Ripple: All Concepts and Structures You Need to Know
Ripple: All Concepts and Structures You Need to Know
Ripple is a blockchain project that provides essential solutions focused on the finance industry. The blockchain project includes a remittance network with currency exchange supporting real-time processing and settlement of transactions on the network. The project’s native cryptocurrency, also called Ripple (XRP), may be used for payments where supported and may be exchanged to fiat currencies on cryptocurrency exchange platforms. Ripple’s systems, in addition, are not exclusively for XRP but support other currencies. Ripple’s development focuses to enhance faster and secure cross-border payments. As a result, the system has been hugely adopted by financial institutions. Ripple’s enhanced structures have enhanced this adoption by major financial firms, leading to increased value for its native currency XRP.
Ripple’s Blockchain Elements: RippleNet
One of the elements of Ripple is RippleNet, a product that aims to enhance a seamless transfer of money across borders. RippleNet allows for the finance industry to adapt to the latest technology and enhance movement of money as fast as information currently moves. RippleNet applies the core of blockchain to decentralize the payment systems while creating identical standards within the systems to enhance faster and more secure transfer of money. Existing cross-border payment systems comprise of centralized institutions, especially banks, which demand waiting periods for processing cross-border payments. Most of these financial institutions have varying terms of operation limiting the speed of international transfers up to five days, averagely.
While technology advances and the world adopts a global market, amounts of international funds transferred continue to rise as more businesses expand to new markets worldwide. These businesses demand reliable cross-border payment systems to ensure their operations continue steadily. Financial institutions that integrate RippleNet into their operations enhance an internet of value by creating a single platform for stakeholders in payments to interact seamlessly. The decentralized system facilitates a secure transfer of payments to recipients. RippleNet’s components include the network’s members and users.
RippleNet’s members are often banks and payment providers. These members integrate Ripple’s solutions to their existing systems to access the unique features of RippleNet. The network’s users, however, comprise of firms, small and medium-sized enterprises (SMEs) and small banks. Based on RippleNet’s solutions, members of the network access a platform for real-time settlement of all payments, including global transfers through xCurrent. Through xCurrent, banks engaging in a global fund transfer first communicate by messaging, validating the details of the transaction before final processing and settlement. After the settlement, the members may confirm the delivery of the payment via messaging, allowing the network members to ascertain the validity of a transaction.
Another component of RippleNet is the xRapid. This component offers network members liquidity at comparatively very low costs. Through xRapid, banks and payment providers access additional liquidity on demand to ensure that all payments are seamlessly settled with no delays. Through XRP, the banks may access liquidity to top up operational deficiency at very low costs. Another component of RippleNet is xVia, a tool that offers a standard platform for making payments by the network’s users. Users, especially the payment providers, receive a more transparent way to proceed with payments. These procedures involve tracking the payments and accompanying relevant rich data including invoices with the transaction. xCurrent, xRapid and xVia are the key elements for developing efficient global transfer payment systems through RippleNet.
Among the top ten cryptocurrencies, XRP lies third in terms of market capitalization, with over $14 billion behind BTC and Ethereum’s Ether (ETH) with $88.70 and $17.57 billion respectively. As reviewed in the RippleNet tech structures, the performance of XRP is affected by among other factors its adoption by RippleNet members which include banks and payment providers. As such, it is essential to understand the impact of RippleNet in advancing the adoption of XRP by users. For instance, xRapid, a liquidity source for banks engaging in global transfers uses XRP to settle payments. XRP’s performance is enhanced by the practical solutions that drive the internet to become a place of value using the RippleNet.
XRP’s performance in the past has often been characterized by a rising and falling value on exchange platforms. The cryptocurrency’s value before April 2017 did not trade above $0.052. However, toward the end of the year, as other cryptocurrency prices like BTC soared, XRP’s value reached record high figures up to $0.3. Late into 2018, as prices of most cryptocurrencies skyrocketed, XRP’s value similarly rose up to $3.84. As BTC shares over 50% of the cryptocurrency market’s, trends in the coin may affect other altcoins, including XRP. This phenomenon is responsible for the market performance of XRP, which often simulates the performance of BTC.
XRP’s prices nosedived during the 2018’s bear market for the cryptocurrency industry. The slowing prices created more concerns on the future of cryptocurrencies, and blockchain solutions including smart contracts, global payment, and decentralized applications. Some viewed it as the end of the technology as the ‘bubble’ had just burst. However, the industry has often got back up following such struggles. The recent steady rise in the prices of the cryptocurrencies this new month (April 2019) has seen XRP prices at exchange platforms average $0.35. April 2, 2019, saw prices rise rapidly creating speculations of the start of a bull market, a matter that most experts tend to disagree although predicting price increase in the future.
Behind the XRP’s Technology
Founded by Chris Larsen and Jed McCaleb, Ripple’s technology is unique to other cryptocurrencies. The company created a maximum 100 billion XRP in which some is stored by the firm, some rewarded to firms while others are sold. The huge amounts of XRP held by Ripple have led critics to argue that XRP is in itself fighting against blockchain’s decentralization by limiting the control of its systems to professionals in its systems. Despite having very low exchange rates ($0.35) compared to BTC ($5,030), XRP’s market cap remains the third highest in the industry worldwide. This high value relies heavily on the partnerships of Ripple with finance institutions.
