Ripple, an advanced payments system originally launched by Chris Larsen and Jed McCaleb in 2012, includes its own cryptocurrency, called XRP, to enable fast and cheap cross-border transactions. Unlike other cryptocurrencies, which use some form of mining consensus to issue tokens and secure ledgers, Ripple pre-mined 100 billion XRP tokens at its inception, releasing them in stages through an escrow system to dampen price volatility. Ripple’s technology focuses on financial institutions, offering a faster (settling transactions in 3-5 seconds), cheaper and more scalable alternative to current cross-border settlement systems such as the Society for Worldwide Interbank Financial Telecommunication (SWIFT) network, using its own Ripple Protocol Consensus Algorithm.
Its underlying network, RippleNet, enables banks to use XRP as a bridge currency or to optimise conventional transfers using Ripple’s messaging system to more efficiently match transfers. Other transactions can take advantage of the underlying pool of liquidity to identify the best-priced paths and maximise efficiency. The result is that, when compared with conventional banking systems and other cryptocurrencies, Ripple has emerged as a means to transfer value between and among banks at a fraction of current costs. But Ripple has moved beyond helping banks transact payments for their clients, and has recently expanded its efforts into the rapidly growing decentralised finance (DeFi) arena, tokenisation and smart contracts on the XRP Ledger.
But Ripple hasn’t had an easy path either, with the SEC pursuing it in the courts over whether XRP sales have been unregistered securities – something that adds a lot of uncertainty over its regulatory status – and, even with RippleNet’s node-adding partnerships and expansion into new markets like CBDCs, it still has to contend with stiff competition from emerging blockchain solutions and the growing sophistication of legacy banking networks such as SWIFT. Whatever Ripple’s ultimate influence will be, or how large it will become, it will depend most on regulatory rulings, market acceptance, and how well the company can maintain its technological edge in an ever-evolving world of digital payments.
Source: Forbes
