- Ripple is a private company that provides global payment solutions to banks and financial institutions.
- RippleNet and XRPL are the two independent products of the company.
The earlier methods for cross-border payments like the SWIFT (Society for Worldwide Interbank Financial Telecommunication) have long been serving people in the financial ecosystem. However, these methods take a long processing time, charge high transaction fees, and are not transparent about the charges they hide. Users are forced to use it as they are left with no other choice.
Until Ripple came to light. Ripple is a privately held company that founded the Ripple Protocol. The Ripple protocol has two separate independent entities which are the Ripple Consensus Ledger (RCL now renamed as XRP Ledger) and RippleNet which is a payment and exchange network and has a suite of payment solutions like xCurrent, xRapid, and xVia.
RippleNet is an exclusive product of the company Ripple and has complete rights over it. This payment and exchange network was built on top of XRPL (XRP Ledger) and the 3-product suite offers its services to banks and other financial institutions. XRPL on the other hand is built on distributed ledger technology (the same blockchains use) which is open source allowing anyone to access that network without the permission of Ripple, the company. XRP is the native token launched by XRPL and is used within the ecosystem.
What is the RippleNet Ecosystem?
RippleNet was built to provide a solution to the issue of a single global payment network. In the traditional financial system, there were several independent networks between countries but not a single global channel. Users had to wait for long periods despite being charged a high transaction fee. This outdated payment system did not fit in the internationally connected world.
RippleNet is based on blockchain technology and allows banks, common people, and other financial institutions to connect to its network through an API and move funds and money globally, quickly and cheaply. The network uses an XRP token and all the transactions made are recorded on the XRP blockchain, however, RippleNet is not a blockchain itself. RippleNet offers a suite of 3 products which are:
xCurrent
This product was created to enable instant settlement of cross-border payments and targeted the banks. Banks can install the software in their system through an API and replace the traditional payments with a better alternative powered by XRP. The product was designed considering the risk capabilities of banks and abides by the policies of KYC and Anti-Money Laundering (AML).
It has four basic components which are:
Messenger: The communication channel allowed banks to talk and exchange KYC and payment details, risk information, scheduled time for funds, and much more. This created a global communication network between banks.
FX Ticker: A space that allowed people to exchange the FX rates so that everyone is aware of the value of converting one fiat to another.
Validator: Banks can use their validator or depend on a third-party validator to confirm the status of the transactions. They use cryptography methods and ensure to move only legitimate funds.
ILP Ledger: Each bank in the network has its own ILP ledger, which acts as a sub-ledger and tracks all the debits, credits, and liquidity of the bank.
xRapid
Banks used to deposit pre-funds in foreign bank accounts using nostro and vostro accounts to avail liquidity. xRapid provides an on-demand liquidity solution.
For instance, Jacob has to transfer $50 to Linda’s account from the USA to France. Then the bank would take up the $50 from Jacob in the USA, get instant liquidity by xRapid, and convert it to XRP tokens, then these will convert to Francs instantly by the other bank and sent to Linda.
xVia
The API-based interface for connecting banks to a single network.
Final Thoughts
There are many doubts regarding the complete understanding of Ripple and readers often get confused between Ripple, XRP, XRPL, and RippleNet.
XRP is the native cryptocurrency of the network which is independent of the Ripple company and XRCl.