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What is XRP?
XRP is a cryptocurrency by Ripple. Ripple Inc. CA describes it as a “digital asset built for global payments”. But, what does that mean? XRP is used for faster, more reliable payments globally at a very cheap price. When international transfers are done by banks, the bank charges a huge fee and takes days to transfer the money, whereas Ripple coin XRP is designed to handle large transactions securely and at a very fast speed with little cost. So this is helping everyday banking customers and banks and other financial institutions dealing in international transfers. This is one of the key factor why larger banks and payments providers are using ripple platforms for transferring money internationally, few names include; Bank of America, RBS, Barclays, American express, Santander, Money Gram, HSBC and Unicredit.
This is not the only reason for banks to start using ripple platform, another big advantage is unlike BTC which is taking an hour to clear the transactions and ETH taking two minutes, XRP takes only 4 seconds
Major concern was scalability I.e. if blockchain would be able to handle the ever increasing demand, which is assumed to be solved with XRP.
How does Ripple work?
Lets see these 2 different words that are normally taken as one: Ripple and XRP; Ripple is the technology to facilitate faster payments whereas XRP is an independent digital asset (a coin) by Ripple Inc CA but has no control over technology. The maximum token that Ripple currency can issue are 100 billions and our of these 60 billions are owned by the company itself.
In straight terms one can say, Ripple is the technology that allows for the transfer of promise of payment (IOU) rather physically sending the money from one party to another.
Lets understand this by an example:
Lets say, a father sitting in America want to send money to her daughter in London but wants to avoid the delay and exchange rates. Then this father would go to agent in US and would hand him the cash n this agent would give him the code to share to his daughter. When she provides that code to her local agent the daughter receives the money in local currency.
Looking at the procedure, it is evident that Ripple works like ancient hawala system in Arab world and its just that in Ripple agents are replaced by validators and gateways which are based on complex mathematical equations.
XRP like any other digital currency is a neutral asset and can represent anything; for father sending money it is USD and for the daughter receiving money it in pounds. For the countries that are not directly traded against each other, like Uganda shilling needed to be converted to USD to received Krona in Iceland, so I have to pay conversion and commission twice. With Ripple this double conversion can easily be avoided.
Ripple trading and storing
Ripple is available on all major exchanges and easily be stored in the wallet but unlike bitcoin and Ethereum is not that widely accepted for everyday purchases and targets to other market segment which emphasize on money transfer.
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