What is Ripple and XRP?
Among other digital currencies, Ripple is a revolutionary invention. This name is used to denote a digital currency, XRP, as well as the decentralized payment network where any type of currency or asset can be transferred. Ripple was created to unite different financial systems into one. This can guarantee secure money transfer despite the currency in real time. Chris Larsen and Jed McCaleb founded their company to make people more financially independent and teach them how to handle their money without the constant usage of credit cards, banks, and other financial bodies. The main idea was to allow people to have unrestricted access to their finances, no currency exchange fees, and delays in transactions. Money needs to flow freely, and this software can provide this. So what is Ripple and how can it change the way we treat our money?
The world’s financial industry is divided into separate financial systems that are used by millions of people every day. These systems never cooperate. And this is what Ripple is about – global integration and unity of all financial systems to simplify the process of exchange. It is a complicated task as every financial structure has its own rules and requirements that need to be fulfilled otherwise money transaction never happens. Ripple has the solution to this problem – Ripple Transaction Protocol (RTXP). By means of this innovative approach, secure and instant transactions of different currencies or assets between divergent financial institutions can become a reality. Literary, it helps one system to understand the messages of the other. This is the set of rules in accordance with which unrelated financial systems can communicate with each other. The idea is to create a universal protocol for all financial institutions to perform a common global exchange.Ripple Transaction Protocol (RTXP). By means of this innovative approach, secure and instant transactions of different currencies or assets between divergent financial institutions can become a reality. Literary, it helps one system to understand the messages of the other. This is the set of rules in accordance with which unrelated financial systems can communicate with each other. The idea is to create a universal protocol for all financial institutions to perform a common global exchange.
The clients can exchange not only digital money or fiat currency but any unit of value, for instance, air miles or anything similar. It is a platform fancied by big financial institutions like banks – with its help they can transfer any type of asset they need between different institutions. And if the protocol is supported, that transfer will happen instantly. To make it possible, Ripple uses the consensus algorithm, which aims to check whether every system follows the protocol. It guarantees fast and secure transactions on the protocol omitting troublesome ones the security of which is under question – if your transaction is considered by the system to be a fraud, the system will reject it and start the verification process from the beginning. Within the consensus algorithm, all information on the network process is recorded and stored on the platform. It takes a little energy and has a great advantage – the transactions are processed quicker.
For such currency to be able to enter Ripple protocol, there should be a special “entrance” which will allow them inside. This is called Ripple Gateway and grants any currency the right to enter or leave the Ripple platform. And due to these “entrances” currency exchange is possible in the first place. Each currency needs to have its own door or gateway. These gateways are similar to traditional banks in terms of duties performed, but it can be any financial institute, person or website – money services, marketplaces, etc. It accepts the deposits with money from clients and stores them within the platform. There are two types of gateways – anti-money laundering (AML) and know your customer (KYC) that verify payment details of every client. The most popular gateways in the network are SnepSwap, Gatehub, and Butsramp.
Ripple also has its own digital currency, XRP, which is issued by Ripple Labs and can’t be mined. It practically has no value plus it is not exchanged directly but used as a medium for converting currency into another one within seconds independently from the central exchange. The transaction fees are very low, which is a considerable benefit for clients. Another factor that differs these digital currencies from others is that the company that created XRP owns some amount of their stock. Typically, cryptocurrencies are not owned by anyone, neither governments nor companies. The distribution of XRP directly depends on the desires of its owners.
Ripple’s objectives differ greatly from other blockchain platforms and digital currencies. The process of integration with banks and other major financial institutions helps Ripple to provide a secure and transparent cross-border platform which unites totally different financial systems. With the help of this platform, banks can benefit from efficient and fast transaction mechanism making slow bank transactions obsolete. If the mission of Ripple is fulfilled, the complicated and tiresome financial process will become history.