What is Ripple?

Ripple, currently one of the top five cryptocurrency in terms of market capitalization, has experienced a fair controversy.

On the one hand, proponents point out that the company's goal to increase cross-border transfers through distributed ledger technology will have a significant impact on trade and finance and thus have a positive impact on the world economy.

On the other hand, detractors claim that the company's product offerings are complex, the tokens are unnecessary and the concept is far from decentralized.

Let's open each point, and then see how different parts can work together to achieve the Ripple goal.

Increase cross-border transfers

Few argue that the current system of money transfers across currencies and borders is inefficient and wasteful. In order to be able to make cross-border payments on behalf of their clients, commercial banks must have accounts at banks in the destination country. They generally hold the balance of that country's currency in this account. Often balances just sit there, waiting for payment instructions.

The company believes that funds for payments can be transferred to other currencies more efficiently, using their own technology.

Complex offer

Ripple technology is divided into several sections: xCurrent, xVia, xRapid and cryptotoken XRP.

We will introduce them one by one:


xCurrent is a platform used by banks and other financial institutions to complete cross-border payments. It uses a message delivery protocol that extracts the information needed to manage payments, which is communicated to the banks involved (usually the initiating bank, the correspondent bank in the recipient country, and the recipient bank). After account validation and balance before the transaction is completed, all parties lock in funds.

At this point, a cryptographic signature is generated that verifies the available funds and that the parties are ready to make the transaction. The funds are then simultaneously issued to all participants.

xCurrent uses a distributed ledger called Interledger, developed by Ripple but currently managed by the World Wide Web Consortium, a non-profit group that maintains international standards for world-class web.

This solution is currently the most widely used Ripple platform, with more than 100 registered financial institutions. Many have gone beyond the testing phase and used xCurrent for direct transactions.

xCurrent only works well, for cross-border payments where pairs trade liquidally (such as moving money from the euro to the dollar or vice versa, or paying dollar-yen).

x Fast

Payments in less liquid combinations are more likely to use xRapid, which relies on XRP Ripple tokens to facilitate liquidity (more about the token below). This is done by moving the initial funds to the XRP, and from there to the recipient's funds. This allows the origin bank to avoid the need to have "parking" funds in accounts at correspondent banks in the recipient country, or depend on other institutions ("liquidity providers") to supply recipient banks with the right amount in local currency (increase costs) .

For example, if company A in Thailand buys raw materials from company B in Nigeria, the transaction will look like this:

xRapid will use the company A baht to buy XRP, and then convert it to naira, which will be sent to the receiving bank. The algorithm will automatically select the baht / XRP market maker at the best price, and the XRP / naira market maker at the best price. In this way the company A bank in Thailand does not need to hold naira in account with the correspondent bank in Nigeria. It is also not necessary to find a liquidity provider that is willing to exchange currencies.

At the time of writing, several payment providers (including Western Union and Moneygram) were experimenting with the platform, and Mexican money transfer company Cuallix actually used it in production.

One potential barrier to xRapid growth is XRP liquidity. For platforms for scale, XRP needs to be listed on exchanges around the world, with a reasonable level of trading volume.

And its reliability depends on third-party XRP market makers, which are currently relatively few in number. In order for the number of market makers to grow organically, the demand for xRapid services needs to grow - but that depends on the number of market makers.


xVia is a user interface designed to make xCurrent and xRapid easier to use. Through API integration, it offers connections to financial institutions that use Ripple products, as well as tracking payments and invoicing.

Ripple started a social payment provider to test xVia in early 2018 - some are currently doing it.


XRP is a Ripple token. At the time of writing, this is the third largest cryptoasset in terms of market capitalization.

The Token does not have miners - all 100 billion tokens were issued to Ripple in 2015. The maker saves 20 billion and gives the rest to companies, which have used it to develop liquidity, distribute it methodically to clients and encourage market-making activities.

The blockchain run by XRP is called XRP Ledger. Rather than relying on proof of work, proof of ownership or similar, transactions are validated by a list of "trusted" nodes, which are authorized by Ripple.

Another term that you might encounter is RippleNet, which does not refer to certain products, but to a network of financial institutions that use Ripple products. In other words, it includes xCurrent, xRapid and all banks that use it.

Tokens are not necessary?

Because of its relatively limited use to date in cross-border transfers, some have suggested that Ripple values ​​do not exist in tokens, but in xCurrent software that streamlines payments. They show relative interest in xCurrent as opposed to xRapid as proof that tokens are not needed so that Ripple technology is useful.

In addition, some claim that the volatility of tokens prevents it from being a practical payment mechanism.

Ripple advocates, however, insist that using xCurrent is the first step towards wider use of xRapid and XRP tokens. While xCurrent relies on correspondent banking and liquid currency corridors, there is no need to have accounts at correspondent banks - using XRP as a bridge between currencies - will free up bank liquidity.

And for volatility, Ripple argues that exchanges between fiat and XRP currencies in xRapid occur too quickly so that the movement of token prices becomes unimportant.

How decentralized?

Many detractors of Ripple insisted that the XRP did not even qualify as a crypto currency, because it was controlled by one company (at the time of writing, Ripple had more than 60% of XRP tokens, even though most of them were held on escrow).

Also, transactions are processed by validators authorized by Ripple. The company has sought to diversify the approved list of validators (known as the Unique Node List), but the list is still permitted, not open to everyone, and therefore not really decentralized.

Ripple states that full decentralization of the XRP Ledger is not needed for its purposes, and that for security reasons it needs to be limited to "trusted" parties.

Existential split

One of the core problems at the heart of the centralized / decentralized debate is whether Ripples can survive without XRP and vice versa.

On the surface, it seems that if Ripple (company) disappears tomorrow, the token will continue to trade on the exchange, and can have value if the user decides to use it as his own currency bridge, or even as a payment token.

However, the amount of XRP held by Ripple implies a symbiotic relationship going forward, as well as the perceived (and possibly real) influence on the price of the token.

Regarding whether Ripple needs XRP to survive, Ripple can decide to suspend xRapid development and focus on xCurrent, which does not require tokens. However, the company repeatedly stated its commitment to make XRP a "bridge currency" for cross-border transfers in the near future, and corporate wealth tied to the token value.
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