XRP unlike other cryptocurrencies mainly developed as a replacement for fiat currencies supports the exchange of valuables, and other regulated currencies in its systems. The technology allows Ripple to reach further regions as the blockchain technology just starts to become felt and adopted in countries worldwide, especially in developing markets. Ripple, thus, seeks to impact the adoption of XRP and consequently cryptocurrencies for the future economy. The cryptocurrency utilizes a unique technology for its consensus model – a blockchain’s method of verifying or validating the transaction(s) in a blockchain. XRP’s Ripple protocol consensus algorithm (RPCA) is an automated system for approving the validity of transactions in the system. The system’s automation assists to limit the power spent in verifying the transactions, as in BTC and Litecoin (LTC) which require very high power for validating transactions. Consequently, Ripple’s XRP is not subject to miners. Its automation of the validation process makes it therefore significantly power efficient compared to proof of work models of consensus.
XRP’s technology seeks to enhance faster processing speeds focusing mainly on the finance industry’s cross-border payments which may currently take up to several days to complete on traditional banking methods. In addition, the technology builds a growing number of nodes – computers involved in the validation process – worldwide, ensuring that its open-source technology upholds the decentralization aspects for the blockchain. In addition to the ease and accuracy of ledger validation, XRP has displayed scalability of its systems allowing up to 1,500 transactions per second, the highest speeds for processing transactions compared to other cryptocurrencies. For instance, BTC’s one MB block sizes resulted in delayed validation as its adoption increased, causing BTC to suffer distributed denial of service (DDoS) and delaying transaction speeds. The upgrade to eight MB made validation faster (one hour or more), but not as XRP, which takes just 4 seconds. ETH, second largest by market cap, takes two or more minutes. The project’s technology is versatile, interoperating on various networks while ensuring scalability and security.
Apart from being deployed in xRapid for sourcing liquidity in the banking sector, XRP may be used for currency exchange. Making cross border payments may involve several currency exchanges which turn out to be very expensive. These huge amounts of money lost to the forex may cause a business to access insufficient funds for their operations. Using XRP as a currency exchange, the coin’s very low commissions ensure that very little is cut off during the exchange and that one finds convenience using the exchange platform as it supports several coins. Just like other crypto coins, XRP attracts investments from individuals with a prospect of rising prices of the coin. Being an early investor, they hope to reap hugely when the prices of XRP rise as several predict it will.
Investing in XRP
Just like any other cryptocurrencies and even stocks, investment requires in-depth knowledge on the product being offered, and a clear roadmap of the future of the product before one can almost safely invest. Achieving perfect investment, with expected high returns is quite uncommon in the crypto world. Many people with hardly any knowledge on the cryptocurrencies have lost money due to rash decisions made to invest. Determining whether one would like a short-term or otherwise, long-term investment is essential. The key points that may help you decide whether to invest in XRP include the following:
- Adoption of RippleNet: More banks continue to integrate RippleNet systems into their operations to access a new and decentralized network for fast processing of transactions across borders. This phenomenon may result in an increase in value for XRP as its demand rises.
- The impossibility of Inflation: Since the XRP is pre-mined, it is impossible that others may be reproduced that will flood the market and lead to reduced value for XRP.
- Organizational Reputation: While Ripple has received some backlash for some activities, the project’s technologic stability over the years has earned the trust of financial institutions and other firms.
- Controlled decentralization: Although Ripple’s systems are decentralized, the nodes are limited to control by the organization only. This feature, though effective for the operation of RippleNet, risks the entire organization’s operation as a hack may cause the entire system to collapse.
- Majority Ownership: Ripple itself owns a majority of the XRP on its platform. This feature may be viewed as a commitment by the firm to grow the value of XRP. However, the situation may define a biased control over a stake, which may result in decisions that fail the project.
While some people agree that the coin is worth considering for investment, critics seek to make it known that investing in any cryptocurrency should be approached with care, with one prepared to lose as they are prepared to gain money.
Ripple and Stellar Controversy
Both blockchain projects were cofounded by Jed McCaleb, and possess huge similarities. Stellar’s native currency, Lumens (XLM) also possesses similarities to Ripple’s XRP. First, both projects have no mining of tokens. Also, both systems enhance global transfer and transactions fees are very low. Just like in Ripple, developers of Stellar control the supply of its coins. After deciding to leave and while trying to sell his XRP, Jed McCaleb’s XRP wallet was frozen. This scenario displayed a rather centralized approach to the Ripple systems as most people joined to invest in the new Stellar, considered less centralized than Ripple. Stellar seeks to access people in developing countries with no access to banking services while Ripple’s focus is mainly on the financial institutions.
Ripple has partnered with over 200 banks and payment providers within its operation period, with most of the partners joining in the last two years. The features of RippleNet provide a prospective future of low-cost operation for banks while enhancing their reputation with customers, as services are fast, secure and with no downtime. Some of Ripple’s customers, who are its network members, include; MoneyGram, Standard Chartered, InstaRem, American Express, Santander and many more banks and remittance firms worldwide.
Ripple’s growth to its current state has shown the project’s readiness for any threats that it may face. Having enhanced its reputation as a stable project, financial institutions now seek to incorporate its solutions to enhance their service to customers. Ripple has ensured that its systems are dynamic and compatible with various networks, to enhance its adoption in the finance industry. Further, features of RippleNet like the interbank communication before and after processing transactions enhance the security of transactions and customers’ satisfaction. Ripple’s commitment to comply with relevant regulations ensures that the service provided is of desired quality. Despite the blockchain market’s volatility and the controversies the project has faced in the past, Ripple still offers a valid solution for global funds transfers; a feature that will aid in its growth as it has already done.