Everything You Need to Know About Ripple
Bitcoin might command most of the public’s mindshare on cryptocurrency, but Ripple is a company you definitely don’t want to overlook. Founded in 2012, Ripple sells a currency settlement and exchange platform and issues the third largest cryptocurrency (based on market capitalization) in the world.
But its value proposition doesn’t stem from being a Bitcoin copycat. It actually stems from being one of the most unique cryptocurrencies on the market.
Ripple wants to speed up the process of cross-border payment transfers and, in turn, improve the current global payments system rather than replace it like the company’s competitors do.
To accomplish this goal, Ripple decided to design their token, XRP, as a currency transfer tool instead of as a medium of exchange, underpin it with a unique blockchain that can validate its transactions 215 times faster than Bitcoin can, and eliminate mining as the only way to acquire it.
Ripple as a Currency Transfer Tool
Ripple’s cryptocurrency, XRP, is popular amongst huge financial institutions, like Santander and American Express, because the token can significantly expedite these financial institution’s cross-border payment transfers.
XRP is designed to rapidly transfer any fiat currency into another, allowing financial institutions to shift money from one currency to another and move funds around the world in a matter of seconds. In fact, XRP can settle payments within four seconds and process 1,500 transactions per second.
This is refreshing and a lot more convenient for financial institutions who usually have to deal with the typical yet complex global payment system, SWIFT, which makes every bank open a separate account for every country they work in.
Financial institutions who use Ripple also don’t have to deal with cryptocurrencies that have notoriously slow transaction speeds like Bitcoin.
While XRP can process 1,500 transactions per second, Bitcoin can only process seven transactions per second. And coupled with each cryptocurrency’s volatile prices, there’s more of a risk that financial institutions will receive a lower amount of tokens than initially expected once their transaction finalizes if they transact with Bitcoin instead of XRP.
Ripple’s Unique Blockchain Improves Current Global Payments System and Requires No Mining
The XRP transfer process is swift because the cryptocurrency isn’t nearly as decentralized as the other major currencies like Bitcoin. Bitcoin’s main purpose is to introduce a new global payment system that can connect consumers directly with suppliers, removing the need for a financial middleman like a bank.
To do this, their blockchain completely decentralizes the cryptocurrency by requiring a network of millions of miners to solve complex cryptography puzzles to validate each of its transactions, instead of asking a central power like a bank to verify them.
Ripple, on the other hand, wants to improve the existing global payment system. So the currency’s blockchain, RippleNet, requires only 25 independent nodes, managed by various financial institutions, tech companies, and Ripple itself, to all agree on the true state of XRP’s public ledger and, in turn, validate its transactions.
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