This article talks about Ripple that is both a platform(RippleNet) which is an open source protocol which allows fast and cheap transactions, and a token(XRP) which is used for representing the transfer of value across the RippleNet. It also discusses the advantages and disadvantages of Ripple.
Unlike Bitcoin that was never intended to be a simple payment machine, Ripple is definitely going to rule all the international transactions globally.
The platform has its own currency (XRP) but also allows everybody to use the platform to create their own via RippleNet.
RippleNet is a network of institutional payment-providers such as banks and money services businesses that use solutions developed by Ripple to provide a frictionless experience for sending money globally.
As said XRP is a token used for representing the transfer of value across the Ripple Network. The main purpose of XRP is to be a mediator for other – both cryptocurrencies and fiat exchanges. If you want to exchange dollars to euro, it can be dollar with dollars and euro with euros to minimize the commission. As highlighted above, the transaction cost on Ripple is $0.00001.
An interesting fact: after the transaction the amount of $0.00001 ‘disappears’ from the platform and can’t be replenished. So, with every transaction the world becomes $0.00001 poorer. It is designed that way to prevent spammers attacks.
What is Ripple used for
- Low commission currency exchange. There are many currencies that can’t be directly converted to each other. So banks use the US dollar as a mediator. So, there is a double commission: converting currency A to USD and USD to currency B. Ripple is a mediator too, but much cheaper than USD.
- Fast international transactions. Transaction time is about 4 seconds. Compare it to hour or more for Bitcoin and days for regular banking systems.
- Payment ecosystem. User can basically issue his own currency for fast and cheap transaction.
advantages of Ripple:
- One of the most important advantages of Ripple is that it’s an official organization with the trust of many banks. So it’s not another unknown Blockchain startup.
- There is not any inflation. All the tokens are initially mined and already exist.
- The more banks use it as their transaction platform, the higher the value of XRP. If all the banks start to use it as a unified bank currency instead of processing redundant currency exchanges then it will make a fortune for all the early birds who invested in it.
disadvantages of Ripple:
- It is so centralized. The whole idea of cryptocurrency is to avoid centralized control. As the tokens are already mined, the Ripple developers can decide when and how much to release, or not to release. So, it’s like investing in a bank.
- In addition to centralization, today it is like a monopoly as Ripple Labs owns 61 percent of the coins.
- And finally one of the most important disadvantages of Ripple is that despite the fact that it’s an open source and very smart, once the code is accessible there is a high chance of hackers’ attack. Some of them even might succeed.