In the traditional banking system, there is a hierarchical network ranging from central banks to banking services users and as middlemen are the financial intermediaries as conventional banks that channel money from the central bank to their customers usually in the form of loans and credits. Payment methods and transfers require these intermediaries to pass ownership of funds from one bank to another between holders. This implies having a set payment routes that function as control points to execute and validate the operations.
During the second decade of this century, many banks have tried to create a more dynamic, efficient and fast structure for international payment and clearing system, even they tried to create digital currencies to facilitate that process without much success because of the "double spending", where several people could use two or more times the same funds.
In 2012, a company called Ripple Labs, created the XRP Ledger project, to help streamline payments between users and to be able to replace SWIFT or BIC in international cross-border payments system which is capable of sending 24 million transfers daily but may contain security gaps and has little scalability and high transaction costs. It is a system that has been used since 1974. On the other hand, the Ripple system is currently being used, mainly by banks as an interbank network to solve the SWIFT imperfections as an international platform for international monetary payments.
Many financial entities, institutions and foundations have joined the Ripple project, providing it with a large budget to develop the interbank network and make it more efficient and modern as an ongoing process. This system allows you to make payments and fund clearing without having to resort to central banks using a distributed accounting technology or "DLT - Distributed Ledger Technology", allowing more transactions per second, more efficiently and less costly than the obsolete SWIFT.
But as usual to analyze criptos you have to distinguish the technology from the cryptocurrency, if Ripple (XRP) is the crypto currency that runs on the Ripplenet platform, the XRP ledger is free or open source which is not based on the Bitcoin or Etherium blockchain and the Ripplenet platform runs under the XRP ledger protocol. Ripplenet is a private company that owns the digital payment platform and the Ripple (XRP) is the cryptocurrency. While bitcoins and etheriums have to be mined, with Ripple this is not the case as the 100 billion units were created by the company from the beginning. And it is estimated that the company owns more than 50% of this initial issuance, which is concentrated in a few hands (the company's CEOs and executives) and therefore they control the price because they are dominant holders. These two details make ripple controversial based on the fact that it is not a very decentralized system, especially since the nodes are conveniently selected by the Ripple issuing company.
Thus RippleNet is a RTGS (Real-Time Gross Settlement) platform that enables instant monetary payments globally in which virtually any fiat currency or cryptocurrency can be used even if the native cryptocurrency is Ripple, and this is what it makes it really revolutionary.
In short, Ripple is a global payment platform and settlement clearing system that aims to solve the huge banking costs and the inefficiency and slowness of the SWIFT system. The Ripple Platform is based on a P2P Distributed Ledger technology allowing players to function as banks to make payments to each other without the need of miner confirmation for sending funds.
This system is already supported by many banks and money transfer companies such as MoneyGram, Banco Santander, American Express, UBS, and even international auditing firms such as Accenture and Standard Chartered.
But how does the Ripple system work?
The system for undertaking transactions is very simple, the bank has to be integrated in the ripple system as a Ripple node being part of the DLT (Distributed Ledger Technology) system. As the ripples are instantly available, they travel from bank to bank instantly after checking out that there are sufficient funds in fiat currency, being the operation validated by the two banks representing the system nodes.
This way, we can list the following considerable advantages:
- Standard transaction costs are very low at a fixed fee of around 0.00001 XRP.
- In about 4 seconds the funds reach their destination compared to Etherium which is 2 minutes and bitcoin which is 10 minutes approximately.
- Great acceptance and almost massive adoption by global financial institutions.
As it was said before, the negative part of this system is the concentration of the project in few hands within the company Ripple Labs which may have a 55% dominance of the technology and control over the cryptocurrency, so it is not a very decentralized system, and on the other hand there are other cryptocurrencies also very efficient that seek the same objective as Ripple, we are talking about Stellar Lumens.
To acquire Ripple cryptos it is necessary firstly to buy bitcoins or etheriums in any exchange platform such as Binance or OKEx and then exchange them for ripples so you can include them in your portfolio as a very interesting cryptcurrency.
It should be noted that it is ranked 4th in CoinMarketCap by capitalization, due to its huge adoption by financial institutions, but it has a somewhat stable market price which is currently around 0.178137 USD with a downward trend. Since its highest price reached (all time high) was 3.84 USD in January 2018, we are talking about a very interesting cryptocurrency to include in our portfolio.