Ripple is revolutionizing international finance by making it possible to transfer money around the world within seconds. Ripple’s innovative use of blockchain technology has excited major financial institutions such as American Express and Standard Chartered. By bridging the gap between Bitcoin and traditional finance, Ripple has also become a figure of hate for many within the world of cryptocurrency.
With all the hype surrounding cryptocurrencies these days, surprisingly little mainstream media attention has been focused on Ripple. This is despite Ripple having a market cap of almost $10 billion, making it the fourth largest cryptocurrency after Bitcoin, Bitcoin Cash and Ethereum. Ripple’s market cap is more than double that of Dash and Litecoin and around four times larger than Monero and Neo.
Ripple is also much more stable than most cryptocurrencies. While it has seen some huge swings in its valuation, Ripple experiences far less volatility than almost any other cryptocurrency.
Unlike most cryptocurrencies, Ripple has the backing of many major financial institutions. American Express is one its most recent supporters. Santander and Standard Chartered are two of many big banks who’ve been on board longer. But when Ripple is mentioned on cryptocurrency forums and in comment sections, it attracts stronger criticism than any other coin.
Creating the Internet of Value
A recent gathering of representatives from the IMF and central banks around the world at New York’s Carnegie Hall shows how seriously big finance is taking Ripple. During this event, Ripple CEO Brad Garlinghouse declared that Ripple was at the forefront of the development of the “Internet of Value,” where money moves as seamlessly across borders as data.
Ripple’s connection to major financial institutions is part of the reason it’s hated by many in the cryptocurrency world. Many of Bitcoin’s early adopters are hardcore libertarians who see crypto as the ultimate escape from government and corporate control of financial markets. They see Ripple as an existential threat to everything that Bitcoin stands for.
But Bitcoin is no longer the rebellious outsider it was a few years ago. Until recently, Bitcoin’s primary function was facilitating sales of illegal goods on the dark net. Governments have since gotten a lot better at tracing Bitcoin payments. Cryptocurrencies such as Monero offer much stronger anonymity and are now much more likely to be used for transactions of questionable legality. Big money has already moved into cryptocurrency. This trend will only grow as Bitcoin futures begin trading on Wall Street.
Ripple isn’t an alternative to Bitcoin. Ripple is instead a tool that massively increases Bitcoin’s usefulness as a form of currency. It has been designed with the purpose of moving and converting money as easily and cheaply as possible. Its natural customers are therefore big banks.
A Bridge Between Blockchain and Fiat
In its earliest form, Ripple predates the creation of Bitcoin by several years. It was first conceived in 2004 by Ryan Fugger, a Canadian web developer with experience working for a local currency exchange. Early iterations of Ripple found little success, but the project and team expanded quickly once Bitcoin had shown the possibility of blockchain and distributed ledger technology to facilitate financial transactions.
While it operates on similar underlying principles to Bitcoin, Ripple was expressly intended to be different than Bitcoin in several important ways. Transactions on the Ripple network are verified by consensus in a similar way to Bitcoin’s proposed Segwit2x hard fork. Scarcity is built into Ripple in a way that is almost opposite to Bitcoin. Where Bitcoin is mined with increasing difficulty until 21 million coins are in circulation, Ripple was launched with all one hundred billion XRP in circulation. Every time a transaction is conducted, a small amount of XRP is destroyed forever.
The most important difference between Ripple and most alt-coins is that Ripple is intended to supplement rather than supplant Bitcoin. Ripple is designed to facilitate the transfer of any currency, from US Dollars and Euros to Bitcoin and Ethereum. It can even be used to transfer token-like items such as air miles. One of the biggest problems facing Bitcoin is a slowdown in transaction speeds as network activity increases. Ripple overcomes this problem by allowing instant transfer of Bitcoin over its network.
While much of the attention online focuses on Ripple’s connection to Bitcoin and other cryptocurrencies, Ripple’s effect on transfers of fiat currency is likely to be even more revolutionary. Bitcoin transfers are slow compared to other cryptocurrencies but they are lightening-quick compared to traditional international payments, which can take as much as a week to clear. Ripple reduces typical wait times of around four days to just four seconds.
The Future of International Finance
Ripple is at the forefront of technological development in the incredibly lucrative cross-border payment space. The deep connections between Ripple and major financial institutions mean it is likely to retain its enviable position as the bridge between the brave new world of cryptocurrency and the staid old world of traditional finance.
Whenever cryptocurrency skeptics cast doubt on the long-term potential of something within the blockchain space, they typically point to a lack of real utility underlying the value of digital assets. However, it’s clear that central banks and major financial institutions recognize Ripple has incredible utility value. Within four seconds, money can be sent from a bank in New York to a bank in London, Frankfurt or Hong Kong. In the past, this type of transfer might have taken four days to complete.
Ripple, therefore, has the potential to massively increase the ease and speed of global trade. Its connection to Bitcoin and cryptocurrencies lends the space both utility and legitimacy. There is no longer any question of whether Ripple has the potential to shake up the world of finance. The only question is just how quickly the Ripple revolution is going to take place.
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