that allowed the use of “IOUs” as currency. It didn’t take off then, but it was revived as a blockchain project shortly after Bitcoin came on the scene.
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