If you want to know what Ripple is, then you are in the right place. Ripple is one of the most innovative companies in the cryptocurrency market. The firm is located in San Francisco and it has been working in the industry for several years now.
What is Ripple? #
As we mentioned before, Ripple is one of the largest cryptocurrency and blockchain-related firms in the industry. The main goal of this firm is to provide better payments experience to financial companies from all over the world.
Understanding the Financial System #
To know what Ripple is and how it works, we also need to understand the current financial system. Nowadays, transactions across borders are processed through the legacy system called SWIFT. SWIFT stands for Society for Worldwide Interbank Financial Telecommunication.
This company is currently providing financial institutions with a standardized telecommunication service related to financial transactions. However, the main issue related to SWIFT is that it does not allow for money to be sent from one country to another in seconds, minutes or hours. It usually takes days before transactions are settled.
Ripple Solutions #
This is where Ripple comes into play. Ripple wants to make cross-border payments more efficient. That means that they want to make transactions fast and cheap for financial companies. Until the beginning of 2020, Ripple was already working with over 300 different financial companies from all over the world.
These financial firms are connected through the so-called RippleNet. This is a network of institutions that are using Ripple’s solutions to perform frictionless cross-border transfers.
Let’s use an example. Nowadays, it is very difficult to send funds from New York to London. Indeed, it can be faster to transfer money from these two cities using a commercial flight rather than through SWIFT.
Considering we are in the year 2020 (excluding COVID-19), Ripple considers it is unacceptable to wait so long for a transfer of money between two large financial centres (or any other place in the world).
This is why Ripple developed a wide range of services that allow financial institutions to perform seamless cross-border payments. RippleNet is making it happen. This network provides financial institutions with the fastest and shortest way to transact funds from point A to point B.
XRP Cryptocurrency #
Take into consideration that XRP is not the same as Ripple. Ripple is a financial company and XRP is a cryptocurrency. Ripple leverages the power of the XRP digital asset to make transfers faster and cheaper.
Banks and other financial institutions can use the XRP virtual currency to source liquidity on-demand. What does it mean? Let’s put it in simple terms.
Let’s say you live in Malaysia and you want to send Malaysian ringgit (RM) to Mexico and receive Mexican peso (MXN). By using SWIFT and legacy financial services, this transaction will be expensive (there is no liquidity) and it will also take a long time to be processed.
With the XRP cryptocurrency, it is possible to send RM and convert it to MXN in just a few seconds and for almost no transaction fee. XRP provides liquidity in both countries, Malaysia and Mexico. Furthermore, by using XRP, users avoid unwanted currency fluctuations or holding virtual currencies for long periods of time (which can be very volatile).
