Ripple The Ultimate Cryptocurrency For International Payments
What is Ripple?
Ripple is used on a network blockchain technology to connect banks, payment providers and digital asset exchanges via its own ‘RippleNet’. Ripple aims to provide an incredibly cheap and frictionless experience to facilitate cross border transactions for a multitude of different currencies and assets, making it potentially one of the most scalable digital assets in the world today.
The origins of ripple
It may come as a surprise, but ripple actually originates from a payment protocol originally developed in 2004, five years before the first bitcoin was mined. This RipplePay.com community based payment system aimed to ‘provide secure payment options to members of an online community via a global computer network through the use of traditional currency and virtual currency’. Put simply, the goal was to take the concept of credit lines with a bank, and apply them to a trust network between friends and communities, and rely on the six degrees of separation concept.
Ripple is best known for its peer-to-peer network that continues to enhance cross border transactions. The open-source, decentralized platform enables seamless transfer of money in any form, is it in U.S dollar Euro or even Bitcoin and Litecoin.
How ripple works
Before we look at ripple, we need to look at the concept of the RippleNet, the network ripple transacts with.
Imagine you and a friend are on holiday, and you meet up with your friend’s cousin and their friend, who neither of you have ever met. The four of you have a meal at the airport on the way back, and you decide to pay for everyone. You trust your friend will pay you back so you accept an IOU from him, but you don’t really know his cousin or friend. You do however know that your friend trusts his cousin, and that his cousin trusts his friend. You therefore accept an IOU from them. This is the basic principle of the Ripple network – a web of trust between parties who know each other and trust each other by association, to deal their own personal ledger and ‘debt’ (IOU’s), without a need for an intermediary.
With this concept of debt in mind, you can go one step further with the ripple network. Imagine after getting home you want a haircut, and the barber you go to also knows your cousin. He would be willing to accept the IOUs, as he knows you and your cousin, and by association the trust with the other two (your friend and your cousins friend). You can then offload the debt to effectively pay for your haircut.
If you extrapolate this basic concept, allow the network to be multicurrency and cross border, and make it near instant, you have the fundamentals of the ripple network. All users trust and debt balances are updated simultaneously and automatically, causing a ‘ripple’ effect across all trusted associates.
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Ripple Digital Currency (XRP)
XRP is the native currency that powers the Ripple network. The digital currency acts as the bridge currency that does not discriminate against any currencies, thus enabling the transfer of money regardless of the type.
The Ripple network designates a gateway for each currency; for instance, CADBluezelle for the Canadian dollar, BTCbitstamp for Bitcoin, and USDsnapswap for the U.S dollar. Therefore one does not need to have Bitcoin to send Bitcoin on the network.
The ripple cryptocurrency operates in a proof-of-work system whereby transactions rely on consensus protocols in order to validate account balances. The consensus system also works to prevent double-spending.
What Affects XRP Price
XRP is one of the biggest cryptocurrency by market cap. Its prices are susceptible to extreme levels of volatility, thus one of the reasons why it is difficult to say with certainty its actual value.
The technology powering the XRP cryptocurrency is one of the factors that influence its price in the market. Ripple Labs, the company behind the cryptocurrency, has a specific goal of making XRP the go-to crypto for international payments. Likewise, it continues to add new innovation on Ripple Net, the technology behind XRP.
Any advancement that enhances the technologies ability to facilitate fast and secure transactions goes a long way in fuelling XRP demand.
Crypto holders, often referred to as whales who own a good chunk of XRP coins, also influence a great deal of the underlying price. Depending on how the whales use the altcoin in various exchanges goes a long way in influencing its price.
South Korea, as a whole, also has a significant impact on the XRP price. It is the only country to incorporate and authorize the use of Ripple on everyday use. Likewise, any action that the government takes related to XRP goes a long way in affecting its price.
What are the negatives of ripple?
Ripple have taken the blockchain model, and have tried to make it commercially friendly and ‘for the banks’. They don’t have a decentralised consensus network in the same way as a number of other coins out there, and in fact the system is wholly owned by ripple labs – this is in direct opposition to a key philosophy of many other cryptographers and crypto users. Furthermore, in theory, ripple could increase the supply of XRP and devalue the coin, and in a worst case scenario they’d be able to run the entire nipple network without the actual coin itself. This, for many, is too great a risk.