Ripple (XRP) is the native currency of the Ripple network, which has been described as a system to connect banks, payment providers, digital asset exchanges, and corporates via RippleNet to provide one frictionless experience to send money globally.
The ultimate goal of Ripple is to facilitate secure, instant, and nearly free global financial transactions of any size with no chargebacks.
A brief history of payment protocols
It’s interesting to note that each of these three projects-Litecoin, Ripple, and Stellar-is trying to improve upon one major failure of bitcoin. For example, Litecoin transactions are nearly instant (bitcoin transactions can take up to 10 minutes). It takes 2.5 minutes for a litecoin miner to verify a transaction versus 10 minutes for bitcoin miners.
So Litecoin is quicker. But Ripple has another advantage over both bitcoin and litecoin-and that is that its native currency, XRP, can be easily exchanged between parties without an intermediary or exchange rate markups. Why does that matter? Because exchanges are where parties often get ripped off by paying excessive transaction fees.
Ripple allows users to exchange currencies in a decentralized manner, meaning no third party needs to hold funds in escrow until after payments have been made. This means you can send money directly from one person to another person with no middleman. How cool is that?
How does Ripple work?
XRP is Ripple’s native currency, but you don’t need to know anything about it (or even own any XRP) to take advantage of Ripple. Banks use XRP as a bridge currency when trading between different fiat currencies (think dollars for euros) or with other banks in a foreign exchange corridor.
As an example of how value moves through a network of banks using xRapid technology, let’s say I’m at Chase Manhattan and want to move $1 million to First National Bank in Australia. Chase has an account with BNP Paribas, which then has an account with Westpac.
However, neither bank currently uses Ripple’s solution. We’d have to go through two separate intermediaries to make a transaction happen. The first step would be to buy $1 million worth of XRP on an open market from someone like Bitstamp.
Then we’d send that $1 million worth of XRP from Chase Manhattan to BNP Paribas, where it would sit until they could forward that amount on to Westpac.
Why do we need it?
The world is shrinking in many ways. We live more closely with our families than ever before. Yet we can still be separated by borders. This has created a major hurdle for those who want to do business across countries and barriers because of fees that range from 10% to 25%.
It doesn’t matter if you’re using Bitcoin or Paypal; credit cards or PayPal-the price you pay to move money between countries can really add up over time, especially as your company grows.
And no matter what system you use (or even if you decide not to use one at all), there’s always some level of risk involved when it comes to moving money outside of your country.
Who’s using it?
Payment providers like MoneyGram are using Ripple’s protocol to send real-time international payments across networks. Other financial institutions such as Fidor Bank in Germany and CBW Bank in Kansas are also experimenting with Ripple’s technology.
There’s plenty of interest because Ripple allows banks to free up capital by reducing dependency on Nostro accounts (these require banks to hold foreign currency deposits around the world in order to facilitate global transactions).
All of that creates a lot of opportunities-and a great deal of buzz. In fact, Ripple was recently named one of TIME magazine’s 50 Best Inventions.
Many cryptocurrency enthusiasts want to invest in XRP tokens. There are many opportunities to buy XRP if you’re in a country that is listed on an exchange.
Otherwise, you can buy BTC or ETH using dollars or euros on Coinbase or CEX and then send it to one of several exchanges that list XRP. You can check CoinMarketCap to see if there is an active trading market for your desired currency pair.