What is Ripple?

What is Ripple?

What is Ripple?

In short, Ripple is a payment network exclusively created for banks and financial institutions. It enables those institutions to settle transactions faster and cheaper than through their existing back-end systems.

There are actually three parts to Ripple (this can sometimes be confusing): Ripple Labs, the San Francisco-based parent company (originally called Opencoin), RippleNet, the payment network, and XRP, the settlement token of the network, i.e. the cryptocurrency.  

It was officially launched in 2012, but it was conceived by its creator Ryan Fugger way back in 2004.

The whole idea of this ecosystem is to allow transfer of any sort of assets (currency, gold etc). The main goal is to eliminate the use of older systems like Western Union or SWIFT. To do that, Ripple offers an alternative in the form of XRP which is supposed to bridge the gap between various currencies. Its system enables users to send, receive, and hold any currency in a decentralized way via the proprietary network. Transaction fees are much lower, while transfers only 4 seconds to execute and verify at the most. Ripple’s network of nodes is actually pretty similar to the bitcoin blockchain.

Now that we have given some basic information about Ripple and the way it works, we’ll focus on XRP (the currency) and its protocol. We’ll also give some information about its price and market capitalization.

Ripple XRP

XRP is the currency of the Ripple Network (as ether is to Ethereum, or bitcoin to the bitcoin blockchain). It is a form of cryptocurrency that can be traded, but what sets it apart from most other cryptocurrencies is the fact that it doesn’t have to be mined. The coins are actually released every so often by Ripple Labs and can be freely traded on numerous exchanges.

However, XRP was never intended to be a functional digital currency the way that bitcoin is. It is a utility for banks or financial institutions that use it to conduct their transactions in XRP. This is the main difference when compared to Bitcoin.

XRP is not tied to any kind of asset and can thus play the role of intermediate currency by banks and other financial institutions.

While most cryptocurrencies tend to decentralization, this platform is extremely centralized, this centralization is the fact that the majority of the coins are owned by Ripple. Nobody is allowed to mine and acquire coins.

XRP Use Cases

XRP Use Cases

The cryptocurrency (XRP) vs the Ripple Protocol

One point of confusion is the difference between the Ripple cryptocurrency and the Ripple protocol. The coin has a lot of similarities to a regular blockchain, but it also displays some glaring differences, too. Apart from the fact that you don’t mine it, the coin is based on a consensus network instead of being consumer-facing, unlike for example Bitcoin. The protocol is a settlement system created to replace age old systems like SWIFT, which was developed in 1972 and is still used by most banks today in currency exchange, remittance and gross settlement transactions. Compared to that, Ripple has big advantages in both the speed of transfer and transfer tracking. Being 45 years younger, that’s not a big surprise.

Ripple Protocol

Ripple Protocol

How does it work?

Transferring funds with Ripple is done in the same way as with all other cryptocurrencies: Ripple wallets are the same as any other cryptocurrency wallets. You buy XRP on an exchange and then transfer them to your wallet, it’s as simple as that. Then you enter (or scan, depending on what you’re using) the address of person you’re sending the funds to and that’s it. Instructions are on your wallet and all you need to do is to follow them.  Just enter the amount and send, it’s as simple as that. The transaction should be verified in a few seconds and you’re done.

Ripple doesn’t take transaction fees like, for example, PayPal, banks etc. but it does take a small portion from each transaction. It can be easily purchased by using other cryptocurriencies like Bitcoin. The process is exactly the same – simply find a cryptocurrency exchange that has this coin listed and buy Ripple with just a few clicks. Finally, don’t forget to transfer the coins to your Ripple wallet for safekeeping.

Buy XRP

Buy XRP

Market value

Ripple’s total market capitalisation is at this moment valued at more than $51 billion, according to CoinMarketCap. This makes it the third biggest cryptocurency on the market after bitcoin. Another important element is the number of both tokens. Just for comparison of bitcoin’s and ripple’s market, at the moment  there are just below 17 million bitcoin in existence, while there are 40 billion Ripple coins. Ripple price is at the moment 1.34$

As we mentioned before, this cryptocurrency offers many benefits but there are also some concerns over privacy and centralization.

XRP Market Value

XRP Market Value

Cryptocurrencies have always been synonims for privacy and anonymity. However, the company has decided to market their platform exclusively to banks. Some users were therefore worried about the privacy of their personal informations and transactions.

Unlike most cryptocurrencies, itss platform is extremely centralized. Ripple owns the majority of the coins available on the platform and the coins released first go to the company which decides how to use them. This extreme centralization is also, by some people considered as Ripple’s disadvantage.

With that said, the future of this ecosystem depends entirely on the adoption of the platform by financial institutions. As more and more banks join the network, its price will probably grow too. This will certainly help to ripple’s popularity and promotion as more and more banbanks joine platform. This could very well change the way business is done, so investing in it is certainly not a bad idea. Investing in this asset is an investment opportunity that investors shouldn’t miss. But if you need more investment proposals or simply a place to trade, check out our other articles here. They will show you everything.

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Author: Ben Prescott
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