Ripple has been somewhat of a unique entry into the cryptocurrency space, going against the
grain of many cryptocurrencies that want to ‘free’ consumers from banks and decentralize the
movement of money. Instead, it’s a company whose goal is to enable financial institutions to
make real-time, cross-border payments for their customers. Using Ripple’s network, banks can
execute transactions directly with one another in mere seconds using an open-source public
database called the interledger protocol (ILP), while having full visibility of the process.
”Where Bitcoin is a decentralised, trustless digital currency, Ripple’s network is a private, centralised and permission-based currency exchange.
Solving a problem
It’s 2018 and technology is amazing. We can stream cat videos in seconds and have our data
bounce from satellites around the globe in the blink of an eye. But let’s say you want to transfer
your money to your friend in Portugal. Incredibly, the most efficient method would be to book a
flight and physically fly it there. In 2018 we can send instant messages to each other in seconds,
but can’t move our own money from country to country easily.
The problem Ripple aims to solve is this inefficiency of current cross-border payments, where
settlement can take a number of days and pass through many intermediaries. Most of us would
have experienced the slowness of sending money overseas or frustration of waiting for an
overseas cheque to clear – and in 2018 this inefficiency simply doesn’t meet the demands of our
digital economy anymore.
What’s the difference between Ripple and XRP?
The uniqueness of Ripple in the cryptocurrency space is that it’s a company – just like any other
business in the marketplace today. Different to other crypto projects and their often volunteer
devs, Ripple has a traditional business structure with a board of directors, investors and
hundreds of commercial customers around the world, most notable being several banks that are
trialing or adopting the Ripple network technology today.
Ripple’s main product or digital token is called XRP, which most investors have come to know
simply as ‘Ripple’. However, one of the most interesting aspects to Ripple is that it’s network is
able to facilitate transactions without the use of XRP tokens. This fact has been one of the main
concerns of crypto investors since Rpple came onto the scene. The most commonly asked
question being, “If XRP isn’t needed for international transfers, then where does the value of
XRP come from?” The answer is quite a simple one; David Schwartz , Chief Cryptographer at
Ripple answers is most simply, “There isn’t fast settlement without XRP, just fast payments.
When you use RippleNet (the Ripple network) but don’t use XRP, the actual money has to move
using either the traditional correspondent banking system. This is significantly slower and more
expensive than instantaneous, atomic settlement with XRP.”
So as you can see, the incentive for banks to use XRP for international payments is high,
especially given that by using XRP it lowers their cost of transactions. And we all know if it’s one
thing banks love, it’s to lower their costs. This is where XRP’s value becomes apparent.
Background: What is SWIFT and why is it important?
Before we talk about some of the main features of Ripple, we need to understand the current
global payments system. SWIFT stands for the Society for Worldwide Interbank Financial
Telecommunications . Created in 1974, it’s the network that financial institutions use to securely
transmit information and instructions through a standardized system of codes. However, of late,
SWIFT has been prone to an increasingly number of problems. Along with problems with the
speed of transactions and the way SWIFT works, it’s also seen several attacks by hackers,
looking to penetrate and steal funds. SWIFT has naturally had a level of ‘security through
obscurity’ for many years but now that modern cyber-criminals are more knowledgeable, it is no
longer able to go unnoticed and what’s been a decades-long monopoly in financial transactions
looks to be coming to an end. In a nutshell, it’s now considered analog technology in a digital
Ripple’s goal is simple; it intends to replace SWIFT and become the dominant global payments
Main Token Features
● Uses the Interledger protocol (a variation of TCP/IP) and chain-links across multiple
● Transaction speeds of around 3.3 seconds.
● Low transaction costs of around $0.004 cents per transaction.
● High scalability of currently around 1500 transactions per second (TPS) compared
to Bitcoin and Ethereum’s low TPS numbers (~3-6 and 15 respectively).
● When transactions are completed using XRP, a tiny bit of XRP is destroyed or
‘burnt’ thus increasing the value of the token over time.
● The Ripple XRP token (XRP ticker) currently has a circulating supply of 39 billion
(total 100 billion), pre-mined.
● To provide additional predictability to the XRP supply, Ripple has locked 55 billion
XRP (55% of the total possible supply) into a series of escrows. These escrows are
on the ledger itself and the ledger mechanics, enforced by consensus, control the
release of the token over time.
● Using XRP, banks can source liquidity on demand in real time without having to
pre-fund nostro accounts (A nostro account is an account held by a bank in another
bank, typically in a different currency.)
● Negligible energy consumption in the use of XRP.
● Wallet; Chrome-based Ripple app for XRP storage with Ledger Nano S hardware
● 20 XRP are reserved for each Ripple address to prevent spamming of the network.
● A legitimate cryptocurrency with strong potential to disrupt currency exchange.
● Strong company backing and talented team behind it.
● A laser-focused goal – to enable the world to move value like information moves
● Ripple’s market position – it has customers deploying its products in production
● Ripple boasts some big-name clients such as Santander, UniCredit, UBS and
● Adoption – the National Bank of Abu Dhabi (NBAD) has become the first bank in the
Middle East to use Ripple’s solution to provide real-time cross-border payments for
● Ripple holds the majority of XRP to create a stable supply of the token, but can
easily impact the price instantly by dumping more coins onto the market.
● Ripple is a company, and goes against the philosophy that cryptocurrency should be
● Some investors and crypto evangelists are uncomfortable investing in XRP due to a
dislike of the banking system.
● Banks aren’t required to use XRP on Ripple’s network.
Typically, the most common use case for Ripple is a cross-border transaction where a customer
wants to transfer money overseas. For example, let’s say Dave wants to transfer money to his
sister, Scarlett for her birthday. Currently, it’s not an easy process and quite a slow (and
expensive) one at that. With the Ripple network in place between both Dave and Scarlett’s
banks, they can perform a cross-border payment easily and quickly, having the currency
conversion done on the fly and the money in Scarlett’s bank account in mere seconds. On
Dave’s end, he would see the real-time conversion rate and fees before the transfer, and on
clicking send, the transaction would hit the Ripple network and be completed easily, without any
intermediaries or taking days to settle.
Ripple came onto the scene initially as a solution for banks and cross-border payments and in
some ways was initially ignored by many investors due to its close alignment with banks and the
financial system. But in it’s short history, it has gained traction as a popular cryptocurrency
among consumers who love it’s fast transaction speed and small fees. Not only is the potential
for Ripple as a global payments system for the financial system high, but global workers who
often send remittance back home to families are beginning to see Ripple as an ideal solution to
send money to their loved ones, superior to Bitcoin.
Ripple has a promising future ahead of it. Whether XRP becomes a cryptocurrency for
consumers is still unknown as some investors do have reservations dealing with a company that
has close ties to the traditional banking system. But with solid backing behind Ripple and the
token, its potential in becoming a global cryptocurrency that also works with our current banking
system is definitely present.
Gary Denne is an Australian-born writer and technology evangelist with 20 years tech Industry exp. Loves crypto, stocks, cats, outdoors & healthy living. Not a fan of gluten ?