Everything You Need To Know About Ripple (XRP)
Ripple is a platform that has a currency by the same name. Operated by Technology Company RippleLabs, Ripple was established back in 2004 but really took off in 2013 when major investors were brought in. It is an open-source, permission-less, decentralized protocol that was designed to facilitate swift and cheap transactions.
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Ripple’s primary goal is to provide a network solution for reliable and affordable global money and goods transfers. Since traditional money transfer systems such as Western Union, Swift, and various banks rely on dated technology, transfers using these agents can take several days and can be quite expensive. Conversely, transfers on Ripple can be done within a matter of seconds and are incredibly cost-effective.
How does Ripple work?
Unlike Bitcoin and Ethereum, Ripple does not have a blockchain but rather has its own patented technology, the Ripple Protocol consensus algorithm (RPCA). The RPCA stores all the information of accounts and transactions in a shared ledger (XRP ledger) that is managed by a network of independent validating nodes. Either banks or individuals manage these nodes, and they are what provide the consensus that confirms transactions.
How do transactions on Ripple take place?
Ripple serves as a mediator between transactions. Its token (XRP) can be transferred across different values embodying anything from fiat currency to commodities. To simplify this further, consider the following example:
You have a vintage clock, and you’d like to travel to Miami. Somebody across the globe (or across the street!) has a ticket to Miami and would enjoy a bottle of rare wine. A third person has a bottle of rare wine and really wants a vintage clock. Ripple’s mechanism works to find the cheapest path to combine each of these transactions, which couldn’t have otherwise found each other.
What are some of the Advantages of Ripple?
Ripple provides secure, cheap, and quick cross-border transactions. Ripple currently performs some of the fastest blockchain transactions in the crypto world, each of which takes only around 2 seconds. This, in comparison to Ethereum’s two-minutes and Bitcoin’s 10-minutes is an impressive feat.
Ripple also has some of the lowest transaction fees in the market, as each transaction costs the equivalent of around $0.01 in XRP. Ripple (XRP) has minimal commissions across exchanges; whether you’re exchanging XRP into dollars or gold, the flat fee is the same across the board.
Ripple provides an effective solution to cross-currency conversions. For example, if you would like to transfer money from Japan to Brazil, a traditional bank or money transfer institution will take your Japanese Yen and convert it into US Dollars, then to Brazilian Reals. This can be extremely expensive, time-consuming, and tack on additional conversion costs. Ripple provides a more direct path for transactions across the world.