What is Ripple?
Ripple is a global settlement network, making it easy to transfer nearly any currency to anyone in the world in just seconds. The Ripple platform has rendered the archaic system of sending money through SWIFT or Western Union obsolete. At this point, Ripple is focused entirely on working with banks, offering them a more efficient and cost-effective way to send real-time payments around the world.
Consider this hypothetical example. Directly transferring currency inexpensively from Japan to Nicaragua, JPY/NIO isn’t generally feasible. Instead, an individual or bank will usually trade JPY to USD and then USD to NIO.
At each step, the fees add up, making for an expensive way to send money internationally. By using Ripple, one can trade JPY to XRP (Ripple’s currency) relatively inexpensively, send XRP to the recipient, either an individual who has a Ripple wallet or a bank in Nicaragua, and from there, trade XRP into NIO. In other words, XRP is the grease that allows any currency to be easily exchanged for any other currency on the Ripple platform.
While banks in general have been slow to adopt Ripple, there is no doubt that real time worldwide payments are the future. The Ripple platform gives banks a huge advantage both over their competition and financially. Ripple is focused on the “Internet of Value”, meaning that money transfers should move as quickly as information does in the technological age. With Ripple, there is no reason to pay a fortune and wait days when transferring money globally.
Why Are Banks Using Ripple?
A few banks have embraced the Ripple platform including, Santander, Axis Bank, Yes Bank, Westpac, Union Credit, NBAD, and UBS, among others. According to Ripple, banks can save an average of $3.76 per payment by using their protocol. Considering that banks perform thousands or perhaps millions of transactions every year, this represents a significant savings.
If there is one thing that captures the attention of banks, it is how to make more money, while saving more money. This is why Ripple, or a real time, inexpensive, global settlement network similar to it, has a bright future ahead of it, as they are offering a new way to conduct business that brings financial institutions up to speed in the Internet age.
Ripple is lead by Brad Garlinghouse, while the brains behind the scene is David Schwartz, the Chief Cryptographer. Based out of San Francisco and branching out around the world, the Ripple team has been constantly improving the protocol, while connecting with banks internationally. Ripple continues to hire top talent from around the world and aims to facilitate the greater majority of international payments worldwide. As it currently stands, Ripple is one of the most exciting Fintech organizations with their innovative financial platform, as Forbes even includes Ripple in their Fintech 50.
How Do I Invest In Ripple?
While large scale investors may be able to invest in Ripple directly, most other investors and speculators are limited to investing in XRP. XRP, Ripple’s native currency, took off in value in 2017 when it went from under $0.01 to over $0.30 a coin. This huge surge in value is due to both bank adoption and speculative interest. As it currently stands, Ripple has the third highest market cap behind Bitcoin and Ethereum.
XRP allows for seamless financial transactions from any given currency to any other currency with negligible fees. In a sense, XRP is the reserve currency on the Ripple platform that enables users to trade nearly any currency of choice into XRP and send XRP globally to anyone. The individual who receives XRP can then trade it for the currency of their choice.
Every time any given currency is traded into XRP, liquidity increases, as does the value of XRP, due to greater demand. In other words, Ripple is attempting to turn XRP into a global reserve currency of such even though it may not seem that way just yet.
However, transferring XRP is the easiest and least expensive way to send value over the Ripple protocol. At some point, it may not make sense to move into any other currency, while instead, simply using XRP exclusively for global payments. If people and banks from around the world turn their fiat into XRP and collectively decide not to move back into fiat, the price of XRP will no doubt skyrocket.
The goal is to turn XRP into a stable currency that doesn’t deviate in value much so banks would be comfortable moving into it without fear of volatility. As it stands, many banks don’t want anything to do with XRP because it can dramatically change in value overnight or even in seconds. In order to assist banks and payment providers Ripple has partnered with BitGo to mediate these risks so expect further bank adoption relatively soon.
A long-term appreciation in the value of XRP is ultimately the end game strategy for Ripple, as they hold the majority of XRP in existence. This means that a bet on XRP is a bet on Ripple. It should be noted that Ripple also offers consulting services to financial institutions and has no problem securing funding when needed. In other words, it looks like Ripple is likely to be around for a long time.