Over the past decade, the value of cryptocurrencies has been growing by leaps and bounds. In early 2018, the combined value of all cryptocurrencies, also known as digital currencies, touched nearly 824 billion USD, a 4,500% growth from 17.7 billion USD just over a year ago. At the end of 2017, with a value of 285 billion USD, Bitcoin was the world’s largest cryptocurrency by aggregate market capitalisation.
In recent times, other cryptocurrencies have been steadily gaining popularity among investors and merchants. One of the cryptocurrencies steadily gaining prominence among others is Ripple.
Between early 2017 and early 2018, the market capitalisation value of Ripple and its coin XRP increased by 48,744%. By the end of the first week of 2018, Ripple was valued at USD 121 billion (market capitalisation).
Bitcoin has been around for longer and therefore its basics, processes and technologies are fairly common knowledge by now.
Ripple, on the other hand, is newer (established in 2012) and probably not as well-understood. In this article, we attempt to answer two basic questions about this fast-growing digital currency: what it is, and what it isn’t.
1.) …Officially Known As XRP
Although the name Ripple is easier to say and remember, it actually refers not to the token itself, but to the company Ripple Labs, known as OpenCoin until 2013, that came up with the XRP token. The XRP token is used as part of Ripple’s digital network of financial institutions that processes customer payments.
It is important to note that Ripple’s network allows financial institutions to use its service even with no XRP in hand. In other words, the XRP token is not mandatory to initiate and complete crypto transactions.
For the purpose of this article, we will use the terms Ripple and XRP interchangeably.
2.) …An Open-Source Payment System That Is Cheaper Than Other Cryptocurrencies:
The main goal of Ripple is to enable enterprises to conduct financial transactions much more easily and efficiently than they could with ‘regular’ currencies. Ripple’s open-source technology is built on the blockchain principle with a fast-growing set of validators.
In addition, thanks to small transaction fees – about 1% as compared to Bitcoin – XRP enables cheaper transactions than other cryptocurrencies such as Bitcoin or Ethereum. It is also cheaper than standard bank-to-bank transfers.
3.) …The Second-Largest Cryptocurrency In The World:
In the two-week period between the end of 2017 and the beginning of 2018, the price of Ripple’s XRP coin quadrupled. For most of 2017, Ethereum had the highest market capitalisation, second only to Bitcoin. By early 2018, however, Ripple had overtaken Ethereum as the second-most valuable cryptocurrency in the world.
4.) …Part Of A Fast Network:
Unlike Bitcoin and a few other cryptocurrencies such as Ethereum, Ripple offers very fast transaction speed. With Ripple’s almost-instantaneous processing times, it is possible to transfer money between institutions in approximately 4 seconds, instead of minutes (Ethereum) or hours (Bitcoin).
It is definitely faster than traditional payments systems which can take between 3 and 5 days to settle a transaction. Ripple has partnered with several large banks to reduce settlement time over its network, especially for cross-border transactions.
5.) …In Controlled Circulation As Of 2018
Ripple Labs designed the XRP currency to include about 100 billion tokens, most of which are not in circulation yet. Only about 40% of the XRP (40 billion) is in circulation, while Ripple Labs owns the remaining 60% (60 billion). Of the latter, Ripple Labs directly owns 6.25 billion XRP, and the remaining 55 billion is in ‘escrow’ for future use
Each of these 55 escrow contracts will expire at the rate of 1/month, freeing up to 1 billion XRP for release in the market. This controlled release is meant to prevent ‘dumping’ of tokens in the market and the possibility of a subsequent crash in their value.
Ripple is NOT:
1.) …A Payment Currency:
Although Ripple is a payment system, it is not a payment currency. It cannot be used to make payments for online purchases. It is designed to be a transfer system to move money from one point to another. Ripple’s XRP coin functions as a low-cost, fast intermediary in cross-border transactions.
Unlike Bitcoin, it not possible to mine Ripple or make it grow. Every existing Ripple coin has already been calculated, even if it’s not in circulation (yet).
3.) …Available On Coinbase (Yet):
Coinbase is the world’s most popular cryptocurrency exchange. Despite rumours that Ripple would be added to Coinbase soon, it has not happened yet. Therefore, it cannot be traded on Coinbase. In January 2018, a few reports suggested that Ripple might soon be added to the trading platform of Coinsquare, the largest cryptocurrency exchange in Canada. As of July 2018, Ripple is not available on Coinsquare either.
4.) …Available With Its Own XRP Wallet:
Ripple used to provide a website RippleTrade.com that acted as a ‘digital wallet’, allowing users to buy, sell, trade and store XRP coins. In 2016, this service was discontinued and Ripple Labs collaborated with GateHub, a third-party wallet provider to migrate existing accounts away from Ripple Trade.
The Bottom Line:
Ripple’s XRP is a fast and scalable digital asset for payments, offering financial institutions a reliable option to secure liquidity for cross-border transactions. With its fast processing times, lower transaction fees and a well-connected financial network, Ripple provides a seamless system to send money globally. Ripple has tied-up with several cross-border remittance firms to facilitate cross-border payments.
Southeast Asia’s leading digital cross-border money transfer service provider, InstaReM is one of the few remittance firms to have partnered with Ripple. With zero-margin FX rates, no hidden charges and complete transparency, InstaReM powers fast and hassle-free local payments to more than 3.2 billion people across 55+ countries.
InstaReM uses Ripple’s enterprise-ready ledger product xCurrent to process global, cross-border payments for its customers, and its xVia API to plug into RippleNet and send payments. This coordination between Ripple and InstaReM facilitates quick and secure payouts for RippleNet members in Southeast Asia.