To better understand Ripple it’s important to understand the current problems that exist within todays banking infrastructure. The current global payment system is painfully slow. It can take anywhere from three to five business days for a transaction to be posted. The global payment system also fails to be cost effective. An international transfer could cost up to fifty dollars depending on the bank and the amount of money being sent. According to Ripple as many as four percent of global transactions actually fail as well. So currently you have an incohesive global payment system that is disparate, inefficient, unreliable and not to mention costly. Ripple aims to solve these problems with a decentralized solution.
What is XRP?
XRP by market capitalization is the third largest cryptocurrency following Bitcoin and Ethereum. XRP is the digital token or cryptocurrency that many refer to as Ripple, that can be traded through the Ripple network. It was designed as a payment system for financial institutions all over the world. This is beneficial for a few reasons.
- Individuals and financial institutions can send each other payments in real time, we’re talking seconds.
- Replaces the need for systems like Swift or Western Union, which are not cost effective.
- Removes fees and delays that occur between different types of currency exchanges.
Does it use the Blockchain like Bitcoin?
Ripple does take advantage of Blockchain technologies but not in the way the Bitcoin does. It uses a distributed consensus ledger verified by Ripple servers rather than utilizing mining techniques. So basically all these nodes (servers) end up validating each others order of transactions to prevent the double spending of funds. This is what’s called a consensus.
So apparently Ripple has a Validator Registry available for our viewing pleasure, which looks to be a list of all the nodes in the consensus and their corresponding domain names. You’ll see various columns denoting things such as the name of the server, the agreement score and the total number of validations that the node is aware of. You can even click on the domain name of each of those servers, whereas the server is likely to be a financial institution that can send and receive payments. Depending on what the server does or who the financial institution is, you’ll most likely be presented with a web page of some sort.
What is RippleNet?
The Ripple Network or RippleNet for short is kind of what we described above. It’s basically a network of financial institutions that wish to send and receive payments to each other across borders and in real time. RippleNet is awesome because customers are able to transact in new market territory and international payments are made seamless. Ripple says that these transactions occur in mere seconds and are more secure and reliable as opposed to traditional payment methods.
Customers also have around 40 currencies that they can receive payment in. According to Ripple they offer what’s called on demand liquidity. Which basically boils down to the idea that two currencies can be bridged utilizing XRP tokens. Different countries use different currency and currencies are valued differently. One example that comes to mind is the US dollars versus the Euro. At the time of writing one Euro is worth $!.09 in US dollars. XRP bridges these two currencies so that customers receive the correct amount in local currency. Interestingly enough there is a small charge of $0.00001 for the transaction commission cost over RippleNet. This ensures that DDos attacks don’t occur against the network.
What is Ripple?
Ripple is the software solutions company behind the Ripple network and XRP. They aim to use Blockchain technology to help government and financial institutions send global payments quickly, seamlessly and in a secure fashion. Many people use Ripple to describe the XRP token but its important to know the difference.
How it works
Ripple provides a descriptive video on how everything works in the RippleNet. Check it out!