- Ripple is a unique blockchain ecosystem in terms of functionality and solutions that it offers.
- The platform has been in the news for its legal troubles and other contributing factors.
On the face of it, Ripple may look like just another crypto. However, some of its characteristics shed light on blockchain’s capabilities. It may be an overstatement to say that the coin solves many problems and takes blockchain ahead. Still, this peculiar blockchain network is worth the time and attention of crypto enthusiasts. So let’s take a deep dive into the Ripple ecosystem and see what it does for digital asset holders.
Everything To Know About Ripple
Ripple is an open-source decentralized mechanism that enables the storage and execution of cryptocurrencies. More importantly, it functions as a payment settlement and remittance platform. It should be noted that Ripple has been presented as a replacement for the SWIFT system.
For the uninitiated, SWIFT stands for Society for Worldwide Interbank Financial Telecom. It is a body that connects several international banks for easy cross-border transactions. However, Ripple deploys blockchain to execute the transfer of money in any form. The peer-to-peer structure facilitates not just cryptos but also fiat currencies.
Understanding Ripple Mechanism
Ripple works on a unique consensus protocol as opposed to PoW or PoS. It validates transactions and account balances while improving the integrity of the system. While facilitating quick conversions between different currencies, it also prevents double-spending.
It works as a global payments network and provides services to financial services and major banks. The unique system consumes less energy than many other cryptos. Moreover, it executes transactions at a much lower cost. Ripple runs its own blockchain, the XRP Ledger. XRP is the native token of XRPL. which was developed with the intent of mainstream adoption.
A Peep Into the Functionality of XRP
XRP works like a bridge to other currencies without discriminating between crypto or fiat. The ecosystem provides a gateway to every currency for easy execution. It’s better to understand this feature with the help of an example. Suppose Mr. A wants Bitcoin as payment for the services catered to Ms. B. Using the Ripple blockchain, Ms. B can do that without necessarily possessing BTC.
She can send the payment in US dollars or any other currency. Mr. A will receive the payment in Bitcoin in this ecosystem. It must be noted that XRP deploys multiple gateways for seamless operations. At the same time, users must know that gateways bring the risk of exposure. They may even lose money if gateways don’t honor their liabilities.
To prevent this possibility, users are advised to use trusted and certified gateways.
How Does Ripple Work For Cross-Border Payments?
RippleNet is the payment network created to improve cross-border transactions. It offered a more cost-effective and optimized method for executing remittances. The network works like a real-time gross settlement system. It also extends exchange services through its native XRP crypto. It emerges as an alternative to the SWIFT system using a decentralized ledger instead of banks.
The ecosystem enables an end-to-end transfer process that lasts for minutes. Unlike the traditional banking system, it provides transparency and better security. Initially, Ripple introduced three different services.
xCurrent– A payment system that focuses on banks.
xRapid– A liquidity provider to its clients and token users.
xVia– It connected the two services above through an application programming service (API).
In 2019, RippleNet was formed by combining all these services. It also established XRP as a single means for sending funds. Using an interledger standard, Ripple makes transnational payments easier and faster. It reduces the cost and curtails the lengthy process by eliminating centralized control.
Furthermore, the participating ledgers get a chance to join the network of trusted nodes.
RippleNet is designed to find the fastest way of transferring value between senders and recipients. The network does that with account verification checks and compliance assessments.
It goes through these procedures every time before facilitating the payment. In addition, the ledgers safeguard the funds during the transaction process. They also act as an escrow and ensure that payments are made when the predetermined conditions are met.
How is Ripple (XRP) As An Investment?
Wise investors know that no crypto or any other instrument can guarantee profits. While Ripple is no exception, it may gain the traders’ attention due to some factors. The ecosystem was introduced to disrupt mainstream international payments.
Several financial institutions have expressed interest in testing the network. However, its ongoing legal tussle with the SEC has somewhat hindered its advancing steps. Some US authorities have advised crypto users against using Ripple services and XRP tokens. On top of that, some exchanges have limited or stopped the trading of XRP.
Irrespective of all the challenges, the supporters of Ripple in the crypto community hope that Ripple emerges triumphant. Only time will tell if it proves its worth in payments or investment.
Disclaimer
This article is only for information purposes and does not promote any type of investment, it is strictly suggested to do your research before investing or to consult with investment professionals.