Understanding XRP & Ripple

What is Ripple?

Ripple Labs is a company founded in 2012 and based in San Francisco, California.
Ripple connects banks, payment providers and digital asset exchanges via RippleNet to provide one frictionless experience to send money globally.

Ripple offers various solutions for banks, payment processors and businesses. The solutions include xCurrent, xRapid and xVia.

xCurrent is Ripple’s enterprise software solution that enables banks to instantly settle cross-border payments with end-to-end tracking. More information about xCurrent can be found here.

xRapid is for payment providers and other financial institutions who want to minimize liquidity costs while improving their customer experience. xRapid uniquely uses a digital asset, XRP, to offer on-demand liquidity, which dramatically lowers costs while enabling real-time payments in emerging markets. More information about xRapid can be found here.

xVia is for corporates, payment providers and banks who want to send payments across various networks using a standard interface. More information about xVia can be found here and here.

What problem is Ripple solving?

The current technology used in the back-end settlement of payments and money transfer globally did not improve from decades ago. Although technology used in the front-end; such as instant payments like credit cards and bank transfers are done in a matter of seconds, the actual settlement takes days or even weeks to complete. As quoted often by Ripple's CEO Brad Garlinghouse, the fastest way to transfer money overseas is to carry the money along with you onboard a flight to the country you are transferring the money to.

Ripple aspires to make the settlement process incredibly efficient by using blockchain technology and their own cryptocurrency, XRP. Settlements are instantaneous (takes 3-4 seconds), with negligible costs, highly scalable (1500 TPS and can scale even further) and built on a distributed network.

Why xRapid over xCurrent?

xCurrent utilizes the Ripple Protocol, the blockchain technology developed by Ripple to enable real-time settlement and messaging between financial institutions (using fiat) while xRapid solves the liquidity problem by enabling real-time liquidity solutions, with greater cost savings.

Currently, there are over 100 banks using xCurrent, with some notable financial institutions using or trialling xRapid, such as MoneyGram, Western Union, MercuryFX and IDT.

Using an example of a Singapore bank transferring money to a US bank. Using xRapid would mean that the Singapore bank need not open a pre-funded account of USD with a US bank that would otherwise lie dormant and incur account maintenance cost and also inflation. The back-end settlement will still take days and weeks as the money sent has to pass through various intermediaries. Instead, if the Singapore bank makes a transaction of 1000 SGD to the US bank now, the amount would be converted into XRP, transferred over to the account in US, and converted into the equivalent USD amount, in a matter of seconds.

XRP Ecosystem

Ripple announced a new initiative called Xpring, which is aimed at bringing entrepreneurs and their businesses over to XRP to build an ecosystem. The project will use a mixture of investment, grants, and incubation to lure companies and expand the use of XRP whilst allowing Ripple to continue to focus on its financial services business.

Stefan Thomas, the Chief Technical Officer at Ripple, and an investor in Ripple Interledger Protocol has started a new startup building micropayment applications known as Coil. Coil is going to be designing applications for transaction settlement, but it is going to depend fully on Interledger Protocol and the XRP token. More information about Coil can be found here.

A few prominent examples include Omni, the software company known for its contributions to for the macOS, iOS, and watchOS platforms, who announced that it would “soon” incorporated XRP as a currency in its marketplace. Another example would be Scooter Braun – Justin Bieber’s manager – who recently said that he is “pursuing several endeavors that will use XRP to improve artists’ ability to monetize and manage their content.”

The future prospects and use-cases of XRP looks promising, especially as Ripple had only focused on the financial institutions in the past few years. Now, along with the relaunch of Codius, Ripple's smart contracts platform, the ecosystem of XRP has only just began.