Ripple is very unique because it's focused on solving just one problem and in just one industry - International Payment Transfers.
Ripple is a payment protocol that's often confused with the currency - XRP. To put it simply, Ripple is referring to the payment protocol while XRP refers to the cryptocurrency coin that runs on the Ripple network.
Ripple is a global system of payments, settlements, and exchanges. Ripple aims to improve on the worst banking system that is currently in place. The issues that Ripple aims to improve are:
- Slow transaction times
- Expensive cross-border payments
Bitcoin is a decentralized coin, on the other hand, Ripple is very different from Bitcoin, it is designed to work with banks instead of replacing the banks. People have called it the internet for banks because it will allow all banks to communicate with each other under one common language.
Ripple's Long History
Ripple has one of the longest histories and started as "Ripplepay" in 2004. The version of Ripple that is out right now started out in 2012. Since early 2013, numerous banks have started using Ripple to help with money transfers and exchanges. it is estimated that at least 80% of Japanese banks are currently using Ripple.
In terms of market cap, XRP (Ripple's own cryptocurrency) is the third-largest coin in the market. It has been helping banks make exchanges between currencies and to allow clients to make lightning-quick payments to each other. For example, if you want to pay a friend that's on the other side of the world, if you're using a bank that is using Ripple's payment protocol, your friend will receive the payment in seconds in their local currency.
Pros of Ripple
- An international money transfer takes about a week. Ripple can make it happen within seconds. The fees are considerably lower when compared to what is charged by financial institutions and other cryptocurrencies.
- Ripple has a very clear mission and use case — international payments. The team is able to deliver the best solutions targeted at one particular industry.
- Ripple is among the few cryptocurrency platforms which are being tested out in the real world - American Express and Santander.
- Potential to become the backbone of the global economy
Cons of Ripple
- Since the company itself owns half of the coins, Ripple is being criticized for being centralized, the whole purpose behind cryptocurrencies are to stay decentralized.
- Banks and financial institutions, which are Ripple’s biggest users, have started developing their own cryptocurrencies for international payments.
- To make it government-approved, Ripple allows balances to be frozen. This should scare all those who get excited by the permission-less nature of Bitcoin and all other cryptos.
A snippet of how Ripple is used
Ripple is used as a global settlement network. It lets banks (and other retail users) make cross-border payments and exchange currencies with one another. It gives all the banks using it one common language. This means they can communicate much more easily with each other.
What is XRP and how is it used?
XRP is a digital coin, it exists on the Ripple platform. The purpose of XRP is to be used as a "currency of last resort". If there's no line of trust available between two parties then XRP will settle it. XRP is transferred quickly and only takes a few seconds between the person who's sending it and the person who's receiving it.
Ripple sounds like it's too good to be true but the fact remains, Ripple is already being used and will become a key player in the global economy around the world. Most of you most likely have Ripple being used by your banks when you send and receive money.